The financial impact of temporary incapacity benefits (IT) due to common illnesses has surged in Spain, increasing by 78.5% since 2019 to over €15 billion, equivalent to approximately 1% of the country's GDP, as reported in the Banco de España’s annual report.

The expenditure rises to €16.48 billion when factoring in payments for professional contingencies.

The report warns of "growing signs of tightening" in the labor market, highlighting a significant increase in the proportion of companies reporting that labor shortages are limiting their activities, alongside a notable rise in employees on temporary sick leave.

Spain's spending on temporary incapacity is among the highest within the European Union, comparable to countries like the Netherlands, Germany, and Sweden, though the expenditure in these nations ranged between 1.5% and 2% of their GDP in 2022.

According to the Banco de España, Spain has experienced one of the largest increases in IT expenditures since 2019, with an approximate rise of three-tenths of GDP, a figure similar to those seen in the Netherlands, Sweden, and Slovenia.

In contrast, countries like France and Italy maintained relatively stable spending ratios during the same period.

For businesses, absences due to temporary incapacity incur both direct costs, related to economic benefits paid to absent workers, and indirect costs tied to workforce adjustments necessary to maintain operations.

The direct cost to companies for temporary incapacity benefits and possible contractual complements has risen by 62% between 2019 and 2024, increasing from €2.84 billion to €4.61 billion.

This estimation is derived from a combination of data from the Quarterly Labor Cost Survey and the Labor Force Survey, though it excludes employees in sectors such as agriculture, fishing, and forestry.

The update includes an economic benefit provision of 60% of the regulatory base for sick leave from the fourth to the fifteenth day, alongside Social Security contributions and any potential enhancements outlined in the applicable collective agreements.

The Banco de España's 2024 annual report also analyzes potential causes for the rise in temporary incapacity, suggesting worsened worker health post-pandemic, an aging population, congestion in healthcare services, and shifts in worker preferences regarding work-life balance.

Historical trends indicate that the incidence of temporary incapacity tends to be higher during periods of economic expansion.

Data from the Labor Force Survey indicates that the percentage of employees on temporary sick leave rose from 2.7% in 2019 to 4.4% in 2024. In comparison to other European nations, Spain's rate in 2023 (4.1%) surpassed that of France (3.6%), Germany (3.1%), and Italy (1.3%).

Before the pandemic, the incidence of temporary incapacity was higher among women (3.3% versus 2.2% for men), Spanish nationals (2.9% versus 1.7% for foreign nationals), and older workers (5%, more than double that of younger demographics).

In the last five years, there has been a noticeable increase across all demographics, with temporary sick leave rising by approximately 1.5 percentage points among men and 2 percentage points among women.

Age groups revealing the largest increases are those over 55 years (up by 2.5 points), followed by the 30 to 54 age demographic (up by 1.6 points) and the under-30 group (up by 1.1 points).

National employees have seen a greater increase (1.8 points) compared to foreign workers (1.4 points).

Sectorally, the report indicates a broad increase in temporary incapacity across various fields, though specific sectors such as extractive industries and energy supply have experienced declines in absenteeism from 2019 to 2023. Notable increases in sick leave have been recorded in agriculture, manufacturing, construction, commerce, transport, and significant surges in water supply and sanitation.

At the regional level, the report highlights significant increases in temporary incapacity in the Basque Country, Galicia, Cantabria, and Murcia, compared to much smaller spikes seen in Asturias, Madrid, and notably Navarra.

Furthermore, regarding public health, data from the CIS indicates a rise of over 17 points in the proportion of the population reporting chronic health issues between 2019 and July 2024.

In addition to the financial implications of temporary incapacity, the report addresses the issue of unfilled job vacancies causing further strain on the Spanish labor market.

Between 2021 and 2024, the percentage of companies reporting operational limitations due to labor shortages increased from 10% to 43%.

This scarcity is particularly acute in hospitality and construction, impacting 64% and 56% of firms, respectively.

The Banco de España noted that the increase in job vacancies may stem from a mismatch between the skills of job seekers and the demands of employers, resulting in a dislocation within the labor market.

Additionally, cyclical elements are considered, where, in an expanding economic phase, the demand for new hires increases concurrently with a rise in the minimum acceptable wages among job seekers, reflecting an inverse relationship between unemployment rates and vacancy rates.

To improve understanding of labor dynamics, the Banco de España has emphasized the need for enhanced data collection from job search portals, with the INE undertaking initiatives to augment its vacancy information through details provided by employment agencies and temporary employment firms.