Understanding Mandatory Social Security Contribution Rules

Item 3: Social Security Contributions

1. Definition and Purpose of Contributions

A contribution (or assessment) is the mandatory payment made by individuals or entities to fund the Social Security system. The specific amount contributed depends on the scheme or category under which the person is registered.

2. Basic Elements of Contribution Assessment

The basic elements used for calculating contributions are three:

• The Contribution Base
• The Contribution Rate
• The Contribution Fee (or amount payable)

What is the Contribution Base?

The Contribution Base is the calculated amount resulting from applying specific rules defined for each scheme established in the relevant national legislation (e.g., the Finance Act or State Budget Law).

What is the Contribution Rate?

The Contribution Rate is the percentage applied to the Contribution Base. The result of this calculation is the final fee or amount payable. Contribution rates are typically set annually according to the Law of the State Budget.

What is the Contribution Fee?

The Contribution Fee is the final amount payable. It is the result of applying the Contribution Rate to the Contribution Base, minus any applicable bonuses and/or reductions that may apply.

3. Who is Obligated to Contribute?

Both natural persons (individuals) and legal persons (companies/organizations) covered by the various schemes that constitute the Social Security System are subject to the obligation to contribute, according to the regulatory terms set for each of them.

Any individual or group agreement where one party required to contribute for their dependents assumes the obligation to pay the fee (in whole or in part) for the other, or attempts to waive rights and obligations related to contributions recognized by the regulation of each scheme, shall be considered null and void.

4. Concepts Subject to Contribution Assessment

The concepts subject to contribution assessment are generally categorized into four areas:

• Common Contingencies
• Accidents at Work and Occupational Diseases
• Overtime
• Other Specific Contributions

Common Contingencies

The contribution for this concept covers situations resulting from sickness, accidents outside the workplace, retirement, maternity and paternity leave, risk during pregnancy, and risk during breastfeeding.

Accidents at Work and Occupational Diseases

This contribution base is specifically intended to cover these types of contingencies.

Overtime

Contributions related to overtime earnings.

Other Specific Contributions

These contributions correspond to specific concepts:

• Unemployment.
• Wage Guarantee Fund (FOGASA): Used when the company is unable to pay the worker's wages.
• Professional Training: Contributions assessed on both the worker and the company.

5. Maximum and Minimum Contribution Bases (Limits)

The contribution bases used for the Social Security system are subject to statutory limits, often referred to as ceilings and floors:

• Maximum Base (Ceiling): Contribution bases may not exceed the basic limit established, which is determined each year by the General Budget Law for the State.
• Minimum Base (Floor): The contribution base shall have a minimum amount that integrates the Minimum Wage in force at any time plus one-sixth (1/6).

The specific minimum and maximum contribution bases are established relative to the professional category or group of activities, as set forth in the Act for the State Budget.