Two out of three freelancers currently “have net income below the minimum contribution for the self-employed,” of almost 290 euros per month, the Minister of Social Security, José Luis Escrivá, explained this Tuesday. This group of people with low income is the one that will pay the least in the new contribution system for self-employed workers in which the Government is working. The resulting mechanism will adapt the contribution to the income of the self-employed so that those who earn little contribute less and those who obtain more income contribute more to Social Security, something that happens with salaried workers and that was requested by the parliamentary majority in the recommendations. of the Toledo Pact.
Division on the contribution of the self-employed according to their income: progressive groups support it and the CEOE association is unmarked
José Luis Escrivá responded this Tuesday about the quota model proposed by the Executive, a minimum of 90 euros per month and a maximum of 1,220 euros per month, in an interview on Cadena Cope. The contribution mechanism is still being debated at the social dialogue table with the majority unions and employers, as well as with the main self-employed organizations, so it may change during negotiation.
The minister has responded to some of the criticisms about the proposed system, which are mainly being disseminated by the self-employed organization ATA, which is part of the CEOE employers’ association. For example, contributions to Social Security are criticized as high, both for the self-employed with less income and those who have higher profits in their businesses.
The reality is that the new proposed system offers up to five monthly payments to Social Security lower than the current minimum, which is located almost at 290 euros per month. The document with the Executive’s proposal, to which this media has had access, It includes five income brackets (from less than 3,000 euros per year to 17,000 euros per year) in which the self-employed would pay fees of between 90 and 275 euros per month.
These tranches would be reached at the end of the implementation of the new listing system, which will be gradual. The Government has proposed that it be applied gradually, over the next nine years. The first in which it would begin to be launched (2023), Social Security proposes that the section with the lowest income pay 200 euros per month. In front of the almost 290 current, we remember.
José Luis Escrivá has highlighted this same thing in the interview. “A freelancer who earns 3,000 euros per year is paying 289 euros a month. Which is the minimum now. The new model will free him from quotes widely. They are two out of every three” freelancers, he pointed out.
Contributing little means pensions and low benefits
In this debate, several premises must be remembered. The first: contributing little later means that that person has the right to few social benefits, which are calculated according to the amount paid. A lower retirement pension, a reduced disability benefit and a limited termination benefit, as seen in the pandemic, for example. The higher the contribution, the greater the social protection.
The second: that now the self-employed benefit from an exception, which means that they choose how much to contribute. Always with a minimum, which is almost 290 euros per month. Thus, a worker with large earnings can contribute at the minimum, something that does not happen with salaried employees, whose contributions to Social Security are applied to what they earn, their wages. The result of this eligible system is that “86%” of self-employed workers contribute for the minimum available, according to Social Security data.
That minimum for some people is an effort, those two out of three self-employed with lower incomes that the minister points out, but it is a very small amount for other workers who obtain higher profits with their activities.
José Luis Escrivá has emphasized the differences between the self-employed and salaried workers in retirement. The average pension for the self-employed (791.52 euros) is almost “70%” lower than the average for salaried workers (more than 1,330 euros per month), the minister stressed. Contributing more, depending on the income of the workers, will cause “higher pensions,” explained Escrivá. “Honestly, I do not see the controversy,” he maintained.
Social contributions are not taxes
The head of Social Security has also reacted to another of the criticisms spread these days by the president of ATA, Lorenzo Amor, who is denouncing that the self-employed “will work for Social Security” to apply this system, or “for the State “In general, when adding the taxes paid by the self-employed and the contributions to Social Security.
As the minister recalled, “social contributions are not taxes.” “They are contributions for a contributory pension system. They are contributing to have pensions,” he stressed. With taxes, citizens contribute to the State to pay for public services of different kinds, such as health, education and public transport, among many others, which they can use or not later as they wish. In the case of social contributions, it is a contribution that generates direct social protection to the worker, in the form of a subsequent retirement pension, for example, or the aforementioned ‘unemployment of the self-employed’ benefit that has been granted in this crisis of the covid. If you have quoted “X”, you are entitled to “Y” for social protection.
The minister has refused to make that sum of what the self-employed contribute with social contributions and taxes, which on the other hand could also be done with the group of salaried workers, Escrivá has warned, without the self-employed being at a disadvantage in this sense. “The self-employed do not contribute more than salaried employees when taxes and contributions are added,” he pointed out.
Another interesting fact to highlight in this debate is that, today, the State supports the self-employed more than wage earners in their retirement pensions. The State finances through taxes the so-called “minimum supplements” so that people who have contributed little can get to receive the minimum pension. In the case of the self-employed, the State complements to a minimum 32% of the retirement pensions of people who come from self-employment, according to the latest April data. Among salaried employees, the minimum supplements for retirement are granted to 19.6% of the people who were salaried and comes from the General Scheme. The same occurs with all kinds of pension, such as widowhood and permanent disability, among others.
José Luis Escrivá has hoped to reach an agreement on this issue and on the whole of the pension reform through dialogue with social agents. The minister stressed that the Government, unions and employers have already a “quite advanced” text on the first phase of the pension reform sent to Brussels. “We are very close to the end,” he said.