Government’s Proposed New Self Employed Reform Favours Lower Earners

The Spanish government has proposed a major overhaul of Spain’s autónomo system for calculating self employed workers social security contributions.

The overhaul is an attempt to redress the present pension deficit of self employed workers in Spain.

In 2019 retired self-employed workers received an average €686 monthly pension whereas the average for payroll retirees was €1,091.

The new rates will allow for lower tariffs for those earning less and and increases for those earning more.

The present system gives self employed several bands of social security contributions but are not tied to the income earned.

According to the Spanish Tax Agency, 86% of workers pay €289 per month rate or less, regardless of income, so that a self employed person who actually earns €10,000 can end up paying the same rate as someone earning €50,000.

Under the new proposals a freelancer who earns €10,000 will pay €235 per month while those earning €50,000 will pay €1,220.

The proposed new system would create 13 social security bands, based for the first time on income declared or anticipated for that tax year.

  • Band 1 –   90 Euros monthly contribution – Income up to 3,000 Euros per annum
  • Band 2 – 120 Euros monthly contribution – Income:  3,000-6,000 Euros per annum
  • Band 3 – 185 Euros monthly contribution  – Income:  6,000- 9,000 Euros per annum
  • Band 4 – 235 Euros monthly contribution  – Income:  9,000 – 12,600 Euros per annum
  • Band 5 – 275 Euros monthly contribution  – Income:  12,600-17,000 Euros per annum
  • Band 6 – 305 Euros monthly contribution – Income:  17,000-22,000 Euros per annum
  • Band 7 – 425 Euros monthly contribution – Income:  22,000-27,000 Euros per annum
  • Band 8 – 545 Euros monthly contribution – Income:  27,000-32,000 Euros per annum
  • Band 9 – 670 Euros monthly contribution – Income:  32,000-37,000 Euros per annum
  • Band 10 – 800 Euros monthly contribution – Income: 37,000- 42,000 Euros per annum
  • Band 11 –  935 Euros monthly contribution – Income:  42,000-47,000 Euros per annum
  • Band 12 – 1,075 Euros monthly contribution – Income: 47,000-48,841 Euros per annum
  • Band 13 – 1,220 Euros monthly contribution – Income:  48,841 Euros & Above per annum
In addition contributors can change their band up to 6 times a year and make the adjustment for any discrepancy between contributions and income which can mean a refund or additional payment depending on the final income declared.

The proposals were announced in parliament by the Social Security Minister, José Luis Escrivá, who said the government was in consultation with trade union, employer and small business representatives.

It is expected that the proposed changes would be introduced in 2022, to take effect for the 2023 tax year.

The new system is likely to benefit lower earning self employed workers and increase pension benefits whilst at the same time penalising early retirement.

The average retirement age is presently 64.4 years and the proposals would introduce tougher benefit reductions for early retirement. For example, a worker who paid into the system for under 38.5 years and wanted to retire two years ahead of time would get a 21% reduction on their pensions, compared with 16% under the current system.




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