The Spanish government first announced its plan to overhaul the autónomo system back in October 2020, saying that they would propose a way in which social security payments would be linked to yearly earnings, rather than just one flat fee.
Currently, most autónomos pay around €283 a month (lower in first two years) in social security fees, meaning that you contribute the same, whether you earn €20,000 a year or €200,000.
In theory, an overhaul the autónomo system is a good thing and something that self-employed people have been demanding for years.
However, the new proposal by Spain’s Minister of Inclusion, Social Security and Migrations José Luis Escrivá could see some autónomos paying up to €1,220 per month, just in social security contributions.
Self-employment unions in Spain have already decreed the new payment proposals to be “outrageous”.
Both the president of the National Federation of Self-Employed (ATA), Lorenzo Amor, and that of the Union of Professionals and Self-Employed Workers (UPTA), Eduardo Abad, have expressed anger at the new proposal.
Speaking to Europa Press, Amor criticised the move and has rejected the proposal. “Tomorrow the CEOE Social Security commission will meet, and there is no way we will agree with this draft that the Government has sent,” he said, after noting that “there hasn’t been any dialogue or negotiations in place”.
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How would the scheme work under the new proposal?
Under the new proposal, the minimum quota for the self-employed would be €90 per month and would rise from there, up to €1,220 per month, depending on how much you earn.
However, the €90 per month would only be applicable to those earning up to €3,000 net per year, which is not even enough to live on in Spain.
This would mean that those earning just €3,000 per year or less would be expected to pay €1,080 in social security fees.
And it doesn’t seem to get any better from there upwards. Those earning between €12,600 and €17,000 net per year would pay €275 per month and those earning between €17,000 and €22,000 would pay €305 per month.
This is totally bonkers. Great that lower earners pay less as 'autonomos' but the mid to higher earners would pay insane amounts. This is a great way to discourage entrepreneurship. https://t.co/synBJcPCSX pic.twitter.com/Q66GnpP43m
— Josh Feldberg 🐦 (@JoshFeldberg) May 13, 2021
According to Statista, the average annual wage in Spain in 2019 (not taking into account the Covid-19 years) was €27,500. Spain’s National Statistics Institute reported in June 2020 a lower average gross annual figure of €24,000, but this applied to 2018.
Under the new proposal, it means that anyone earning the average amount or above would be paying €425 to €545 or more per month in social security payments. The top amount rises to €1,220 per month for those earning above €48,841 per year.
Self-employed in Spain already pay the highest monthly social security fees in Europe, far higher than the UK’s €14/month (minimum fee), the Netherlands’s €50 a year, and Germany’s €140 for those earning more than €1,700 a month.
Many already consider the flat fee of €283 a month to be crippling, and if the new thresholds come into play, it could mean that thousands could struggle to even stay self-employed.
When would the new rules come into force?
If Escrivá gets the go-ahead, the new changes to social security payments will start to come into force next year, but the effects wouldn’t be seen until 2023.
However, the changes would not happen all at once and the social security payments would gradually rise or fall over a period of nine years, during which the reform would be progressively implemented.
How would the process work?
Because of the nature of being self-employed, most freelancers who work for a variety of different clients don’t know how much they will earn in a year. Therefore, you will have to estimate your annual earnings in advance to know how much social security you will have to pay. You will be able to change your forecasted earnings up to six times per year.
If at the end of the year, your estimate is different from the amount you actually earned you will have to pay extra social security or will receive a refund, depending on whether you earned more or less.