Spain: Labour costs rise by 18.5% more than gross salaries over five-year period due to increase in contributions

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El Economista | An average salary of €26,555 gross per year is associated with an additional labour cost of €9,340 totaling €35,900 by the end of 2023. In 2018, before the surge in labour costs, a company paid €30,880 in labour charges for a gross payroll of €23,000. Thus, while the gross salary has increased by just over €3,500, total charges have risen by €5,900. In summary, companies today pay 18.5% more in labour costs for the same average salary.

Labour costs include the employee’s gross payroll plus non-salary charges that the company must pay primarily in social security contributions. Even after accounting for deductions and subsidies, labour costs have increased by almost 20% more than employees’ gross salaries over the last five years, particularly intensively after the pandemic. The rise in contributions explains this increase in burdens on companies: an average salary now costs between €1,300 and €1,500 more per year in labour costs than it did in 2018.

The aforementioned increase in labour costs of an additional €1,300 to €1,500 per employee compared to the gross salary represents, based on 2018 figures, an increase of between 14.5% and 20%, depending on the sector. The various increases in contributions, along with the creation of new fees, explain this rise amid a price crisis. The same worker earning the average salary in each sector is significantly more expensive, which has created a barrier to recovering purchasing power after the inflationary period.

Increases in contributions through bases and the creation of new fees that raise the amount payable to the pension fund distort the cost per worker. Construction and industry have seen the most contained percentage increase in costs (both around 15%) between 2018 and 2023, according to calculations based on the latest available data from the Annual Labour Cost Survey conducted by the National Institute of Statistics (INE).


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.