Spain's pension mechanism to increase payroll contributions by 2027

The Intergenerational Equity Mechanism (MEI) in Spain will see a further increase in contributions by 2027 to bolster the Social Security Reserve Fund. This additional payroll tax was implemented in 2023 to address the rising costs of pensions, particularly as the large baby boom generation approaches retirement age.

The contribution rate has increased annually: starting at 0.6% in 2023, it rose to 0.7% in 2024, and is projected to reach 1% by 2027. The cost is shared between employers and employees, with workers expected to cover 0.17% and companies 0.83% of the total rate in 2027. Self-employed workers (autónomos) are responsible for the full percentage.

In regions like Galicia, where the average contribution base is approximately 2,213 euros per month, the worker's portion will rise to nearly 3.8 euros per month, totaling about 45 euros annually. High earners with maximum contribution bases may see annual increases of up to 104 euros, while self-employed individuals with high incomes could see contributions rise by approximately 612 euros per year.