Labor plays the card of public contracts to attract CEOE to an agreement on the minimum wage

The Ministry of Labor still hopes to reach an agreement to raise the minimum interprofessional wage (SMI) that has the signature of businessmen and not only from the unions, as is usual in social dialogue. The department headed by Yolanda Díaz proposed on Wednesday raising the minimum remuneration that can be paid by law by 3.1% and exempting it from paying personal income tax for another year. A proposal supported by the Ministry of Economy and the Ministry of Finance, in this case with regard to the SMI being left off the radar of the Tax Agency.

The department headed by Yolanda Díaz has opted for the lowest increase in the range proposed by the experts who have prepared their proposal, but it is still well above the 1.5% that the employers’ association has put on the table. And furthermore, it has recovered an old demand of employers, also shared by unions, which is end the deindexation law approved in 2015.

“The ministry’s commitment is explore, with relevant ministries [Hacienda y Economía]the possibility of relaxing indexing rules that have to do with the impact on public contracts on salaries,” launched the Secretary of State for Labor and ‘number two’ of Yolanda Díaz, Joaquín Pérez Rey after meeting with unions and businessmen. An opinion that the second vice president herself also delved into, minutes later. “It is true that there is a discrepancy with the Socialist Party, but of course, for our part, they know that we defend it,” said Yolanda Díaz.

The deindexation law prevents companies that provide services to the administration from passing on unexpected increases in their costs to contract prices. The rule practically prevents service companies in sectors such as cleaning, security, catering or outsourced services in general from passing on to the administration the cost of the increase in the minimum wage approved by the Government.

Contracts are usually signed for periods spanning several years and The law prevents prices from being reviewed during that time except in highly priced situations.. For example, in 2022 the Government exceptionally allowed the increase in the prices of construction materials, which skyrocketed after the Russian invasion of Ukraine, to be passed on.

Except in exceptional cases like this, cost increases cannot be passed on. Let’s think, for example, of a cleaning company that was awarded a contract for the period 2022 and 2025. Between those years, the minimum wage went from 1,000 to 1,184 euros per month in 14 payments, an increase of 18.4% that represents a cost that the company cannot pass on to the administration during all that time because the law prevents it.

The employers have been asking the Government to change this rule for several years as a condition for accepting increases in the minimum wage proposed by the Government. The Ministry of Labor has always welcomed this possibility, but has encountered rejection from the Treasury, which is the one who holds the key to public accounts.

If contracts could be reviewed periodically, the cost would fall on the public treasurywhose finances are already under great pressure from spending items such as those linked to aging (pensions, healthcare, long-term care…) and more recently from the commitments made in defense matters. All this in a context in which Spain has agreed with the European Commission on a path of fiscal adjustment to reduce its chronic public deficit.

A difficult agreement

Despite everything, the agreement with the employers seems very difficult. Even if the Treasury gave in – it has already accepted that the minimum wage is not taxed in personal income tax, with the consequent loss of income that this entails – the Ministry of Labor and the unions intend that the minimum wage cannot be absorbed or compensated for salary supplements (night shifts, availability, shift work…).

This measure seeks to prevent companies from deducting the SMI increase from certain salary supplements for workers with payrolls that are close to, but above, the minimum wage. In this way, These low salaries are prevented from being driven by the increase in the SMIsince its increase dilutes the complements.

The Ministry of Labor is working on a decree without the force of law to put an end to this phenomenon, which the employers have already warned that they will appeal to the courts. If the rule were to prosper, companies would find themselves with an increase in costs additional to the increase in the minimum wage that would be notable, although difficult to quantify. In fact, one of the conditions that CEOE set for its 1.5% offer was that “compliance with the absorption and compensation rules of the Workers’ Statute” be guaranteed.