Spain’s self-employed workers are one step closer to paying contributions based on their real income, rather than a fixed monthly amount regardless of how much they make. This has been a longstanding demand by some leading freelancer associations, though not everyone agrees with the plans.
According to the Cadena SER radio network, the Social Security Ministry and the Tax Agency are sharing data to come up with a new system based on income brackets, similar to what is already done with Spanish income tax (IRPF).
Under the current system, freelancers can choose the contribution base that they want to pay a rate on – keeping in mind that the lower the base, the smaller the monthly fee – but this also means fewer benefits down the line. Right now, 85% of Spain’s self-employed have opted for the lowest available contribution base, which is €944. This amounts to a monthly payment of €250 or more for most freelancers. By comparison, the lowest base for salaried employees is €1,108, although the employer covers much of the contribution.
Sources at the Social Security Ministry said that nothing specific has been decided yet, but confirmed that there are plans for a change that aims to be simple. These sources insisted on the need for simplicity, because an administratively complex system would make the paperwork difficult for freelancers and could lead to failure, they said.
A longstanding demand
The need to adjust freelancers’ Social Security contributions to their actual earnings has been a subject of debate for years, both in Congress and among self-employed associations. A couple of years ago, when the minimum wage in Spain was increased by 22.3% (affecting the minimum Social Security contribution base for employees), self-employed associations rejected a similar increase. Freelancers ended up paying a higher monthly fee anyway, although the increase was far lower.
In the meantime, work got underway to develop a system that would find a better balance between what freelancers make and what they pay into the system. But new elections came around, followed by prolonged political gridlock, and the plans were relegated to the back burner. The coronavirus pandemic has also delayed talks that Social Security Minister José Luis Escrivá had meant to hold weeks ago with self-employed groups.
Lorenzo Amor, the president of the self-employed workers association ATA, warned on Monday that now is not a good time to introduce new income brackets that might in fact mean higher monthly payments for some freelancers who are now paying in the lowest possible amount.
“We will not support any change in the contribution system for the self-employed that means a raise in their contributions. This is not the right time, and the self-employed are really struggling,” he said, alluding to the impact of the coronavirus on thousands of small businesses, especially in the hospitality and retail sectors.
The ATA, which is the largest freelancer association in Spain, has never been a strong supporter of this kind of contribution system. Amor on Monday noted that there is no way to determine the real income of freelancers. But other self-employed associations such as UATAE and UPTA welcomed the executive’s plans.
“We celebrate the fact that a government is doing something about one of the sector’s longstanding demands, which is a protection system based on solidarity. It is important to come out of our state of precariousness and firmly join the welfare state, and this is a fundamental step toward that,” said María José Landaburu, secretary general of UATAE.
“The current system is unfair, since those with lower incomes are harmed, as they have to make a contributive effort that is above their possibilities,” said Eduardo Abad, president of UPTA, mirroring complaints by freelancers who are forced to keep making their fixed payments even on months when they have had little or no income.
English version by Susana Urra.