So far this year there have been some important social security changes in Spain affecting both companies and employees. Most notably, the Social Security Solidarity Mechanism has come into force, which is generating confusion about its implementation and the implications for companies managing international assignments. In addition, there has been an update to the Official Minimum Wage (SMI) and there is an expected reduction in the maximum working hours.
Update to the Official Minimum Wage (SMI) and expected reduction in the maximum working time
The update of the Official Minimum Wage (SMI) in 2025, currently 1,184 euros gross in 14 payments, will probably not significantly affect the global mobility area, as most of the assigned employees have higher salaries. However, the expected reduction in the maximum working week to 37.5 hours per week, while maintaining the current salary, may imply the need for companies to adjust their mobility policies to ensure that it does not affect the performance of international teams. It will also be necessary to update the records of hours worked of assigned employees to ensure regulatory compliance.
These changes come on top of the impact of another key issue, the Social Security Solidarity Mechanism.
Solidarity Mechanism
Although published on 17 March 2023 in Royal Decree-Law 2/2023 of 16 March, it was not until 1 January 2025 that the solidarity mechanism, provided for in art. 19 bis of Royal Legislative Decree 8/2015 of 30 October of the General Social Security Act, came into force. However, the repeal of the Omnibus Act at the end of January raised doubts about its continuity, giving rise to rumours of its possible annulment. Only a few days later, a new Royal Decree seemed to reactivate it, restoring certainty to companies.
Definition
Who must pay it?
It affects workers who exceed the maximum contribution base (in 2025 this is 4,909.50 euros per month).
Implementation and Calculation
| Ranges | From – To | Rate |
| First range | €4,909.50 – €5,400.45 | 0,92% |
| Second range | €5,400.45 – €7,364.25 | 1% |
| Third range | €7,364.25 – No ceiling | 1,17% |
Company vs Employee split
How it affects global mobility
The new Solidarity Mechanism imposes an uncapped contribution for high salaries which will increase the cost per employee. This affects companies with employees paying contributions in Spain, as the lack of a cap will increase labour costs and complicate the financial planning of global assignments, in a country where traditionally the cost of social security has always been known and attractive as it is significantly lower compared to other neighbouring countries.
In the particular case of long-term share-based incentives, which are usually a significant part of the executive remuneration package, it will increase the burden on this income, as the final cost may not be known until the plans expire, deviating the possible budgetary provision for the plans, as well as the impact on the executive’s cash salary at the time of receipt, as the part corresponding to the employee’s contribution will have to be deducted.
Likewise, in cases where payroll is transferred to the host company, complications arise for the Spanish company in determining which compensation elements should be included in the social security contribution base, along with the administrative complexity of coordinating information. This is an area currently being discussed in major forums.
The Solidarity Mechanism represents a challenge for companies, which will have to adapt to the new rules because of the impact of higher social contributions on these incentives and ensure that compensation packages remain competitive and attractive to employees.
New horizons
Any social security contributions for pensions contribute directly to improving future benefits, reflecting their clearly contributory nature. However, the Solidarity Mechanism is different in nature to the Intergenerational Equity Mechanism, as it does not impact the contributor’s pension. This lack of a connection between the contribution and the benefit creates confusion about its true purpose.
The Social Security Solidarity Mechanism, by removing the cap on contributions, follows the path of significant change in the Spanish Social Security system. This new contribution not only has an impact on the highest salaries, but also provides an indication of the direction that future adjustments and reforms of the system might take. It is possible that similar measures will be explored in the coming years, which would further extend the scope of social contributions to a larger part of the working population. This scenario suggests that companies should be prepared to adapt to possible additional changes in contributions regulations that could transform the usual dynamics in the near future.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or
alternatively:
José Mª Leis Mayán
Partner
Sergio Murillo Martínez
Senior Manager
Francisco Cano Cuellar
Manager
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