Contribution bases: What are they?

Find out what your contribution base is and start preparing today to avoid losing purchasing power in your retirement

The pension system in Spain is based on the contributions principle, meaning that all workers, whether self-employed or employees, are required to pay contributions into the corresponding Social Security scheme.

Employees pay into the General Scheme, while the self-employed pay into the scheme known as the RETA (the Special Scheme for Self-employed Workers). 

The contribution base refers to the monthly remuneration received by a worker registered with the Social Security Institute. It refers to the gross income and includes any prorated extra salary payments. There are maximum and minimum contribution bases stipulated by law. Self-employed workers have the freedom to set their own contribution base by choosing any amount within the legal limits. Once they reach 47 years of age, however, self-employed workers no longer enjoy this freedom of choice.

Find out what exactly the contribution base means in your case and, if you think it may be insufficient in the future, start working towards improving it today.

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Technical aspects of the contribution base

The legal concept of the contribution bases is defined in detail in article 147 of the Social Security Act, approved by Legislative Royal Decree 8/2015 of October 30. As the Act sets out, the contribution base refers to the total remuneration a worker receives, regardless of its form or designation (both in cash and in kind). The Act also sets out that the contribution base includes any prorated extra salary payments, in the case of employees, as well as any other remunerations from vacations that have not been taken.

Self-employed, on the other hand, can set their contribution base at an amount of their choice, within certain legal limits, although ideally it should be directly proportional to the incomes generated. In 2017, these limits were set at a minimum contribution base of €893.10 per month and a maximum of €3,751.20. Self-employed workers, therefore, decide how much of their income they want to allocate to Social Security.

In the case of employees, however, there is something else to take into account: did you know that not everything you can earn as an employee should be reflected in the contribution base? There are certain concepts that do not count towards the contribution base. These are:

  • Allocations for employee transportation expenses.
  • Allocations for ordinary subsistence and travel expenses.
  • Death benefits and those corresponding to relocations, suspensions and dismissals.
  • Allocations to cover study expenses intended for updating, training or rotating staff.
  • Extra hours. 

In other words, the contribution base is understood as the gross monthly remuneration a worker receives, whether as an employee or self-employed, and the Social Security contributions are set as percentage of this amount. There are certain minimum and maximum limits for the contribution bases in different professions, which are established by law and modified each year. 

You can view the contribution bases applicable for the 2017 tax year by clicking on this link.

What is the purpose of the contribution base?

Both business owners and employees must pay a percentage of their contribution base as Social Security. This payment is made by self-employed workers themselves, or by the company in the case of employees. What is the importance of the contribution base? 

The contribution base serves to assess a person's access to Social Security benefits, such as unemployment benefit, a contribution-based pension or temporary and permanent disability benefits. In other words, a person who has a very low contribution base cannot expect to receive high levels of unemployment benefit or a decent pension. 

Bear in mind, especially if you are an employee, that everything you receive that is not considered part of the contribution base (transportation or subsistence allowances, fees or payments out of salary) do not count towards your entitlement to future benefits. It is true that you will save on Social Security contributions during your working life; however, in the future you may live to regret it. These supplements will not have any impact on the amount of your future pension or any unemployment benefit, so if some unforeseen circumstance were to arise, such as becoming unemployed or disabled, you will undoubtedly lose purchasing power. 

Your salary pay slips are required by law to show your contribution base, and it is usually indicated at the bottom of each statement. You can also find out your contribution base online at the Social Security e-office, where you can request it either directly on the website (for example, using a digital certificate), or by mail. So make sure you find out about your contribution base and start preparing right away.

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How can you guarantee yourself a pension if your contribution base is too low?

The higher your contributions are during your working life, the greater your benefits will be in the event of unemployment, retirement or disability. However, in the majority of cases, peoples' contributions as not so high. This is why it can often be a good idea to guarantee a part of your future income, in the event of one of these three situations occurring, by paying into a private pension plan which will subsidize or supplement your monthly income. This is a good option, for instance, for workers who enjoy extra income or supplements.

Don't neglect your contribution base, study your pension simulations carefully and think about the options available to you to ensure your income in retirement is not cut in half. If this is what you want to do, perhaps the best solution could be a pension plan that offers flexibility when it comes to managing the contributions.

At bbva.es, you can take a look at these kinds of products. Our excellent pensions calculator will give you an estimate of the income you will receive when you retire if you add a small financial contribution every month to your social security contribution base.

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