The reform of the social security contributions system and its impact on the regulating salary for severance
As discussed in previous posts, the changes ushered in by Royal Decree-Law 16/2013, of December 20, 2013, on measures to encourage stable hiring and improve the employability of workers, entered into force on December 22, 2013.
This piece of legislation, as we have indicated before, established the basis for a far-reaching modification of article 109.2 of the General Social Security Law, whereby the number of salary items excluded from the calculation of the social security contribution base was reduced.
Accordingly, and in rather a unique manner, since article 109.2 deals with the exclusion of salary items and not those which must be included in the final figure making up the contribution base, we are faced with a new piece of legislation which, following the trend of other recent reforms, introduces a series of major changes in a veiled manner, to the extent that: (i) they directly imply an additional social cost due to the increase in the social security contribution bases, and (ii) uncertainty arises surrounding the possibility that these items which should be considered contributory items may also be included in the regulating salary for the calculation of severance.
By way of example, since last December, as a result of the legislative modification, items such as the cost of the canteen service or medical insurance, among others, must be recognized in the social security contribution base from the first euro of cost, although, in principle, this does not preclude the fact that, in application of article 26 of the Workers’ Statute and the prevailing view taken by the courts to date, these same items may continue to be excluded from the regulating salary to be taken into account when determining severance.
However, it seems that the legislative reform could start to come into line with a new line of legal thought that extends the range of items to be considered in the regulating base for severance, as already glimpsed in the judgment handed down by the Supreme Court in a cassation appeal for a definitive ruling on a point of law, of October 2, 2013 (appeal no. 1297/2012), which explicitly classed items paid as life and accidence insurance premiums as compensation in kind, therefore declaring them to be contributory items for the purpose of the regulating salary for severance.
In the judgment, the Supreme Court concluded that, independently of whether the life and accident insurance was stipulated individually or under a collective commitment by the employer, the monthly premium paid by the employer for this benefit constitutes compensation in kind for the provision of labor services, together with the rest of the items making up the paycheck, and can therefore be taken into account for severance purposes.
In conclusion, in line with recent judgments such as the one mentioned, the possibility cannot be ruled out that the inclusion of certain remuneration items in the social security contribution base as a result of the recently implemented modification, could serve as an additional argument for the courts when justifying the inclusion of items in the regulating base for severance.
Garrigues Labor and Employment Law Department