Social Security contributions represent a big part of a company’s labour cost.
The contribution’s base is , broadly speaking , the monthly salary of the employee, either in money or in kind. Non regular payments ( year end bonus, Christmas pay…) should be taken into account and added to the standard monthly salary.
On the contrary, payments to the employee not representing direct compensation for the work rendered are not included in the contributions base. The most common items of this nature are indemnities, per diem allowances, sickness pay etc.
A very important feature of Spanish Social Security Contributions is that the base to calculate the contribution is floored and capped. Thus, regardless the employee’s salary, the contributions base must be comprised ( for the year 2013) between EUR 753 and EUR 3.426 per month. Therefore, if an employee earns less than EUR 753 per month the contributions is calculated on that figure. Likewise, if an employee earns more that EUR 3.426 per month the base to calculate his social security contributions should be limited to EUR 3.426.
The rate applicable to the contributions base is as high as 36,25 % for standard employees. From this amount employers pay 29,9 % and employees pay the remaining 6.35 %. The employer is also obliged to pay a premium to the Accident Insurance Fund . The premium varies depending on the type of job and increases in accordance with the risk involved. Currently the maximum premium , applicable for example to miners and bricklayers is 11,7 % of the contribution base and the minimum premium is 0,99 %, applicable to clerks and other office workers.
The employer shall pay the social security contributions within 30 days following the end of the month to which they refer ( social security contributions of February must be paid before March 31). The employee share of the contribution is deducted by the employer from his monthly payroll.
Social Security contributions are due even during high risk pregnancy, maternity leave and illness , although in these circumstances the employee is not working and, accordingly, not being paid. In these circumstances the worker’s contribution is the same than the one of the last month worked before these circumstances occurred. It should be also noted that during illness the employer, together with the social security contribution, must face a compulsory sickness pay. This sickness pay is only due when the illness or injury is motivated by a non professional cause and only last for fifteen days – from the 4th day of illness to the 20 th because the first three days are not paid-. The daily sickness pay amounts 60 % of the employee’s average daily salary.
The Budget Law for 2013 establishes certain reductions in the employer’s portion of social security contributions in order to promote the hiring of several worker’s groups. In order for the employers to benefit from this reductions, the following conditions must be met:
- The contracts entered must be permanent ( that is, non subject to any term).
- Employees must have been unemployed before the contract.
- Employees must belong to the following groups:
- Long term ( at least, one year) unemployed people older than 52 years old and perceiving an State benefits: No contributions at all.
- Women to work in certain professions. There is a list stating which professions qualify for the benefit – in general professions where women are under-represented. : A reduction of EUR 1.500 per year during 3 years
Other group which benefit from important social security reductions are the disabled. Employers hiring disabled people can apply a reduction in his portion of the social security contributions of an annual amount of EUR 1.500 to 6.300 depending the degree of incapacity, the age and the gender.
They are also entitled to get a non reimbursable subsidy of EUR 3.000 for each full time disabled employee hired. This reductions and subsidies are only applicable for permanent labour contracts of unemployed disabled people or under short term labour contract expanding from 1 to 3 years.
There is a social security contribution’s exemption for people hired to replace employees in maternity leave ( sixteen weeks), providing the newly hired employee is unemployed.