Understanding Wages and Salary Structures in Spain
Understanding Wages and Salary Structures
A wage (or salary) is the total economic benefit received by workers, in cash or in kind, for the professional provision of labor services for others. It includes compensation for actual work. The salary structure includes:
- Base salary (or salary group recruitment)
- Fixed remuneration per unit of time or work
- Wage supplements
Salary may be paid in several ways:
- According to the method of payment:
- Cash
- In kind
- According to the calculation method:
- Salary per unit of time
- Salary per unit of output
- Joint Salary
Minimum Wage in Spain
The Salario Mínimo Interprofesional (SMI) is the minimum amount a worker can receive for a standard 40-hour work week. The minimum wage is legally established.
Public Income Indicator of Multiple Effects (IPREM)
The Indicador Público de Renta de Efectos Múltiples (IPREM) is a compulsory reference point in state standards. It is also used by regional governments (Ceuta and Melilla) and social security institutions. The amount of the IPREM is set annually in the state budget law.
Wage Guarantees
Several guarantees protect workers’ wages:
- Wages for the last thirty days of work have priority.
- Wage claims take precedence over any other claim on objects produced by the workers.
- Appropriations for salaries not protected in the above points are considered singularly privileged, calculated by multiplying the daily SMI by three, times the number of days of unpaid wages.
- The above consideration has the same precedence.
Wage Guarantee Fund (FOGASA)
Fondo de Garantía Salarial (FOGASA) is an autonomous body under the Ministry of Labor and Social Affairs. Its purpose is to partially cover workers’ wages and compensation for dismissal or termination of employment that are outstanding.
a) Wages: In cases of insolvency or bankruptcy of the employer, the maximum payable amount is determined by multiplying three times the daily SMI, with a maximum of 150 days.
b) Allowances: For termination or expiration of a contract by judicial decision or administrative order, there is a limit of one annuity, based on compensation of 30 days per year worked.
FOGASA is funded by contributions from employers.
Payment of Wages
Wages are typically paid monthly, fortnightly, or weekly, depending on the custom of each company. Payment can be made in cash at the workplace, or by check or wire transfer. The employer is obliged to issue a pay slip (receipt of wages) specifying each of the earnings, as well as any deductions.
Wage Structure
A typical pay slip includes:
a) Heading:
- Occupational group or category
- Contribution group
b) Body:
- Accruals:
- Wage Perceptions:
- Base salary
- Supplementary payments
- Personal Supplements: seniority, special skills
- Job Supplements: difficulty, toxicity, danger, shift work, night work, and residence.
- Supplements for quality or quantity of work: Incentives, activity, attendance, punctuality.
- Overtime
- Special Bonuses
- Profit sharing
- Wages in kind
- Wage Perceptions:
- Non-wage payments:
- Compensation or supplements
- Benefits and compensation from social security
- Allowances
- Other non-wage items
- Improvements to social security protection
- Goods in kind provided voluntarily by the company
- Care allocation
- Deductions:
- Worker contributions to social security and joint collection concepts:
- Common contingencies
- Unemployment and professional training contingencies
- Overtime
- Impuesto sobre la Renta de las Personas Físicas (IRPF) – Personal Income Tax
- Advances
- Value of goods received in kind
- Other deductions (e.g., union dues)
- Worker contributions to social security and joint collection concepts:
c) Basis of Social Security Contributions and Base Subject to Income Tax Withholding: This final section details the bases used to calculate the various deductions for social security contributions and income tax withholding.