This is an increase in social security contributions for companies and workers of 0.6% (0.5% for the company and 0.1% for the worker).
The Intergenerational Equity Mechanism (IEM) is a system that replaces the Sustainability Factor approved in the 2013 pension reform to guarantee the financing of pensions.
This is an increase in the social security contribution for companies and workers of 0.6% (0.5% to be paid by the company and 0.1% for the worker). This increase in employers’ and workers’ contributions will serve to offset the reduction in the future income forecast produced, in part, by the repeal of the so-called sustainability factor for pensions.
We inform you that on 1 January 2023 the so-called Intergenerational Equity Mechanism (MEI) came into force, a new contribution applicable to both companies and their employees, which was already provided for in Law 21/2021, on guaranteeing the purchasing power of pensions and other measures to reinforce the financial and social sustainability of the public pension system, and which is now included in the General State Budget Law for 2023.
Intergenerational Equity Mechanism (IEM)
The Intergenerational Equity Mechanism (IEM) is a system that replaces the Sustainability Factor approved in the 2013 pension reform to guarantee the financing of pensions.
Following the mandate of Final Provision 4 of Law 21/2021 on guaranteeing the purchasing power of pensions, it regulates that, from 1 January 2023 (and until 2032), companies and workers must pay the TGSS an extra contribution of 0.6% (0.5% payable by the company and 0.1% payable by the worker), corresponding to the so-called MEI, applicable to the contribution base for common contingencies in all situations of registration or situations assimilated to registration in any of the social security systems and which will only not be applied to those groups of workers excluded from paying contributions for the contingency of retirement (for example, active retirees or those developing training programmes and non-labour and academic internships).
Important: The law states that this new contribution will start in 2023 and will be applied over a period of 10 years.
To whom does it not apply?
The Social Security RED News Bulletin of 28 December 2022 states that it will not apply to those groups of workers who are excluded from paying contributions for the retirement contingency, and therefore will not apply, among other cases, in the following cases:
– Workers obliged to pay contributions exclusively for temporary incapacity due to common contingencies, professional contingencies and solidarity contributions (e.g. active retirees).
– Collectives obliged to pay contributions exclusively for professional contingencies.
– New students entering the Ministry of Defence RDL 13/2010
– Nor will it apply to Workers who carry out training programmes and non-labour and academic internships.
Actions around affiliation
The Social Security informs that no specific action is required for contribution to the MEI.
Changes in the scope of contributions
In relation to the calculation of this contribution, it has been decided to create two new economic concepts:
– 555 – MEI Intergenerational Equity Mechanism: when there is a worker and employer contribution.
– 557 – Company MEI Intergenerational Equity Mechanism: when there is only a company contribution.
As indicated by the Social Security, these concepts will be totalled in the concept 598 “Common contingencies liquidation”, which will be reflected in all receipts.
The additional cost to the company of 0.5% of the contribution (which would be around 5 euros a month for a worker earning the current minimum wage) may be deductible as a personnel expense for corporate income tax purposes.
In conclusion, the approval of the MEI is an attempt to ensure that pensions are not reduced by the forecast increase in the number of pensioners and the reduction in the number of contributors.
The repealed sustainability factor meant a percentage reduction in pensions due to the increase in life expectancy, while the MEI increases the pressure on contributors to pay future pensions.
For further information, please consult Labour counselling
