Hiring workers is increasingly expensive in a historic stage of job creation. Labor costs add up to the employee’s gross payroll plus the non-salary charges that the company must pay essentially in Social Security contributions. Even subtracting deductions and subsidies, labor costs have increased almost 20% more than the gross salaries of employees in the last five years, especially intensely after the pandemic. The rise in contributions explains this increase in burdens on companies: An average salary costs between 1,300 and 1,500 euros more per year in labor costs than in 2018.
The labor costs paid by the company include the gross salary that the worker has on his or her payroll, plus the company’s Social Security obligations and other costs for dismissal or transportation. As companies can benefit from aid and subsidies that cushion the cost per employee, experts recommend calculating the impact of the increase in charges by comparing net labor costs (discounting subsidies and deductions from the gross cost) against the gross salary.
The same worker who receives the average salary in each sector is significantly more expensivewhich has been a barrier to recovering purchasing power after the inflationary stage. The increases in contributions through the bases and the creation of new quotas that increase the rate to be paid to the pension fund vitiate the cost per worker.
The aforementioned increase in labor costs from 1,300 to 1,500 extra euros per employee compared to the gross salary represents, based on 2018, an increase of between 14.5% and 20%, depending on the sector. The various price increases, in addition to the creation of new quotas, explain this increase in the midst of a price crisis.
Construction and industry have seen the most contained cost increase in percentage terms (both are around 15%) between 2018 and 2023, according to calculations made from the latest available data offered by the Annual Labor Cost Survey prepared by the Institute. National Statistics Office (INE).
However, Companies in the service sector have seen their labor costs increase by 20% in the last five years. This sector has also been the one that has created the most jobs in the expansionary phase of the labor market after the impact of the pandemic.
An average salary of 26,555 euros gross per year entails an additional labor cost of 9,340 euros, marking a total of 35,900 euros at the end of 2023. In 2018, before labor costs took off, a company paid 30,880 euros in charges labor for a gross payroll of 23,000 euros. So, While the gross salary has grown by just over 3,500 euros, the total charges have increased by 5,900. In summary, the company today pays 18.5% more for labor costs for the same average salary.
More contributions to pay pensions
The ‘other costs’ that Statistics measures have driven up the cost of hiring and workers. Which have increased the most in the last five years? Miguel Cardoso, Chief Economist for Spain at BBVA Research, points out that Mandatory contributions have grown by 28% and they explain, in essence, the higher labor costs for companies.
“A good part of the increase in contributions was due to common contingencies (that is, the part of the contribution that is intended to cover certain sick leave),” explains the expert from BBVA’s research service in statements to elEconomista.es.
For its part, it points out that the cost of non-salary benefits (IT, partial unemployment, dismissal, etc.) barely grew by 1.5%. Of the 144 euros per month in which the cost of mandatory contributions increased between 2018 and 2024, 93 euros (65%) was due to common contingencies.
Everything ultimately revolves around pensions. Inflation has pushed salary revisions intensely and payrolls were 15% higher in 2023 compared to 2018. And the measures adopted in the reformist bloc from the last legislature They see a constant increase in fees during the present decade.
The creation of Intergenerational Equity Mechanism (MEI)an extra contribution to pay a part of the baby boom pensions will increase the rate of contributions for common contingencies by 1.2 points, 1 on behalf of the company and 0.2 on behalf of the worker, in 2029. This additional fee, which It does not cause an improvement in the regulatory base in return, it is already at 0.8%. and the review every three years may even cause an increase over this rate.
The reform also contemplated the lifting of the maximum contribution bases at a greater rate than inflation and maximum pensions. This year it has been 4%, inflation plus a surcharge of 1.2 points, leaving the base at 58,900 euros per year.
This course starts a new solidarity quota on the salary range that exceeds the maximum base planned. It starts this year by applying between 0.92 and 1.17 points on the workers with the highest payrolls. All this, again, without a reward in future benefits. The rate of this fee will reduce up to 7% of the payroll within two decades.
LinkedinBeloud
#Labor #costs #rise #gross #salaries #years #due #increase #contributions
