Significant Labour Reforms and Pension Changes in Spain for 2025

As Spain embarks on a series of significant labour and pension reforms, expats and residents alike need to be aware of the impending changes that will shape the country's workforce and retirement landscape.

Reduction in Working Hours

One of the most notable reforms is the reduction of the standard workweek from 40 to 37.5 hours, effective April 1, 2025. This change, the first reduction in working hours since 1983, aims to enhance work-life balance, reduce stress, and improve overall employee well-being. Despite the decrease in hours, the reform is designed to maintain productivity levels while promoting employee health and satisfaction[1][4].

Increase in Minimum Wage

To support lower-income workers, the Spanish government has announced a 5% increase in the minimum wage for 2025. This move is part of a broader effort to improve purchasing power and reduce income inequality. Since 2019, the minimum wage has been raised by 26%, although this increase has been somewhat offset by rising costs of living, particularly in food and housing[1][4].

Digital Time Tracking

Another key reform involves the mandatory adoption of digital time tracking systems by all companies in Spain. This change replaces outdated manual methods and is intended to increase transparency, ensure compliance with labor laws, and improve the accuracy of tracking working hours. Companies that fail to implement these systems may face penalties and legal issues[1].

Pension Reforms and Retirement Age

Spanish workers will now have the option to delay their legal retirement beyond the age of 67, with the possibility of continuing to work until 72. This reform, approved by the Socialist Party (PSOE)-Sumar government and supported by major trade unions and the right-wing Popular Party (PP), allows employees to voluntarily continue working while gradually receiving a percentage of their pension. The goal is to extend the working life of Spanish workers in line with European Union directives[2].

However, this change has raised concerns, particularly among low-wage workers who may be forced to continue working due to financial necessity. Currently, 42% of Spanish retirees live below the poverty threshold, and the extension of the working age could exacerbate this issue[2].

Social Security Contributions and Solidarity Tax

Starting January 1, 2025, a new "additional solidarity contribution" will be applied to incomes exceeding the maximum monthly contribution base. This contribution will not generate additional pension rights and will only apply to employed individuals, not self-employed ones. Additionally, the Intergenerational Equity Mechanism (MEI) will introduce a gradual increase in the minimum contribution rate from 2024 to 2029, reaching 1.2% by 2029, equally split between employers and employees[1][3].

Partial Retirement and Social Security Adjustments

The government has also extended the period for partial retirement, allowing employees to commence partial retirement up to three years before their social security normal retirement age. This change, along with modifications to the social security contribution system, aims to provide more flexibility and support for workers transitioning into retirement[4].

These reforms represent a significant shift towards a more balanced and employee-friendly labour market in Spain. However, they also come with challenges, particularly for low-income workers and those nearing retirement age. As these changes take effect, both employers and employees will need to adapt to the new regulations and understand their implications on work-life balance, financial stability, and the overall labour landscape.