Conditions and Requirements of the 100€ Flat Rate on Social Contributions

The spanish government has approved a flat rate of 100€ social security for new employees hoping it will stimulate employment and encourage and promote permanent contracts.

This flat rate,  which applies to permanent contracts issued and signed between the 25th of February 2014 and the 31st of December 2014,  will apply a reduction in the employers contribution towards common contingencies (retirement, health care, etc) to social security as follows:

• – Full time contracts: the contribution has been reduced to a flat rate of 100€ per month.
• – Part time contracts:

• • Working hours equivalent to 75% of full time hours: flat rate of 75€/month.
  • Working hours equivalent to 50% of full time hours: flat rate of 50€/month.

Duration

With this new regulation, any company that hires an employee with a permanent contract will pay this rate during the first two years from the contracts start date.

Additionally, if the company has less than 10 employees, for the 12 months following the initial duration of the incentive (24 months) a reduction of 50% can be applied to the normal rate of the employers contribution towards common contingencies

Requirements

In order to benefit from this flat rate, companies should meet these requirements:

• The employer must be up to date with all Social Security payments as with all payments due to the Tax Office for the total duration of the incentive. Non compliance with this requirement would mean that the employer would no longer qualify to apply the incentive as from when the first payment is missed.
• The employer must not have dismissed employees for disciplinary or objective reasons if these dismissals have since been declared unfair, nor can they have carried out collective dismissals in the 6 months prior to the contract start date . This does not apply to dismissals that took place before the 25th of February 2014.
• The new contract must increase both the level of permanent employment and also the total employment level within the company. These levels of employment must be maintained during 36 months.
• If the employer has been denied access to other employment related incentives they will automatically not qualify for this one.

On the other hand, the incentive does not apply to:

• Special labour relations.
• The spouse, parents, children or any other relatives (up to second degree) of the employer.
• Employees who are included in special systems of the social security’s General Regime (Regimen General).
• Public Sector employees as regulated in art. 20 and 21, and also in the additional disposition 20 and 21 of Law 22/2013 23rd of December.
• Employees previously hired by other companies belonging to the same group, who have been unfairly or collectively dismissed in the 6 months prior to the new contracts start date.
• Employees that in the 6 months prior to the contract to which the incentive is applied held a permanent contract with the same company. This does not apply if the previous contract finished before the 25th of February 2014.

Non-compliance 

If the requirements described above are not complied with at any point, the employer must pay all of the amounts saved from having applied this incentive to the Social Security Office, plus interest and a fine for late payment.

If the level of employment or permanent employment is not maintained during 36 months, the employer must return the amounts saved from having applied the incentive as follows:

• If non compliance occurs 12 months after the contracts start date, the employer must return 100% of the amount.
• If it occurs 24 months after, 50% must be returned.
• If it occurs 36 months after, 33% must be returned.

In this case interest and fines will not be applied.

Other aspects to consider

This incentive is not compatible with any other incentive regarding Social Security payments that may be applicable for the same contract. Additionally, it does not affect  employees in any way with regards to any future benefits they may be entitled to, and it does not apply to social security payments made on supplementary hours carried out by part time employees.

Jaume Roda- PBS