LABOR AND SOCIAL SECURITY LAW
Iraide Mendieta
Context and Supreme Court Rulings
The new year has brought several modifications in the labor and Social Security framework, which will have a significant impact on both companies and workers. These changes stem from Royal Decree-Law 11/2024 of December 23, aimed at improving the compatibility between retirement pensions and engaging in work activities. This Royal Decree-Law will come into force on December 25, 2024.
This regulation contains dense and particularly complex provisions, impacting many of the currently effective rules. This article aims to highlight the most relevant changes affecting a larger number of individuals, summarized as follows:
Article 214 of the General Social Security Law (LGSS) – Active Retirement Pension
The most significant modification lies in the second section, which establishes that the amount of the retirement pension that can be combined with work will depend on a percentage of the initially recognized pension, calculated based on the number of years the individual has delayed accessing retirement. The table is as follows:
DELAY BEYOND THE LEGAL RETIREMENT AGE INITIAL PENSION PERCENTAGE
1 YEAR 45%
2 YEARS 55%
3 YEARS 65%
4 YEARS 80%
5 YEARS 100%
Additionally, the corresponding percentage will increase by 5 percentage points for every 12 consecutive months the retiree remains in active retirement status, with a maximum limit of 100% of the pension.
Another new provision is that, from now on, if the retiree can demonstrate having employed a permanent worker under an indefinite contract, the percentage of the initially recognized pension will rise to 75% (previously, such cases allowed for 100%).
Article 215 of the LGSS – Partial Retirement
The new wording establishes that, to access partial retirement, the age must be at most three years younger than the legal retirement age, as provided in Article 205.1.a) LGSS.
Moreover, while the previous regulation did not contemplate a specific adjustment for work hour reductions in the case of early retirement, the current rule stipulates that if partial retirement is taken more than two years before the ordinary retirement age, the work-hour reduction during the first year must be between 20% and 33%. From the second year onward, the parties may modify the work-hour reduction within the general range of 25%-75%.
Regarding relief contracts, previously, these contracts could be for a fixed term with a minimum duration equal to the remaining time until the ordinary retirement age. However, under the new wording, relief contracts must now be permanent and full-time, with the obligation to maintain them for at least two years after partial retirement ends. If the contract is terminated earlier, the company must formalize a new contract under the same conditions.
Fourth Transitional Provision of the LGSS – Partial Retirement in the Manufacturing Industry
The validity of this provision has now been extended until December 31, 2029. Thus, the regulation for partial retirement combined with relief contracts will continue to apply to pensions initiated before this date, provided the established requirements are met.
Regarding these requirements, the new wording of the regulation maintains, in general terms, the same conditions as before, with two exceptions:
1. Previously, the regulation stipulated that at the time of the partial retirement event, the percentage of workers with indefinite contracts in the company had to exceed 70% of the total workforce. The new regulation raises this threshold to 75%
2. A new subsection (g) has been introduced, stating that during the partial retirement period, both the company and the employee will be required to contribute to Social Security for 80% of the contribution base that would have applied if the partially retired worker had continued working full-time. However, this contribution obligation will be applied gradually according to the following scale:
- Year 2025: The contribution base will equal 40% of the full-time base.
- Year 2026: The contribution base will equal 50% of the full-time base.
- Year 2027: The contribution base will equal 60% of the full-time base.
- Year 2028: The contribution base will equal 70% of the full-time base.
- Year 2029: The contribution base will equal 80% of the full-time base.
Nevertheless, it should be noted that relief contracts signed before the entry into force of this Royal Decree-Law will continue to be governed by the regulations in effect at the time of their approval.
