Employee Compensation: Salary Structure, Rights, and Guarantees
Definition of Salary
Salary is compensation for services rendered and represents one of the main features of the employment relationship.
Types of Salary
Salaries can be categorized based on:
- Type of Perception: In kind or in cash.
- Calculation Method: Per unit of work, per unit of time, or a joint method.
Wage Payment Criteria
Wage payments must meet the following criteria:
- Receiving the salary on the specified date and at the agreed place.
- Providing a receipt to justify the payment of wages.
- Ensuring regular wage payments.
- The ability to request advances on account of work already completed.
- Receiving 10% annual interest on wage arrears in case of delayed payment.
- The right to receive wages is established by the Workers’ Statute as an employment right.
Wage Structure
The structure of wages typically includes:
- Base Salary: The fundamental remuneration.
- Wage Accessories: Additional payments based on personal circumstances, work quality, and quantity.
- Overtime: Compensation for hours worked beyond the standard workweek.
- Extraordinary Bonuses: Additional payments for special achievements or events.
- Wages in Kind: Non-cash compensation, such as housing or a company car.
Extra Payments
Employees have an imperative right to at least two extra payments annually.
Features of Extra Payments
- Collective agreements typically specify the amount of these bonus payments. If not, an internal agreement will apply.
- Collective bargaining may allow for these payments to be pro-rated and distributed over twelve months.
Non-Wage Perceptions
These are compensations that are not considered part of the regular wage:
- Compensation and Expenses: Reimbursement for costs arising directly from work activities.
- Social Security Benefits and Allowances: These are not compensation for services rendered to the company.
- Severance, Transfers, Suspensions, or Dismissals: These perceptions are considered compensation, not wages.
Comprehensive Wage and Salary Structure
Wage Perceptions
- Base Salary
- Wage Accessories
- Overtime
- Wages in Kind
Non-Wage Perceptions
- Compensation and Expenses
- Benefits and Allowances from Social Security
- Compensation for Removal, Suspension, or Dismissal
- Other Fringe Benefits
Wage Guarantees
The law establishes mechanisms to ensure and protect wages, known as wage guarantees.
Higher salaries established by collective agreements, or amounts less than the minimum wage, may be subject to the absorption of compensation or wages.
Minimum Wage (SMI)
The government sets an annual minimum wage.
Elements Determining the SMI
- Consumer Price Index (CPI)
- National average productivity
- Increased participation of labor in national income
Wage and Pension Garnishment Rules
- Wages, salaries, pensions, compensation, or their equivalents, not exceeding the minimum wage amount, are non-garnishable.
- Wages, salaries, or pensions exceeding the minimum wage are subject to garnishment according to the following scale:
- First additional amount, up to double the minimum wage: 30%.
- Additional amount, up to triple the minimum wage: 50%.
- Additional amount, up to four times the minimum wage: 60%.
- Additional amount, up to five times the minimum wage: 75%.
- For any amount exceeding five times the minimum wage: 90%.
Wage Privileges
These are guarantees for creditors of companies, specifically regarding wage claims.
Wage Preferences
- Salaries for the last month, not exceeding twice the SMI, have absolute preference over any other debt.
- Remaining unpaid wages have priority over other claims, particularly those related to items produced by workers.
- Wages not covered by the above rules, and redundancy payments, are considered privileged and enjoy absolute preference.
Separate Enforcement Privilege
In cases of bankruptcy or insolvency, these situations do not prevent an employee from initiating legal action to recover wages owed by the company.
The Wage Guarantee Fund (FOGASA)
FOGASA is an autonomous body designed to cover debts that a company may have with its employees regarding salaries, extra payments, and compensation, especially in cases of declared insolvency or bankruptcy.
FOGASA Features
- An agency funded by contributions from companies.
- Covers wages and allowances up to a maximum of 150 days.
- The maximum daily amount covered is triple the current SMI.
Deductions on Wages
Common deductions from wages include:
- Contributions to Social Security.
- Withholding of income tax.
- Advances on salary.
- Value of goods received in kind.
- Other legally mandated or agreed-upon deductions.
Income Tax
Income tax is applied to the total remuneration received. The applicable percentage is determined by tax tables, based on the individual’s income level and number of dependents.