Spain’s Social Security Ministry is continuing with its plans to reform how the self-employed make contributions to the Social Security system. Under its proposal, presented Thursday to business associations and unions, freelancers would pay monthly contributions based on their real income, rather than a fixed monthly amount regardless of how much they make.
Right now, with a few exceptions, it is possible to choose one’s contribution base, which in turn determines the monthly fee to pay, regardless of actual income. There is a minimum payment to make even for the lowest earners. Currently, an estimated 85% of Spain’s self-employed have opted for the lowest available contribution base, which is €944. This amounts to a monthly payment of around €250 or more for most freelancers.
The proposed reforms would dramatically change this system. According to sources close to the negotiations, the ministry has proposed creating 13 contribution brackets based on the self-employed worker’s income, ranging from €600 and to €4,050 a month. The self-employed in the lowest bracket would pay a minimum monthly fee of €184, while those who exceed the top bracket, would pay €1,267 a month.
The Spanish government – which is led by a coalition of the Socialist Party (PSOE) and junior partner Unidas Podemos – also wants to make the system more flexible, according to the same sources. Under the proposal, the self-employed would be able to change their income bracket up to six times in a year, on the understanding that freelance work fluctuates from month to month. In this way, a freelancer would be able to adapt their monthly Social Security contributions when they earn the most and when they earn the least.
According to the sources, the proposal estimates that two in three freelancers in Spain will pay lower Social Security contributions under the new system. The self-employed who earn between €600 and €900 a month, for example, will see savings of €600 a year. As for the €70 reduced monthly rate, the government plans to keep it in place, but wants to offer it primarily to freelancers who earn less than the minimum wage.
The new system is set to come into effect in 2023. The government, however, earlier indicated that it would be rolled out progressively over a nine-year period.
The proposal, which will be subject to more talks on Monday, was well-received by two of Spain’s main self-employed unions, UPTA and UATAE on Thursday, but strongly criticized by the freelancer association ATA, which is a part of the Spanish Business Confederation (CEOE). ATA president Lorenzo Amor said the government “had no idea what it is like being self-employed,” reported Europa Press. UATAE, however, said Spain needed to move to a “fairer and more supportive [system] for the more than three million self-employed under the current one.”
The changes, which are aimed at ensuring the self-employed have greater protection under the Social Security system if they find themselves out of work, temporarily unable to work or in need of maternity or paternity leave, follow long-standing calls for the system to be reformed.
The Toledo Pact, for example, which was approved by Spanish parliament in 1995, recommended “making the payments of self-employed workers more in line with their real income” in order to guarantee the “financial sustainability” of the country’s pension scheme. The Spanish government also committed to making reforms in a July 2021 pact signed with business associations and unions, and as part of its recovery plan presented to the European Union.