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Spain to invest €1.3 billion in vocational training

Spain will allocate 1.3 billion euros to vocational training in a bid to fight youth unemployment, Prime Minister Pedro Sanchez announced on Saturday.

Published: 29 April 2023 17:29 CEST

Spanish Prime Minister Pedro Sanchez

Prime Minister Pedro Sanchez on Saturday announced Spain would invest 1.3 billion euros in vocational training. Photo by Greg BAKER / AFP

The measure will create 824 new training centres for digital skills, 45,000 vocational training places and 1,500 classrooms for technology and entrepreneurship, Sanchez said.

It will be approved at a cabinet meeting next week, he added while speaking at a Socialist party event in the northern city of Pamplona.

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Boosting vocational training is the best way to reduce youth unemployment “which remains one of the main ills of our labour market,” Sanchez said.

“We are creating more and better jobs, and the best tool is to bet on quality vocational training, like the most advanced countries in Europe,” he added.

The new investment joins the 6.6 billion euros already invested in the area since the current government was sworn in for a second term in January 2020.

The announcement comes ahead of regional and local elections on May 28th and what promises to be closely-fought national elections at the end of the year.

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Spain’s overall unemployment rate stood at 13.26 percent during the first quarter, up from 12.87 percent the final quarter of 2022, according to national statistics institute INE.

But among those aged 16 to 25, the jobless rate stood at 30 percent in the period between January and March.

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EXCLUSIVE: What the new Spain-US social security deal means for Americans

In early April, the United States and Spain announced a new social security and pension agreement.

The first update to the bilateral agreement between the two countries since 1986 was announced by US Ambassador to Spain, Julissa Reynoso, and Spain’s Minister of Inclusion, Social Security, and Migration, Elma Saiz.

The official agreement is unpublished so The Local spoke with a representative from Spain’s Ministry of Inclusion, Social Security, and Migration as well as international tax experts to understand the agreement in more detail.

Key aspects of the agreement

The Ministry told The Local Spain that the agreement is a step towards, bolstering mobility between Spain and the United States by improving pension calculations and social security protections.

The agreement has to do with the accumulation of benefits and affects working Americans living in Spain. There are two main components; the first affects which system people pay into (Spanish or American) and the second maximises the amount people can collect from social security.

Regarding paying into social security, the new agreement extends the “posting period” from three years to five years, with the possibility of extending it to seven years.

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This is meaningful for US employees who are working in Spain and means that they can now pay into the US social security system, rather than the Spanish social security system for longer.

Whereas the employee contributions in Spain and the United States are similar, 6.4 percent in Spain and 6.2 percent in the United States, the rate that employers pay differs greatly. In the United States the employer pays 6.2 percent into social security, whereas in Spain they pay 31 percent.

Why does this matter? “Previously when Americans moved to Spain, US employers were cutting the amount that they paid in salary because the cost of employment went up so much”, Louis Williams, Co-Founder and CEO of Entre Trámites, told The Local Spain.

It’s also made employers hesitant to grant digital nomads an Employer of Record (EOR) which would allow American workers to be on a Spanish contract.

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In terms of collecting benefits, the representative from Spain’s Ministry of Inclusion, Social Security, and Migration says, “In the calculation of the Spanish pension there have been technical modifications that will benefit especially those people who developed their last working life in the United States, without this harming those who have worked in Spain immediately before requesting the benefit.”

In other words, under the new agreement, after calculating a person’s benefits under each country’s system, the recipient will be awarded the most beneficial of those two calculations.

Impacts for self-employed workers and digital nomads

According to the Ministry, “The agreement allows self-employed workers to temporarily move to the other State while maintaining their legislation, a possibility that was previously restricted only to employed workers.”

This has big implications for people who avoid moving to Spain because of the complicated social security contributions scheme, as they’ll now be able to continue paying US social security taxes (rather than Spanish) for up to seven years.

“The interesting thing is if this is extended to digital nomads because it would make the digital nomad visa more attractive,” says Williams.

“Why? Because if you’re posted by an employer (who can now avoid high Spanish social security taxes) you’re eligible for Beckham’s Law.” The law, which does not extend to autonomous works, can cap tax liabilities at 24 percent.

Being posted could make life much simpler, according to Elliott Locke, ACSI, co-founder of abroaden, a financial wellbeing and education start-up for people living abroad headquartered in Barcelona.

“The calculus is harder for freelancers given the different legal structures and methods for freelancing between the two countries. In many ways, if an American moves here to work remotely, it could be beneficial for them to have their US-based employer hire them on a local contract through an employer-of-record,” Locke told The Local.

In short, the new agreement could make it more attractive for U.S. companies to post employees in Spain, making them eligible for Beckham’s law and allowing autonomous workers to pay into the U.S. social security system, making it more beneficial and easier to be a digital nomad in Spain.

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Who benefits from the new agreement?

The people who will feel this new agreement the most are employers, digital nomads, retirees who have paid into both systems over the years, and finally, civil servants. “Spain has incorporated as possible beneficiaries of the Agreement those people who have contributed to the civil servant’s regime (passive class regime), who were excluded in the previous Agreement,” says the Ministry.

When can we expect the new agreement to come into force?

Don’t hold your breath; this is Spain after all, but we can expect the agreement to come into force within the next two years.

The deal has to pass through Congress before approval, which is likely why it has not yet been published. If things move quickly, people could expect to benefit within a year.

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