The new 'solidarity surcharge', an additional contribution that will be applied in the salary brackets that exceed the maximum contribution base and that will increase as the salary grows, will act as a revulsive for some companies to choose to relocate their workers to other countries. This is what different law firms specializing in labor law warn this newspaper, which believe that this impact will be seen even more in the medium and long term.

"The solidarity fee can have an impact on the relocation of managers to avoid this new surcharge that has no impact on benefits. Companies must make the calculations of this new additional solidarity contribution and depending on the number of managers and managers who exceed the maximum contribution base and the impact on expenses, they will be able to make decisions," Carlos de la Torre, partner of Laboral de Gómez Acebo & Pombo (GA&P), tells EL MUNDO.

He believes that the relocation of managers to save this solidarity fee 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 applicable law of the country of destination to save costs", he believes that the relocations "will not be massive because managers will also be interested in maintaining long careers for sure in Spain". Even so, "the reform has been approved by decree and only has the endorsement of the unions but with the frontal rejection of the CEOE. From that angle, companies can evaluate alternatives to save costs," he adds.

What is the solidarity surcharge?


This is a novelty included in the draft law on pension reform, 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 remuneration between 10% above the maximum base and 50%; and 7% for the part of 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 contribution rate for common contingencies.

According to the Independent Authority for Fiscal Responsibility (AIReF) this solidarity tax will increase Social Security revenues by just one additional tenth of GDP (about 1.200 billion euros today).

Workers who earn, for example, between 70,000 and 100,000 euros gross, will have to pay each year 7,500 euros gross more to Social Security in 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 the AIReF.

The solidarity surcharge will not only affect senior officials, recalls Pedro Llorente, counselor and lawyer of 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 over the next 20 years, not only affects management positions but also middle managers and highly qualified personnel. whose capture and retention is not easy in a context of great uncertainty due to increased energy, financial, fiscal and hyper-labor or para-labor costs".

"The labor factor is especially sensitive to measures such as this surcharge on contributions, especially when neighboring countries or our environment are adopting tax policies favorable to the recruitment of talent and teleworking can be used in certain cases. We must not forget that our economy is increasingly internationalized and has a special impact on sectors such as finance, energy, technology and services, in general," he warns.

The same warning launches the Labor team of Hogan Lovells: "In reality it could encourage not only the relocation of managers, but of all those people who charge 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 expense for both companies and workers but, however, there is no economic impact on the pension that these workers will receive at the time of retirement. Therefore, in order to avoid 'extra' costs 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 hiring large companies to senior positions in Spain and directly managing matters from other EU countries where there are no such surcharges, "they admit.

Portugal as an alternative destination

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, erect the neighboring country as an important competitor to attract talent. "The Social Security system in Portugal has lower costs than in Spain and also income tax in Portugal has competitive advantages for managers to pay less taxes. From the perspective of savings in Social Security and tax optimization, some multinationals may consider placing their executives in Portugal. In addition, proximity and various other factors (climate, quality of life, etc.) can facilitate this transfer of executives, "admits the partner of GA&P, who recalls that "community rules facilitate the free movement of workers and the freedom to provide services.

Ignacio Corchuelo, Garrigues' partner in Labour, points out 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 is not ruled out that there is a transfer to Portugal, but today, it would be subject to a Social Security regime 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 different issues, implies the assignment to a public health system, which in Spain is very developed. "

He believes that the relocations 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 contributed.

Ester Maza, partner of Baker McKenzie, also distances 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 by the mere fact of the increase", and highlights that "Social Security costs are very high in many European countries, like France, Sweden or Italy, so he does not think that Spain will stand out excessively for this reason".

Fewer salary increases

Elena Esparza, partner of Laboral of CMS, puts on the table another issue: the solidarity quota could discourage salary increases to save contributions: "Given that the solidarity quota will mean a higher cost, it could have an effect on wage containment by companies in the medium and long term, since it does not come into force until 2025. Some multinationals could consider locating their management in other countries with lower listing costs. However, this decision does not depend solely on contribution costs, but on other factors such as labor regulations in these countries, or the company's strategic policy. We understand that the measure could have more 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 quota of solidarity our country is placed in a position of weakness in competitiveness and will be one of the countries with the highest cost of employment on the side of social contributions. On the side of future spending on pensions, the reform aims at raising contributions but without impact on benefits, breaking the principle of contribution," laments De la Torre, of GA&P.

For the Garrigues expert, the important thing about any Social Security regime 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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  • Articles Alejandra Olcese
  • Pension
  • Social security
  • Employment
  • Wages