Why you should expect a lower salary in Spain in January
Are you a contract employee in Spain who’s noticed that you’ve been paid less in wages this month than in previous ones? Here’s what you need to know.
Many salaried workers in Spain are in for a surprise as they check their nóminas (payslips) for the month of January 2024.
A net salary drop, and one that’s more noticeable the higher the earnings, is in store.
The reason for this is that you’ve been taxed more.
Firstly, Spain’s Intergenerational Equity Mechanism (MEI), introduced in 2023, is a social security contribution intended to help balance pension financing between generations.
The new MEI tax is paid by all workers regardless of their income. The percentage they pay on their salary will be the same for everyone, (including self-employed workers)
In 2023, the MEI tax represented 0.6 percent of workers’ monthly salaries (0.5 percent paid by the employer, 0.1 percent the employee).
In 2024, this percentage increases to 0.7 percent of monthly wages (0.58 percent paid by employer, 0.12 percent by employee), and the figure will continue rising until at least 2032.
It’s worth noting that self-employed workers also have to pay MEI, but they foot the whole 0.7 percent.
READ MORE: The new tax all workers in Spain will pay from 2023
However, the MEI is not the only reason why contract workers’ wages seem considerably lower in January 2024 than in December 2023.
The main reason for a January salary drop is that your company in Spain is withholding a higher amount of personal income tax (IRPF) at the start of the year, resulting in you getting paid less.
Businesses in Spain are obliged to withhold a certain percentage of your IRPF (Impuesto sobre la Renta de las Personas Físicas), which gets passed on to Spain's Hacienda tax agency.
Your gross wages and personal circumstances mean that the income tax withheld will vary.
Your employer will calculate the amount of your gross salary you must pay to the Spanish Treasury as personal income tax and will deduct it from your payroll month by month. This can either be carried out over 12 or 14 salary payments per year.
It’s also possible that a lower percentage of tax may be applied in the first months of the year, which is then adjusted by increasing it in the final few months of the year, or the other way round, which is why salary fluctuations happen.
Remember that if at the beginning of the year you received a raise, had a baby or opened a pension plan, it may mean that the tax withheld from your company will go up or down. For example, having a child gives you a tax reduction.
READ MORE: Why does my salary vary between months in Spain if I'm a contract employee?
Comments
See Also
Many salaried workers in Spain are in for a surprise as they check their nóminas (payslips) for the month of January 2024.
A net salary drop, and one that’s more noticeable the higher the earnings, is in store.
The reason for this is that you’ve been taxed more.
Firstly, Spain’s Intergenerational Equity Mechanism (MEI), introduced in 2023, is a social security contribution intended to help balance pension financing between generations.
The new MEI tax is paid by all workers regardless of their income. The percentage they pay on their salary will be the same for everyone, (including self-employed workers)
In 2023, the MEI tax represented 0.6 percent of workers’ monthly salaries (0.5 percent paid by the employer, 0.1 percent the employee).
In 2024, this percentage increases to 0.7 percent of monthly wages (0.58 percent paid by employer, 0.12 percent by employee), and the figure will continue rising until at least 2032.
It’s worth noting that self-employed workers also have to pay MEI, but they foot the whole 0.7 percent.
READ MORE: The new tax all workers in Spain will pay from 2023
However, the MEI is not the only reason why contract workers’ wages seem considerably lower in January 2024 than in December 2023.
The main reason for a January salary drop is that your company in Spain is withholding a higher amount of personal income tax (IRPF) at the start of the year, resulting in you getting paid less.
Businesses in Spain are obliged to withhold a certain percentage of your IRPF (Impuesto sobre la Renta de las Personas Físicas), which gets passed on to Spain's Hacienda tax agency.
Your gross wages and personal circumstances mean that the income tax withheld will vary.
Your employer will calculate the amount of your gross salary you must pay to the Spanish Treasury as personal income tax and will deduct it from your payroll month by month. This can either be carried out over 12 or 14 salary payments per year.
It’s also possible that a lower percentage of tax may be applied in the first months of the year, which is then adjusted by increasing it in the final few months of the year, or the other way round, which is why salary fluctuations happen.
Remember that if at the beginning of the year you received a raise, had a baby or opened a pension plan, it may mean that the tax withheld from your company will go up or down. For example, having a child gives you a tax reduction.
READ MORE: Why does my salary vary between months in Spain if I'm a contract employee?
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.