There has been much talk over the past few years about bringing the Spanish Social Security system in line with the rest of Europe because as I’m sure you’re aware, sole-traders in this country pay a heck of a lot more than most other European countries (currently a minimum of 278,88 euros without taking possible reduced rates or flat-rates into consideration). In any case, the proposal currently on the table and a source of debate is for sole-traders to contribute in accordance to their income.

As it stands, sole-traders contribute as per minimum and maximum “salaries” and include additional concepts such as Professional Contingencies (for those business owners with a high risk of work-related accidents or illness so in the event of an incident, they would be entitled to higher compensation if they were unable to work) and Closure of Business Activity (in the event the business fails on ALL levels, the business owner may be entitled to a type of “unemployment” pay). The current set-up does not take into consideration what the business owner actually earns, rather, the parameters are rigid and are based on what Social Security calculates a sole-trader must earn as a minimum to pay living expenses etc. For this reason, the vast majority of sole-traders contribute the minimum amount possible.

Unfortunately, the minimum rates established are normally affected by any changes to minimum wage parameters for those who work under contract and this baffles me because they are two completely different concepts. The good news is that the Government has announced its intention of separating these concepts so that a new contribution system can be introduced whereby the sole-trader would pay in accordance to their income, however, the plan also includes a solution for those who earn less than minimum wage in which a flat-rate of approximately 50 euros per month would be payable. In theory, this would mean that if the General Budget is approved in 2019 in its current state, those sole-traders who earn less than 900 euros per month (calculated to 14 months -12 natural months plus 2 months bonus as some employees are entitled to), may benefit from this flat-rate measure.

What seems to be a definite no matter which way this situation is resolved, is another increase to the current contribution rate despite sources close to the Prime Minister state that no decision in that regard has been made.

Another modification in the pipeline has to do with the supplementary concepts I mentioned previously (Professional Contingencies and Closure of Business Activity) that currently are optional but may become obligatory in future which would again increase the monthly contribution amount to account for the additional cover.

As you can see, snippets of information about this Project are being filtered out slowly but there are so many aspects that have not been evaluated in depth and must be considered carefully before making any final decisions about how to proceed so we are expecting to hear further on the matter before the year is out.

Maybe 2019 will finally be the year we see real progress in this regard as it is an issue that professional associations have been demanding for many, many years to help sole-traders pay according to their means and not to some preestablished concept put in place for all business owners across the board without any consideration for personal circumstances. On the other hand, since it seems to be common practice to under declare anything that may pass under the radar, something the Spanish are notorious for, these amendments could also mark the demise of the healthcare system!!! 

As seen in The Voice Fuerteventura

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...

Leave a Comment