“Observatory” to Help Fight Fraud Against Social Security

We have discussed in past issues the serious battle Social Security has on its hands. Although we may

We have discussed in past issues the serious battle Social Security has on its hands. Although we may complain about the amount of money we pay each month towards our Social Security contributions, they are essential if we want to receive our well-earned pensions come retirement age.

When a business owner hires an employee, they do not only have to take their salary into account when calculating costs, but a portion of Social Security and a quarterly tax amount must be factored into the overall expense. These two concepts are based on a percentage of said salary so it stands to reason, the fewer hours the employee works, the lower their salary and the lower the taxes to be paid out by the business owner.

This fact has prompted many business owners to under declare the number of hours their employees actually work in an attempt to avoid paying their full share of employee contributions. This behaviour has its own repercussions because it also means affected employee will not receive the pension they have worked for as Social Security would not have knowledge of their complete work history and it will not be taken into consideration.

Social Security has taken many stances to prevent this type of behaviour but to mixed success. Just last issue, I wrote about a new law that was passed in which employees must log in and out of the workplace so there is a record of the real hours they work. Work Inspectors are doing their best to investigate whether employees found at their workstations during an inspection are actually supposed to be there and in the event of discrepancies, the employer may be forced to issue a full-time contract if for example, the inspector can see they should not be at the workplace at that time or if according to the log, they seem to continuously do “extra hours”.

However, despite their best efforts, the problem continues and for this reason on the 5th June 2019, Orden TMS/667/2019 was passed to create what they have called an Observatory in the fight against fraud in the Social Security system. The objective of this observatory is to recoup resources, i.e., funds that Social Security currently does not receive due to many business owners refusing to correctly register employee contracts, to combat irregular conduct as well as to reinforce trust in their system and its sustainability.

The law mentioned previously states the following objectives:

a)    To propel actions and mechanisms to improve prevention, detection and correction of fraud within the Social Security system

b)    To propose studies and data analysis in relation to registration, contribution and the treasury to identify irregularities and fraud, paying special attention to those areas where benefits may be unduly received.

c)    To propose specific actions to be utilized by inspectors and to incorporate joint objectives between the Treasury and the Work Inspection Department

d)    To carry out follow up studies on any actions taken, the results obtained and resources used

e)    To drive initiatives and proposals to amend current legislation to assist in the fight against fraud

f)     To prepare an annual report on these matters to analyse the results of their efforts


Two types of committee must be established to oversee these objectives and ensure they are achieved. The first committee is on a national level and is to be comprised of the following members:

·         President: Director of the National Treasury Department of Social Security

·         Secretary: Deputy Director of the National Treasury Department of Social Security

·         Spokespersons:

o    Two representatives of the Treasury Department of Social Security

o    Two representatives of the National Institute of Social Security

o    Two representatives of the Social Marine Institute

o    Two representatives of the National Work Inspection Department

o    Two representatives of Legal Services of the Social Security Administration

o    Two representatives of the most represented national syndicates

o    Two representatives of the most represented national business associations

The second committee type is on a provincial level and must be made up of the same members as detailed before but provincial representatives. The only difference is that plenary sessions must be convened at least twice a year on a national level whereas the provincial committees are required to meet at least four times a year.

Even though these new measures will require reorganization within Social Security ranks, it is interesting to note no additional funding will be granted to help them achieve their goals and there is a three-month deadline from approval of this law in which to set-up national and provincial committees.

Despite the fact, we all know it is be common practice to defraud Social Security by under declaring employment contracts, it should not be accepted. Just earlier today, I learned of a predicament somebody is in, a story that is far to frequent nowadays. This person approached their boss to ask for all their work hours to be computed in their contract which would mean an increase in the monthly payslip, but the response received was that this could be done as long as they pay their own Social Security! In what world is an employee responsible for paying their own social? Surely that is what SELF-EMPLOYED persons are expected to do!

Understandably, employees feel like they are on the bottom of the food chain and cannot object to unfair work conditions for fear of losing their jobs and many unscrupulous business owners will use that to their advantage, but if this cycle is ever going to be broken, employees must also accept responsibility for their situation in a way and demand their employer plays by the rules otherwise, it will not matter what measures Social Security tries to put in place to combat these disgusting practices, business owners will always find a way around them. To put a clear picture in your head, imagine reaching retirement age and discovering you are only going to receive a quarter or half the pension you are entitled to. Now that is a sobering thought…

About Sabrina L. Williams

Although I was born in the UK, I moved to the Canary Islands, Spain at a young age and I haven't looked back. The Canaries is a fantastic place to live, I mean you can do all types of outdoor activities practically all year round because of the great weather. Horses are my poison but the islands are also a superb spot for water sports so they do attract a lot of attention from people around the world. Anyway, enough about that. Back in 2011, I made one of the biggest, scariest yet best decisions I'd ever made and set-up my own business in the middle of a recession. I love what I do as no two days are the same, plus Spanish law keeps me on my toes as it is constantly changing (often without warning!) so there is always something new to learn. As I've branched out in the world of Administrative Consultancy, I decided to create a blog to discuss topics of interest to others in my industry and my clients, share tips and experiences, to see what new ideas people have for improving their businesses and the like so I hope you'll find the time to join me on this venture...

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