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The "rise of the SMI"

We hear time and again that the SMI increase harms the company and only benefits the workers, but that, being true, is not complete information since there is another beneficiary: the State itself. What is the reason? Simple: increasing the SMI increases the State's collection both in social insurance and, for the moment and until the regulations are modified, in personal income tax.

What was the situation prior to the rise of the SMI?

The SMI before the increase, that is, in 2023, reaches €1.080,00 (14 payments). If we prorate the two extra payments, per month there would be a gross of €1.260,00.-

With that salary, the cost of social insurance that the company assumes by Law was between €401,94 and €473,13. This range corresponds to the different types of contributions for professional contingencies (due to work accidents and occupational diseases) that vary depending on the sector between 1,5% and 7,15%.

To the employer's contributions we must add those of the worker, which amount to €81,27 (a figure that is deducted from the monthly payroll but which the employer enters into TGSS). Therefore, the worker had a net of 1.178,73 euros.

The cost for the company is made up of the gross salary together with the social insurance payable and amounts to between €1.661,94 and €1.733,13. However, the worker receives €1.178,73 in the bank, with the difference between €483,21 and €554,40 going to the State coffers.

That is, the more the SMI is raised (and salaries in general through agreement updates, which have been very numerous in recent years), the more social insurance collection for the State.

To this increase we should also add the increase in the contributions of the MEI “Intergenerational Equity Mechanism” from 0,60% to 0,70%. Of this increase, 0,08% corresponds to the employer and 0,02% to the worker.

And now the question is:

 

With the increase in the SMI, how much does the worker receive net and what cost does this entail for the company?

Taking into account the modification of the personal income tax limit, that is, without applying personal income tax deductions on the payroll, the worker would have a net salary per month of €1.237,40, that is, €58,67 net more per month. month.

On the other hand, it means between €84,16 and €87,71 more cost for the company. In gross salary figures, the SMI in 12 payments goes from €1.260,00 per month to €1.323,00 per month, 63 gross euros more.

With which the State will collect in Social Security between €25,48 and €29,04 more per month per worker.

 

Summarizing

The impact per worker per month is:

Increase in the SMI with prorated extraordinary payments: 63,00.- €
Monthly cost for the company per worker: 84,16.- € to 87,71.- €
Net salary increase for worker: 58,67.- € (From 66,89% to 70,93% of the employer's cost)
State income increase: €25,48 to €29,04 (From 30,28% to 33,11% of the entrepreneur's cost)

 

Juan Jose Lobo Fernandez
Eudita Leon

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