Why Spain's self-employed get a far lower pension than employees
It's difficult enough being self-employed in Spain, but did you know you'll earn significantly less in pension payments at the end of your working life too?
While working for yourself can have a lot of advantages such as choosing your hours, focusing on areas you want to and selecting your clients, in Spain it’s notoriously tough to be autónomo.
As well as having to pay your own social security, filing your taxes five times per year, paying out a lot for gestores and having difficulty accessing unemployment benefits, self-employed workers get far less in pension payments too.
In fact, the gap between the retirement pensions of employees and the self-employed is much more than you might expect.
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According to official data from the Ministry of Inclusion and Social Security, the average pension for the self-employed is €1,008.80 per month, while employees receive an average of €1,665.50 per month.
This means elf-employed workers Spain get €657 less a month in pension payments than employees of companies.
And when you look at gender, there’s an even greater gap. Self-employed men receive an average pension of €1,150.10 upon retirement, while women receive €863.97. This inequality is due to the number of years of contributions during their working lives and the fact that women take more time off for childcare for example.
This represents a monthly difference of €657.72 between the retirement pension of an employee and that of a self-employed person, which is €9,200 a year.
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This seems very unfair, and while it is, there is an explanation to show why salaried employees get so much more in Spain.
The way in which your pension is worked out in Spain is by the amount of social security contributions you pay per month and contribution base.
READ MORE: What's Spain's self-employed contribution base and which should I choose?
Even if self-employed works and employees earn the same amount of money each month, the key difference is that in the case of salaried workers, part of the social security contribution is covered by the company they work for, while self-employed workers must pay all of it themselves.
Essentially, the higher the contribution base, the better the retirement pension.
For self-employed workers, the amount of contribution they pay is not based on how much they’re paid each month, but on net profit instead. This means self-employed workers pay a minimum contribution base of between €653.59 to €1,928.10 depending on how much profit they make.
The maximum contribution base ranges from €718.94 to €4,909.50. This means they’ll pay between €200 and €590 per month in social security fees, depending on their monthly profit and which contribution base they choose.
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The problem is that most autónomos only choose to pay the minimum contribution base, simply because social security payments are already a big financial burden and most simply can’t afford to pay any more.
This means that while an self-employed person and an employee may earn same salary, the self-employed person pays a much lower contribution base.
According to Ministry statistics, of the 3.4 million self-employed workers in Spain, 2.8 million or 83 percent contribute the minimum. Only 2.1 percent of all self-employed workers in Spain are on a similar contribution base to that of employees, which equals almost three times the minimum base.
Even though both employees and the self-employed contribute around 30 percent of what they earn, the burden is greater for the self-employed who have to pay all of it on their own.
Because of this, according to the Spanish government, in more than 60 percent of Spanish provinces, the average retirement pension for the self-employed barely exceeds €1,008 per month, and nowhere will it even be equal to the minimum wage in 2025.
To get around this, financial experts suggest gradually increase this contribution base as retirement age approaches in order to contribute the highest possible contribution base in the final years of your working life and increase the amount of your retirement pension.
This, however, may be tricky to do as you'll need to significantly increase your profits to afford to do so, or cut down on some big payments.
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