The Spanish government has reached an agreement with trade unions to increase the Minimum Interprofessional Wage (SMI) by €50 per month, bringing it to €1,184 across 14 annual payments. The increase, a rise of €700 a year for minimum wage earners, is set to be approved imminently by the Council of Ministers.
However, the Spanish Confederation of Business Organisations (CEOE), which had proposed a 3% increase to €1,168, has distanced itself from the agreement, criticising the government’s approach to negotiations.
Diverging Proposals in the Wage Debate
The government had initially proposed a 4.4% increase, aligning with the recommendations of its Committee of Experts, which suggested an increase between 3.4% and 4.4%. Meanwhile, trade unions UGT and CC.OO. pushed for a higher rise to €1,200, representing a 5.8% increase.
In contrast, employers’ associations advocated for a more moderate increase of 3%, in line with the 2023-2025 Collective Bargaining Agreement signed with unions. CEOE president Antonio Garamendi expressed dissatisfaction, accusing the government of using the minimum wage increase as a political tool rather than fostering real dialogue between employers and workers.
Next Steps: Further Negotiations in Two Months
As part of the agreement, the government and trade unions have committed to further negotiations in two months regarding new legislative changes related to minimum wages. These discussions will focus on ensuring that SMI increases are not absorbed into other wage supplements and that minimum wage earners fully benefit from the rise.
The unions are also demanding that Spanish law formally align the minimum wage with 60% of the country’s average salary, as stipulated by the European Social Charter. Additionally, they seek updates to collective bargaining agreements affected by the SMI increase and adjustments for daily and hourly wage rates, particularly in light of the planned reduction of the standard working week to 37.5 hours in 2025.
Will the New Minimum Wage Be Exempt from Income Tax?
One key issue remains unresolved: whether the new minimum wage will be exempt from Personal Income Tax (IRPF). While Yolanda Díaz has expressed support for this exemption, the decision ultimately rests with the Ministry of Finance, led by María Jesús Montero. The ministry has stated it will evaluate the tax implications once the wage increase is formally approved.
Both CC.OO. and UGT have reiterated their demand for IRPF exemption on the minimum wage, arguing that low-income earners should not be subject to income tax. However, the issue was not included in the final agreement, and unions have expressed disappointment that employers did not join the deal.
Enforcement and Retroactive Effect
The Ministry of Labour has pledged to implement specific inspection campaigns to ensure that all employers comply with the new minimum wage. Furthermore, authorities have clarified that no company will be allowed to pay below the 2024 SMI levels, even for new contracts.
Following the repeal of the "Omnibus" decree, the SMI had briefly reverted to its 2023 level of €1,080 per month. However, the government is working to approve the new wage increase as soon as possible, ensuring it takes effect retroactively from 1 January 2025.
While unions have welcomed the increase, they acknowledge that the lack of tripartite agreement with employers is a missed opportunity. Still, they view the deal as a positive step towards reducing wage inequality and ensuring that Spain's minimum wage keeps pace with inflation and economic growth.
