Read news from:
Austria
SHARE
COPY LINK
For members

WORKING IN SPAIN

What we know so far about Spain’s next minimum wage increase

Spain's Interprofessional Minimum Wage (SMI) is set for another rise in 2024. Here's what we know so far, from when it is likely to come into force to how much extra money minimum earners are likely to get.

Published: 27 November 2023 16:28 CET
Updated: 8 December 2023 10:50 CET
What we know so far about Spain's next minimum wage increase
Spain's Deputy Prime Minister Yolanda Diaz calls for an increase to the minimum wage in Spain. Photo: JAVIER SORIANO / AFP

Spain’s minimum is currently €1,080 gross per month over 14 payments (€15,120 gross per year), an amount that has been in place since February 2023. That amount now looks set to rise. 

Spanish Deputy Prime Minister and Minister of Labour Yolanda Díaz has said that Spain’s SMI “has to maintain purchasing power” and rise in line with the average CPI rate between December 2022 and November of this year, which she estimates will be between 3.7 and 3.8 percent.

When will Spain’s minimum wage increase?

The government, unions and employers have already begun to outline their positions regarding the negotiation to raise the SMI that the self-employed and companies will have to pay their employees from 2024.

Experts predict that this will most likely happen from January 2024, but it depends on what happens in the meeting on Thursday November 30th.

How much is it likely to increase?

While no one yet knows exactly how much the Spanish minimum wage will increase and what it will be, there has been some speculation and various proposals.

The Spanish Confederation of Small and Medium Companies (CEOE-Cepyme) proposed raising the SMI by six percent over the next two years, to €1,112 over 14 payments in 2024 and to €1,145 in 2025, a proposal that the CCOO and UGT unions call “insufficient”.

The unions have made a counter proposal increase that reaches 60 percent of the average salary as they claim that the evolution of the price of basic products, such as food, must be taken into account. This equates to €1,200 over 14 payments instead.

Spain’s Labour Minister also aims to achieve this increase to €1,200, which would take effect over the next two years.

What are the issues with Spain’s minimum wage?

Spain’s new PSOE-Sumar government needs to strike a balance between providing a decent income to workers and not dissuading employers from hiring more workers, which could destabilise the country’s notoriously rocky economy and employment numbers.

The last minimum wage increase in February 2023 was of 8 percent; this time the rise will be between 3 and 12 percent.

Spain’s left-wing parties consider that an SMI rise will improve the living conditions of workers struggling to make ends meet during times of high inflation, whilst right-wing parties such as the PP and Vox usually side with business owners and their opposition to mandated wage increases.

Admittedly, self-employed workers and small business owners will be the worst affected by the increase, having to absorb the increasing cost of hiring employees; not just higher wages but increased social security contributions.

How does Spain’s minimum wage compare with other EU countries?

Spain still has a much lower minimum wage than some of its EU neighbours. For example, in May 2023 France increased its SMI from €1,709.28 to €1,747.2 per month.  

If you take the Spanish SMI amount over the normal 12 months, this equals to €1260, which is still €487.20 less than the French each month.

In Germany it’s currently €1,997 per month, in Ireland it’s €1,909, in Slovenia it’s €1,203 and in Portugal it’s €886. 

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

AMERICANS IN SPAIN

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

The Local speaks to the Spanish government and tax experts to understand what the new social security and pensions agreement between the United States and Spain means for American workers, digital nomads and pensioners in Spain.

Published: 15 May 2024 11:10 CEST
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.

READ ALSO:

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.

READ ALSO:

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.

READ ALSO:

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.

READ ALSO:

SHOW COMMENTS