Overhauling the Social Security System for self-employed

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23 Jan 2014 08:54 by eos_ian Star rating in Valencia. 485 posts Send private message

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Spain's government is considering overhauling the Social Security system for the self-employed after years of complaints by sole traders and small business owners that they are being bankrupted by financial demands from the State.

In what could be a landmark reform that would provide a much-needed boost to business for those working for themselves, the PP may be considering the possibility of the self-employed paying monthly Social Security (National Insurance) contributions according to what they earn, rather than a flat rate.

Although the government insists it has no immediate plans, after a meeting between vice-president Soraya Sáenz de Santamaría and a national association representing self-employed workers, the latter claims the cabinet has promised to investigate the situation in depth and consider a radical reform.

The association presented a revised system whereby each person who works for him or herself pays according to their 'actual financial capacity', which would drastically reduce Social Security and income tax for those with low earnings and considerably increase them for those who are capable of paying more.

But as the self-employed association explained during the meeting, most of those who work for themselves pay a Social Security fee based upon an income of less than 1,030.70 euros a month whatever they actually earn, since they cannot afford to pay the upper of the two levels and even with the lower level, struggle to meet these payments.

And by paying according to the lower level, their eventual retirement pensions, as at today's figures, will barely reach 350 euros a month.

The introduction of Social Security contributions for the self-employed in recent decades, despite having been something workers had historically clamoured for, was very poorly received when it was set up because of the fixed-fee aspect – and especially now, in the last five years, with pensions having barely increased by 100 euros a month.

Last year alone, over 60,000 people used their dole money to set up a new businesses or agreed to take a ratio of their unemployment benefit entitlement to combine it with working for themselves on a reduced income. 

And in the first nine months of 2013, the number of self-employed workers increased by more than two per cent – six times the average rise in the rest of the EU.

In early 2013, the government allowed all new self-employed workers aged under 30 to pay just 50 euros a month in Social Security for the first six months, but in July extended this to those of any age.

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