The Government agreed on the increase of the Minimum Interprofessional Salary for 2021 on September 16, 2021. This agreement with the unions means an increase in the Minimum Interprofessional Salary (SMI) for the current year. The SMI will go up by €15 gross per month (around 1.6%), thus reaching €965 per month in 14 annual payments.
This increase will come into effect when it is published in the Official State Gazette (BOE). It will be retroactive as from September 1, 2021.
Minimum Interprofessional Salary 2021
The SMI is “the minimum amount of remuneration that an employer is obliged to pay to its employees for the work they have performed during a given period”. According to article 34.1 of the Workers’ Statute, the maximum duration of the ordinary working day will be 40 hours of effective work per week.
The increase will affect all workers who in annual computation earn less than €13,510 if they work full time. If they work part-time, it will have to be calculated proportionally to the working day. The aforementioned increase must be applied automatically.
The beneficiary groups will be those who do not have a collective bargaining agreement that regulates their labor relationship and are receiving the SMI. Such as, for example, domestic workers. On the other hand, all those workers whose collective bargaining agreements currently contain salaries lower than the new minimum interprofessional wage will also benefit. These people will also see their salaries increased without the need for new salary tables to be published in the collective bargaining agreement.
Finally, it should be noted that those workers with internship contracts whose salaries, after applying the corresponding legal percentages, are below the new minimum interprofessional wage, on an annual basis, will also see their salaries increased.
Exceptions to the Minimum Interprofessional Salary 2021
In the case of Spain, there are no exceptions either by Autonomous Communities or by sectors of activity.
However, until today and unless there are changes to the contrary, two exceptions are allowed, which will now have to be clarified whether they are maintained or not:
- When the laws of the Autonomous Communities and/or Ceuta and Melilla establish the SMI as an indicator or reference of the income level to determine the amount of certain benefits. Or for accessing aid, benefits or public services. Also known as “Iprem”.
- When the minimum salary is included in a collective bargaining agreement. Also as a reference and not as remuneration.
In these two cases, when these references to the SMI occur, and specifically the SMI of a specific previous year is taken as a reference. Both for regional (non-state) regulations and contracts of a private nature that entered into force or were concluded after January 1, 2018.
The Ministry of Labor and Social Economy, has not yet decided how much the aforementioned Iprem will increase.
Implications and conflict with the SMI increase.
This agreement does not include the employers, especially the CEOE (Spanish Confederation of Business Organizations). That assured that they do not support this measure, taking into account that the economic situation is still delicate. Although they are not against increasing it, they are against doing it now, when the economy and companies have not yet recovered from the effects of the pandemic.
Among the criticisms of this increase, we can highlight several:
- Its impact is diverse, as it may disrupt the execution of contracts with public administrations. The reason is that these are not obliged to increase the payments to the tendered companies in the same proportion as other companies are obliged to increase the minimum salary of their workers. The employers demand that the administrations pass on by law this increase in their payments to the subcontracted companies. Although there is no confirmation to date, it seems that both the government and the unions would be willing to meet this demand.
- Another of the direct repercussions is on Social Security income. Since the minimum contribution base on which the rates that determine the collection of the pension system are applied is automatically linked by law to the SMI. That is, the minimum contribution base of the General Regime for salaried employees is always identical to the amount of the SMI fixed by law.
- In the case of the self-employed, this increase in the SMI also affects them in the form of payment of Social Security Contributions. Both the self-employed who pay social security contributions at the minimum rate and the self-employed who pay social security contributions at the top of the contribution table.
- Another impact is that it may drag up the wage tables of the immediately higher steps in collective bargaining agreements.
Impact on employment
Undoubtedly, both domestic workers and agricultural workers will be affected.
- The former have been hard hit by the pandemic, as many families have decided to dispense with their services. Or, failing that, their hours have been reduced.
- The agricultural sector will not be able to cope with the increase in the minimum salary, or at least it will be very difficult for them. Due to the coronavirus and the crisis of the low prices of their products, they say that it is unsustainable to pay this salary increase.
- A good part of the economic theory defends that strong increases in the SMI can destroy employment. In addition to slowing down the creation of new jobs or pushing part of the recipients of this income into the underground economy. However, another party believes the opposite and argues that these increases in the SMI increase wage income and boost domestic demand and consumption. Generating more growth and employment.
Labour Consulting and HR Management.