The Government proposes to extend the minimal wage by 3.1%, to 1,221 euros per 30 days in 2026 | Economy | EUROtoday

This Wednesday, the Government communicated to unions and employers its intention to lift the interprofessional minimal wage in 2026 by 3.1%, reaching 1,221 gross euros per 30 days in 14 funds (17,094 euros per 12 months). This revenue is at present set at 1,184 euros per 30 days, so the rise will imply 37 euros extra per 30 days and its beneficiaries will proceed with out paying private revenue tax, as confirmed by the Secretary of State for Labor, Joaquín Pérez Rey. The enhance is much less massive than that of earlier years and is just two tenths greater than the inflation recorded in 2025 (2.9%, in response to the advance CPI information revealed for the month of December).

The social companions should talk within the coming days whether or not or not they help this revaluation. In precept, the CC OO and UGT unions will say sure to what was introduced this Monday, however, as well as, after this assembly the sudden chance has been opened that businessmen can even help the rise of three.1% – in comparison with the 1.5% they initially proposed – in response to the hopes expressed by Pérez Rey himself.

The motive for this alteration in employers’ associations has been Labor’s dedication to barter with the remainder of the Government (essentially ministries of Finance and Economy) the “relaxation of the rules of deindexation of the SMI in public contracts,” mentioned the Secretary of State. This promise responds to an previous demand from unions and employers – who’ve demanded it yearly for years – to have the ability to switch the annual will increase in minimal wages to the wage prices included within the public contracts that corporations have with the administrations. This implies that corporations awarded public contracts can earn extra for them as a result of employees’ compensation turns into costlier.

Despite this primary approximation, the Vice President of the Government and Minister of Labor, Yolanda Díaz, has cooled, simply two hours after the top of the social dialogue assembly, the potential for making use of mentioned deindexation by admitting that “there is a discrepancy with the Socialist Party”, which till now has resisted accepting this measure.

In any case, Díaz has confirmed that, with or with out the help of the employers’ affiliation, the rise can be permitted shortly by the Council of Ministers and could have retroactive results on all of the payrolls of the almost 2.5 million recipients of this revenue since final January 1.

In this fashion, the Executive has opted for the low band of enhance on this revenue proposed by the committee of specialists that proposed a rise of three.1% if the minimal wage remained untaxed in private revenue tax, or 4.7%, as much as 1,240 euros per 30 days (17,360 euros yearly), if its preceptors started to pay taxes to the Treasury for that revenue. With this proposal, Pérez Rey has dedicated to making sure that “the beneficiaries of this income do not pay taxes”, opposite to what the Ministry of Finance had insisted on.

Labor’s dedication is that the online assortment of this revenue is 17,094 euros per 12 months, for which the Treasury should undertake, in vital circumstances, the corresponding deductions that preserve recipients untaxed within the 2026 Income marketing campaign. “The Labor proposal is agreed upon with the Treasury; it is a Government proposal to exempt the resulting amount from taxation. [1.221 euros mensuales]. And how to carry out this tax relief, exemption or appropriate tax figure is something that we leave to the Ministry of Finance, but the most normal thing is that it continues to be proposed in the same terms as in previous years,” said Pérez Rey.

The law does not oblige the Government to negotiate the increase in the minimum wage with employers and unions, it only has to “consult”, listen to them and then make its own decision. Although traditionally the Executive does subject this measure to a negotiating process and tries to seek the greatest possible consensus with the social partners. This year has not been an exception but, from the beginning, the positions have been very conflicting: the unions proposed an increase of 7.5% for 2026, while the employers have only been willing, until now, for the increase to be 1.5%. Now, after having introduced the possibility of companies’ contracts with the public administration being able to transfer increases in the minimum wage to their costs (the so-called deindexation) or, at least a part of them, the door is opened to a possible tripartite agreement (Government, employers and unions) to raise the minimum wage by 3.1% in 2026.

However, the union negotiators of UGT, Fernando Luján, and CC OO, Javier Pacheco, have insisted that the commitment to relax the rules of deindexation of the minimum wage in public contracting will not make the centrals modify one iota their claims on other issues that for them are essential to reach an agreement: the adoption of the legal changes necessary so that the increases in the SMI cannot be absorbed or compensated by the salary bonuses that the workers receive.

Although the unions have accepted that the establishment of limits on this capacity to absorb or compensate for increases in the minimum wage and other regulatory issues to transpose the European directive on minimum wages be adopted in another decree different from the one that will approve the increase in the amount of the SMI by 3.1% for this year, Luján has been clear: “We are usually not going to surrender on the truth that the rise within the minimal wage reaches the pockets of its recipients in full.” To this end, the decree that will continue to be negotiated in the coming days should clarify that future increases in this income cannot be absorbed (and therefore nullified) by salary bonuses.

Taxation debate

After the controversies experienced in recent years about whether or not the minimum wage should be taxed in personal income tax, as this income increases and approaches or exceeds the figures exempt from taxation, the ministry led by Vice President Yolanda Díaz commissioned, after the summer, the committee of experts that prepares the proposal to increase the SMI to set two scenarios for 2026. This committee thus developed an increase scenario if the beneficiaries of the minimum wage continued to pay taxes in practice and another if They were starting to do it.

The debate on the taxation of the legal minimum wage floor lies in the substantial increase in employees who stop contributing to personal income tax as the minimum wage increases and has done so by 61% since 2018. A recent report from the Independent Authority for Fiscal Responsibility (Airef) drew attention to a “concentration of workers around the new threshold [del SMI] and at the levels directly above.” According to this, in 2018 solely 3.5% of employees contributed for the minimal base – akin to those that obtain the SMI -, whereas simply 5 years later, in 2023, this share doubled to 7.4%. And those that earn just a bit greater than the minimal wage are advancing much more strongly: in 2018, 7.9% of employees contributed for 125% of the minimal base and in 2023 they had been 22.8%. Despite all the things, Díaz’s division has managed, as soon as once more, to impose that the personnel who obtain the minimal wage proceed with out paying taxes to the Treasury.