MADRID – The social security contribution for the self-employed in Spain will be linked to their income. The plan is still under discussion, however, freelancers will pay based on what they earn instead of a monthly fixed amount.
The monthly social security contribution will vary between €184 and €1,267. The plan is at the table with the Spanish Ministry of Social Security, which has long wanted to reform the social security system. Furthermore, the government presented this proposal to business associations and trade unions on Thursday. Under the proposal, freelancers would pay monthly premiums based on their real income, rather than a fixed monthly fee, regardless of how much they earn.
Choose your own premium income
At the moment, with a few exceptions, it is possible to choose your own premium income. This income determines the monthly amount you receive, regardless of the actual income. Even the self-employed who earn the least or nothing at all have to pay a minimum amount. Around 85% of the self-employed in Spain currently opt for the lowest defined contribution income. That is set at €944. Therefore, based on this, most self-employed people pay an amount of between €250 and €300 each month.
Thirteen premium tranches
The proposed reforms would fundamentally change this system. According to El País, sources close to the negotiations say the ministry is proposing 13 premium brackets. These brackets are based on the income of the self-employed and range from €600 to €4,050 per month. The self-employed in the lowest bracket pay a minimum monthly amount of €184, while those who exceed the upper bracket pay €1,267 per month.
Change up to six times a year
The Spanish socialist government also wants to make the system more flexible. Based on the proposal, self-employed persons can change their income up to six times a year. After all, the work for freelancers fluctuates from month to month. This way, a freelancer can adjust his monthly premiums when he earns the least and when he earns the most.
Two out of three freelancers will pay less
The sources estimate based on the proposal that two out of three freelancers in Spain will pay lower social security contributions under the new system. The self-employed person who earns between €600 and €900 per month will see savings of €600 per year. Futhermore, the government wants to keep the reduced monthly rate of €70. They mainly offer this to self-employed workers who earn less than the minimum wage.
The new system is expected to come into effect in 2023. However, the government previously said it wanted to roll it out gradually over nine years.
Criticism of proposal
The proposal will be discussed on Monday. On Thursday, two of the main trade unions for the self-employed received the news well. These are UPTA and UATAE. However, it received criticism from the freelancers association ATA, which is part of the Spanish business community. According to ATA president Lorenzo Amor, the government has “no idea what it’s like to be self-employed,” reported Europa Press. However, UATAE said Spain should move to a “fairer and more supportive [system] for the more than three million self-employed”.
Call for change has been around for a long time
The changes are designed to give the self-employed better protection under the social security system if they become unemployed, are temporarily unable to work, or need maternity or paternity leave. They follow long-standing calls for the system to reform.