The new ‘solidarity surcharge’, an additional contribution that will be applied to salary brackets that exceed the maximum contribution base and that will increase as wages grow, will act as a stimulus for some companies to choose to relocate their employees. workers to other countries. This is what different law firms specialized in labor law warn this newspaper, who believe that this impact will be seen even more in the medium and long term.
“The solidarity quota may have an impact on the relocation of managers to avoid this new surcharge that has no impact on benefits. Companies must calculate this new additional solidarity contribution based on the number of managers and managers who exceed the maximum contribution base and the impact on expenses will be able to make decisions,” Carlos de la Torre, a partner at Laboral de Gómez Acebo, told EL MUNDO
He believes that the relocation of managers to save this solidarity quota could be an “excessively aggressive” measure, since it implies a change of residence of the worker and his life project, so although he contemplates “that companies and workers seek the law destination country to save costs”, believes that the relocations “will not be massive because managers will also be interested in maintaining long insurance careers in Spain”. Even so, “the reform has been approved by decree and only has the endorsement of the unions but with the direct rejection of the CEOE. From this angle, companies can assess alternatives to save costs,” he adds.
This is a novelty included in the draft pension reform law, which the Government has agreed with the unions after obtaining the approval of the European Commission.
This surcharge specifically implies that the amount of remuneration that exceeds the maximum contribution base (the part of the salary that until now was exempt from paying Social Security contributions) will be taxed with a new rate of 5.5% that will be applied from the maximum base and up to the value of that base increased by 10%. The rate will be 6% for the part of the remuneration between the 10% above the maximum base and 50%; and 7% for the part of the remuneration that exceeds the previous percentage.
The distribution of the solidarity quota between company and worker will maintain the same proportion as the distribution of the type of contribution for common contingencies.
According to the Independent Authority for Fiscal Responsibility (AIReF), this solidarity tax will increase Social Security income by just one additional tenth of GDP (some 1,200 million euros today).
Workers who earn, for example, between 70,000 and 100,000 euros gross, will have to pay an additional 7,500 euros gross each year to Social Security as contributions -to be distributed between them and the company-, while if the salary reaches 100,000 euros the tax increase will be 9,700 euros, says AIReF.
The solidarity surcharge will not only affect senior officials, recalls Pedro Llorente, director and lawyer for Laboral de Cuatrecasas: “Given the amount on which it is applied (54,000 euros gross per year), its implementation from 2025 and its progressive increase during the following 20 years, not only affects management positions but also middle managers and highly qualified personnel whose recruitment and retention is not easy in a context of great uncertainty due to the increase in energy, financial, fiscal costs and labor or para-employment hyperregulation” .
“The labor factor is especially sensitive to measures such as this surcharge on contributions, especially when neighboring countries or those around us are adopting tax policies favorable to attracting talent and teleworking can be used in certain cases. We must not forget that our economy It is increasingly internationalized and has a special impact on sectors such as finance, energy, technology and services, in general”, he warns.
The Hogan Lovells Labor team launches the same warning: “In reality, it could encourage not only the relocation of managers, but also all those people who earn more than 54,000 euros per year, for example from sectors related to engineering or consulting. In the end, what is intended to be achieved with the solidarity quota is to generate greater spending for both companies and workers but, nevertheless, there is no economic impact on the pension that these workers will receive at the time of retirement. Therefore, in order to avoid ‘additional’ spending for companies and workers, some companies may look for alternatives in other countries that offer better conditions.”
“The reality is that multinationals could benefit if they decided to manage territories such as Spain from other countries of the European Union, since depending on the country chosen they could have lower costs. This could eventually be detrimental to the Spanish economy by not hire large companies to senior positions in Spain and directly manage matters from other EU countries where there are no such surcharges”, they admit.
Given the proximity between Spain and Portugal, there are many multinational companies that appoint managers for the Iberia area that deals with the decisions of both countries. In many cases, these managers were physically located in Spain and from here they coordinated the entire peninsula.
This change, together with fiscal issues, makes the neighboring country an important competitor to attract talent. “The Social Security system in Portugal has lower costs than in Spain and, in addition, personal income tax in Portugal has competitive advantages for managers to pay less taxes. From the point of view of saving in Social Security and tax optimization, some multinationals may consider placing to its executives in Portugal. In addition, proximity and various other factors (climate, quality of life, etc.) can facilitate this transfer of executives”, admits the GA partner
Ignacio Corchuelo, a partner at Laboral de Garrigues, points to this newspaper, however, that although in Portugal the cost of contributions is much lower, so are the benefits, which could discourage some movements: “It cannot be ruled out that there is a transfer to Portugal, but today, it would be subject to a Social Security scheme like the Portuguese one, cheaper in contributions, but also lower in the level of benefits.In addition, registration in the Social Security Regime, although Social Security and Health are two differentiated issues, it implies affiliation to a public health system, which in Spain is highly developed”.
He believes that the relocation of workers could be seen in the long term, when the benefits derived from Social Security are no longer balanced with respect to what is quoted.
Ester Maza, a partner at Baker McKenzie, also rules out this possible effect in the short term: “It is true that the surcharge increases business costs, but it does not seem foreseeable that it will have the effect of encouraging the relocation of managers due to the mere fact of the increase”, and emphasizes that “Social Security costs are very high in many European countries, such as France, Sweden or Italy, so he does not believe that Spain will stand out excessively for this reason”.
Elena Esparza, CMS Labor partner, puts another issue on the table: the solidarity fee could discourage salary increases to save contributions: “Since the solidarity fee will mean a higher cost, it could have an effect on salary containment by companies in the medium and long term, since it does not enter into force until 2025. Some multinationals could consider locating their address in other countries with lower listing costs.However, this decision does not depend solely on listing costs, but other factors such as labor regulations in those countries, or the company’s strategic policy. We understand that the measure could have a greater impact on wage containment by companies.”
The experts consulted by this newspaper also warn that the pension reform, which is based on an “aggressive rise in social contributions”, will reduce the country’s competitiveness.
“Spain has opted for an aggressive rise in contributions to increase income and with this new solidarity quota our country is placed in a position of weakness in competitiveness and is going to be one of the countries with the highest cost of employment on the of social contributions. On the side of future spending on pensions, the reform aims at raising contributions but with no impact on benefits, breaking the principle of contributory”, laments De la Torre, from GA
For the Garrigues expert, the important thing about any Social Security scheme is that there is a correlation between contributions and benefits, and “in Spain, in the medium term, it will be clearly unbalanced for people with high salaries,” he points out.
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