Increase in costs for salaries that exceed the maximum contribution base

Starting in 2025, companies will see increased costs for salaries that exceed the maximum contribution base.

The regulatory development of additional contribution rules for higher salaries has been approved.

The so-called "Additional Solidarity Contribution," effectively a cap removal on social security contributions for the highest salaries within the workforce, was already included in Royal Decree-Law 2/2023 of March 16, which introduced urgent measures to expand pensioners' rights, reduce the gender gap, and establish a new sustainability framework for the public pension system. Now, with its publication in Royal Decree 322/2024 of March 26, which amends the General Social Security Collection Regulations, the rules for applying the additional contribution from next year have been established.

Starting January 1, 2025, employees with a salary exceeding the maximum contribution base (in 2024, this is €4,720.50 per month or €56,646 per year) will be required to make an additional solidarity contribution, calculated as follows:

• A rate of 0.92% on the portion of the salary between the maximum contribution base and an amount exceeding that base by 10%.
• A rate of 1% on the portion of the salary between 10% and 50% above the maximum contribution base.
• A rate of 1.17% on the portion of the salary that exceeds 50% above the maximum contribution base.

This additional solidarity contribution will gradually increase each year, as outlined in the forty-second transitory provision of Royal Decree-Law 2/2023, reaching the following rates by 2045:

• A rate of 5.5% on the portion of the salary between the maximum contribution base and an amount exceeding that base by 10%.
• A rate of 6% on the portion of the salary between 10% and 50% above the maximum contribution base.
• A rate of 7% on the portion of the salary that exceeds the previous percentage.

This increase will be distributed between the employer and the employee in the same proportion as the contribution for common contingencies, which is 83.39% borne by the employer and 16.61% borne by the employee.

It's important to note that the contribution base is also affected by variable compensation (commissions, bonuses, back pay, etc.) and in-kind benefits (use of a company car, childcare, meal vouchers, etc.). Therefore, if the total compensation reaches the maximum contribution base, this "solidarity" contribution must be made.

In addition to this new contribution category, it is important to note that the increase in the intergenerational equity mechanism (MEI) has also been established for the next fiscal year. This increase aims to preserve the balance between generations and strengthen the long-term sustainability of the Social Security system, particularly retirement pensions.

The MEI has been updated for 2025 from 0.70 to 0.80 percentage points, with the contribution based on the common contingencies contribution base. Of this, 0.67 percentage points will be borne by the employer (up from 0.58 in 2024) and 0.13 by the employee (up from 0.12 in 2024).

This regulation also establishes that the MEI will gradually increase until it reaches a contribution of 1.2 percentage points on the common contingencies contribution base by 2029. Specifically, 1% will be borne by the employer, and 0.2% by the employee.

In practical terms, the implementation of the additional solidarity contribution and the new increase in the MEI will result in a significant increase in personnel costs for companies. Additionally, employees will also have to bear an additional contribution in their paychecks, temporarily reducing their net monthly income due to the application of the MEI and/or the additional solidarity contribution.

In summary, the question to consider in this scenario is clear: will the implementation of these measures (along with the increase in the Minimum Interprofessional Wage or the imminent upward revision of dismissal costs) aimed at ensuring the purchasing power of pensions and other measures to reinforce the financial and social sustainability of the public pension system, have the opposite effect by providing companies with an excuse to freeze potential salary increases or halt new hires?

The labor department at Baker Tilly is available to provide more information or address any questions related to this article.