They say freelancing can be a tough gig. Well, one thing’s for sure – not everything is ‘free’ about freelancing! Some major changes are coming into effect for freelancers and contractors in Spain – and it’s high time that employers paid attention, too.
The Spanish Government has announced that some freelancers in Spain will soon see a 50% overall increase in their mandatory social security (‘Seguridad Social’) contributions each month, and the payable amount will now be calculated based on their actual earnings.
Until now, freelancers (known in Spanish as ‘autónomos’) have had the choice to pay their desired contribution rate. 85% of Spanish freelancers have opted for the minimum required amount of about €250/month, with the national average at €289/month. The new regulations, however, will see this average increase to approximately €433/month.
Due to the nature of freelance (i.e. self-employed) and contracting work, independent workers within the gig economy tend to have variable incomes and working agreements when compared to employees. Of course, the economic impact of COVID-19 has also taken a drastic toll on freelancers’ earnings.
Regardless of these differences, the Spanish Government hopes to treat these workers much like permanent employees, ensuring that freelancers still pay mandatory Social Security contributions each month.
With 3.2 million freelancers/self-employed workers registered in Spain, it’s no wonder that the Spanish Government is knuckling down on this particular group of taxpayers.
The continuous change in tax and HR law for independent workers begs the question: Are independent contractors and freelancers better off as employees?
The question remains relevant whether you’re an employer or employee, as it affects both parties. By hiring contractors and freelancers, employers in Spain don’t necessarily get to avoid employment-related administration and responsibilities. In fact, engaging self-employed workers and contractors can be a notoriously grey area when it comes to HR and payroll duties. You could mistake your staff for contractors depending on the working arrangements in place. It is important to be wary of your liability here. You’ll want to check against local labour laws that these workers aren’t actually employees for tax purposes.
What’s more, with the new increase in mandatory social security payments, many previously self-employed workers may wish to seek out permanent employment opportunities in pursuit of set working conditions, earnings, and benefits.
For example, while Spanish employees must pay higher social security contributions, much of this amount is covered by their employers. As an employer, offering these key points helps you to recruit and retain great talent, boost morale and improve company culture, and build more productive teams.
From the workers’ point of view, contracting or freelancing means forfeiting the various guaranteed benefits that come with being a permanent employee. (Think: minimum wage, paid holiday and sick leave, and more). Some employers will also offer additional perks, such as meal vouchers, medical insurance, retirement plans, transportation allowances, and daycare benefits.
In Spain, labour laws are relatively strict; ultimately, to protect the rights of workers. There are clear laws and guidelines in place around the legal working age, paid/unpaid leave, overtime, rest time, types of employment contracts, and more.
Employees will generally prefer an ‘indefinite’ contract, as this is on an ongoing basis (i.e. not temporary or project-based). This makes the contract more difficult to terminate, and also tends to offer a higher salary.
Fortunately, existing contractors can be seamlessly transitioned into employees, which can serve to both satisfy your workers and strengthen your workforce. You can find out more about this from our expert team here.
With an estimated 19 million people employed in Spain – out of a 46-million-strong total population – there’s plenty of talent to go around. And although it can be tricky staying on top of current laws and work patterns, the experts at Teamed are here to help you every step of the way.
Not quite sure how you could be hiring and managing staff more efficiently in Spain or across the world? Get in touch to ensure your practices are up to code – so you can focus on expanding your business to new heights (and regions)!