A proposed increase of Spain's minimum wage (SMI) by €50, bringing it to €1,184 gross per month, is generating vigorous debate among policymakers and employers.

This adjustment represents the upper recommendation by a committee of experts convened under the Ministry of Labor.

They advocate an increment between 3.4% and 4.4% for 2025, which translates to an increase between €39 and €50 per month.

The confirmation of this plan comes from Spain's Second Deputy Prime Minister and Minister of Labor, Yolanda Díaz, who intends to discuss this in the forthcoming social dialogue.

However, employer associations CEOE and Cepyme have expressed their reluctance to support this maximum increase, arguing for a more modest rise aligned with the Consumer Price Index (2.8%) or negotiated wages (3.07%).

These employer groups warn that such an increase could result in "unbearable" financial burdens on small and medium-sized enterprises (SMEs) and the self-employed, potentially leading to negative repercussions for employment and hiring.

If realized, this wage raise, paired with anticipated costs stemming from an intended reduction in the working week, could lead to an overall increase of €3,000 annually per employee, factoring in nearly €1,000 from the wage hike and an estimated 6.25% rise attributed to reduced working hours.

According to Cepyme, if the minimum wage reaches €1,184 gross across 14 payments, the annual salary would total €22,845, up from last year's €21,866.

Additional social security contributions could inflate this figure by €280, further compounded by an increase of 0.8% under the Intergenerational Equity Mechanism (MEI), of which 0.67% falls on employers and 0.13% on employees.

Consequently, the actual monthly wage cost to businesses may rise to €1,903—a 4.5% increase from the previous year.

This could further elevate to €2,077 if calculated using effective monthly wage costs, excluding vacation periods, leading to a real wage cost significantly exceeding the minimum wage owed to workers.

Critics note that this prospective rise may inflate company wage expenses up to 75% more than the minimum wage itself, given factors such as occupational accident insurance contributions.

Since 2018, successive minimum wage hikes have effectively increased these salaries by 54% cumulatively—nearly 30% after inflation adjustments.

Should this new measure pass, the minimum wage will rise to encompass 60% of the country's median salary.

This shift is particularly daunting for SMEs and the self-employed due to their limited size, lower productivity, and economies-of-scale drawbacks.

Cepyme further argues that such increases, potentially raising the minimum wage beyond 60% of the average salary and possibly hitting 70% in SMEs, exceed the labor market’s equilibrium.

In some regions, this could surpass 80% of the local median wage.

Such a scenario prompts worries about the discrepancies with the Worker’s Statute, which ties wage hikes to contemporary economic conditions and productivity levels.

Productivity within the Spanish market has decreased by 3.8% since 2018, clashing with a 4.6% average uptick in advanced economies, highlighting potential competitiveness concerns.

ATA President and CEOE Vice President Lorenzo Amor remarks that the cumulative minimum wage rise starkly contrasts with other economic indicators, noting that inflation, corporate earnings, and overall economic performance have not experienced similar percentage increases.

Over recent years, Spain’s frequent minimum wage adjustments have established it as the prevalent pay rate, while average wages have incrementally improved, now reaching €1,599 gross monthly.

The latest National Institute of Statistics (INE) salary structure survey indicates that over 20% of salaried workers earn an annual gross income ranging from €14,000 to €19,000.

Most of these employees fall under self-employment or for micro-enterprises, suggesting these groups face the largest impacts from any further minimum wage escalation.