Spain: New Minimum Interprofessional Salary (SMI) in Spain for 2025
The Minimum Interprofessional Salary (SMI) has been a fundamental reference to guarantee a minimum remuneration for employees. However, its evolution and the tax implications it carries can sometimes give rise to controversy.
With the publication of the new SMI for 2025 (BOE, February 2025) at 1,184 euros gross per month, which represents an increase of 4.4% compared to the previous year, Spain once again increases employees’ purchasing power but also raises questions about possible effects on net income. Since this measure takes effect retroactively from 1st of January 2025, companies are required to pay the difference between the new SMI and the amounts paid in January/February 2025 if they were lower than the updated figure.
Until December 2024, the SMI remained at around 1,125 euros gross per month (split in 14 payments). In practice, this figure served as the basis for calculating multiple employment benefits and references in Collective Bargaining Agreements, although many voices in the labour market considered it insufficient to cope with the rise in the cost of living.
Starting 1 January 2025, the SMI is set at 1,184 euros gross per month (14 payments) or its proportional equivalent in 12 payments, thereby exceeding the threshold of 39 euros per day. The rationale behind this increase is to continue reducing the wage gap and to strengthen employees’ income, especially those at the bottom of the pay scale. Several official announcements emphasise that the measure seeks greater social justice and aims to ensure that Spain ranks closer to its European counterparts in terms of minimum salary standards. Nonetheless, this increase (though beneficial in gross terms) may pose challenges for certain employees in terms of net take-home pay. Specifically, by slightly exceeding prior thresholds, some employees could find themselves in a higher tax bracket for Personal Income Tax (IRPF). As a result, part of the salary gain might be offset by higher withholdings on their payroll. The question that arises is whether, in the end, this will translate into a real improvement in employees’ disposable income or whether the difference in the tax burden could erode the purchasing power intended by the increase.
Below are some practical considerations about how this raise affects different situations.
- Employees with wages set by a Collective Bargaining Agreement that already exceed 1,184 euros per month will not necessarily see any change.
- The same principle applies to those whose individually negotiated salaries surpass both the relevant Collective Bargaining Agreement amounts and the SMI.
In that sense, experts suggest several possible strategies to mitigate the risk of losing part of the increase through taxation. On one hand, Collective Bargaining Agreements and company-level negotiations may include clauses allowing adjustments or complementary payments that help to maintain net salaries above a certain level. On the other hand, it may be necessary for the tax authority or lawmakers to explore specific deductions or thresholds that prevent an excessive increase in withholdings for employees who barely exceed the bracket limit.
Ultimately, while the new SMI for 2025 stands as an important milestone in improving labour conditions and supporting the most vulnerable segments of the workforce, it also reopens the debate on the real impact of such raises on employees’ pockets.
In practice, companies will need to adapt their payroll systems to the new regulatory framework, and employees should remain aware of the changes in net salary. Once again, the Spanish legislature is challenged to strike a balance between raising the standard of living and ensuring that higher payroll taxes do not end up reducing employees’ disposable income to levels barely above the previous threshold.
