Social Security System in Spain: A Comprehensive Guide

Posted on Sep 4, 2024 in Law & Jurisprudence

ITEM 15: SOCIAL SECURITY

Social Security is a state-run insurance system that provides financial and medical services to individuals facing disability due to illness or accidents.

The Social Security Department of the International Labor Office (ILO) in Geneva, in collaboration with the International Training Center of the ILO, published a document in 1991 titled “Social Security Administration.” This document outlines a widely accepted definition of Social Security:

“It is the protection that society provides to its members through a series of public measures against economic and social deprivation which, otherwise, would cause the disappearance or strong reduction of income due to sickness, maternity, work-related accidents or occupational diseases, unemployment, disability, old age, and death. It also includes protection in the form of medical assistance and aid to families with children.”

1. Historical Stages of Social Protection and Inspiring Principles

Social Security originated in Germany as a result of industrialization, significant worker struggles, and pressure from churches, political groups, and academics of the time. Initially, workers organized themselves into self-help and solidarity associations, with a focus on mutual aid, consumer cooperatives, and trade unions. Under the leadership of German Chancellor Otto von Bismarck (the Iron Chancellor), three social bills were passed, forming the foundation of the modern Universal Social Security System:

  • Illness Insurance (1883)
  • Insurance against Accidents at Work (1884)
  • Insurance against Disability and Old Age (1889)

The success of this model led to its rapid spread throughout Europe and, shortly after, to other parts of the world.

In 1889, the “International Social Security Association” was established in Paris. The Rome Congress proposed the organization of conferences aimed at establishing international conventions. The first of these conferences took place in The Hague in 1910, followed by Dresden in 1911 and Zurich in 1912.

In 1919, the International Labor Organization (ILO) was founded as a result of the Treaty of Versailles. The preamble of the ILO’s constitution serves as the doctrinal and policy foundation for social security.

A second significant component of social security, known as the “Beveridge Plan,” emerged from England. This plan aimed to address situations of need arising from any contingency, regardless of their origin. It emphasized the importance of alleviating and preventing poverty in modern society, inspiring the principle of universal protection. By 1944, security had gained such importance that it was included in the 1948 Declaration of Human Rights.

In Spain, the first clear historical instance of social security is found in the Act of January 30, 1900, which established the country’s first worker insurance program, focused on work-related accidents. In 1908, the National Social Security Institute (INP) was created, characterized by its voluntary nature and the use of an individual capitalization system.

The first compulsory insurance program, called “Seguro Obrero,” was implemented in 1919. It was funded through a dual system (public and businesses), later incorporating employees through a collective capitalization system. In 1939, after the Civil War, the Workers’ Retirement System was transformed into the Mandatory Insurance for Old Age and Disability (SOVI), replacing the individual capitalization system with a shared one.

In 1946, the “Mutualidad Educativa” was established as a compulsory pension system for certain workers. The inconsistencies between the two existing systems (SOVI and Mutualidad) led to the enactment of the Law on the Basis of Social Security in 1963, introducing a distribution system aimed at implementing redistributive policies.

Article 40 of the 1978 Spanish Constitution states that “public authorities shall maintain a public Social Security system for all citizens, guaranteeing adequate assistance and benefits in situations of need, especially in the case of unemployment. Assistance and benefits shall be free of charge.”

During the 1980s, a series of measures were implemented to improve and strengthen protective actions, extend benefits to uncovered groups, and provide greater economic stability to the Social Security system. In 1985, the Economic and Social Agreement led to the drafting of the Document on the Reform of Social Security, although it lacked legal value.

The 1990s witnessed a series of social changes that impacted various aspects of society, including the Social Security system. These changes included shifts in the labor market, increased mobility, and the incorporation of women into the workforce, necessitating an adaptation of social protection to address these new needs.

The principles of social security are a faithful expression of the right to life, manifesting themselves in various ways and circumstances but always aiming to preserve life and human dignity.

Four basic principles are universally recognized, along with other technical operating principles such as participation and efficiency.

a) Universality:

This principle guarantees protection to all individuals covered by the Social Security Act, without discrimination and throughout all stages of life.

b) Solidarity:

This is the fundamental principle upon which all others rest. It involves a collective effort by society to ensure coverage for individual social contingencies. It implies that all members of society contribute according to their abilities to address individual needs equally, guaranteeing protection for the most vulnerable.

c) Completeness:

This principle guarantees coverage for all foreseeable needs within the system. It encompasses all aspects of an individual’s well-being, from conception to death. Applying this principle prevents benefits from falling below a minimum level while also establishing an upper limit to ensure that everyone receives a certain degree of equality in coverage.

d) Unity:

This principle refers to the coordination of policies, institutions, procedures, and benefits to achieve the system’s objectives. It implies harmony in the rules governing Social Security, achieved through consistent legislative behavior and the appropriate allocation of resources.

e) Participation:

This principle emphasizes the active role of all stakeholders, both public and private, involved in the Comprehensive Social Security System. It encourages community involvement, including beneficiaries, in the organization, control, management, and supervision of institutions and the system as a whole. Social security is both a right and a duty for all citizens; members of society are obligated to contribute to its funding according to their economic capacity and to ensure its proper and efficient functioning.

f) Efficiency:

This principle promotes the optimal use of available resources to ensure that benefits are provided promptly, appropriately, and sufficiently. To guarantee adequate and timely services within the social security system, administrative, technical, and financial resources must be managed effectively.

2. The Spanish Social Security System: Structure, Composition, Protected Population, General Arrangements, and Regimes

The Comprehensive Social Security System, as an interconnected and interdependent whole, comprises various social protection systems organized into subsystems. It is a compulsory and contributory public service for all workers.

The Ministry of Labor oversees the Comprehensive Social Security System, operating within the legal framework of the Organic Law of the Social Security System and specific laws governing each subsystem. This is without prejudice to the concurrent powers of other ministries or entities responsible for monitoring and control.

The National Council for Social Security serves as an advisory and consultative body to the National Executive.

The Comprehensive Social Security System consists of the following subsystems, which, while maintaining their autonomy, interact with each other:

  • Pension Subsystem: Covers contingencies related to sickness, old age, death, funeral expenses, marriage, and survival.
  • Health Subsystem: Guarantees healthcare provision and funding for members and beneficiaries.
  • Unemployment and Vocational Training Subsystem: Provides temporary protection for participants facing termination of their employment relationship, offering cash benefits and facilitating their swift reintegration into the workforce through job placement services and training.
  • Housing and Housing Policy Subsystem: Facilitates access to decent and adequate housing, including basic urban services, for members and beneficiaries. It also encourages and supports individual and community involvement in addressing housing problems.
  • Recreation Subsystem: Promotes and encourages the development of recreational programs, leisure activities, rest, and social tourism for members and beneficiaries of the Comprehensive Social Security System.

Protected Population

Section 97 of the Revised General Act on Social Security outlines the following:

  1. The following individuals are subject to compulsory inclusion in the General Scheme of Social Security: employees or equivalent workers specified in paragraph 1.a of Article 7 of this Act (regardless of gender, marital status, or profession), residing in Spain; Spanish citizens and foreigners legally residing or present in Spain, provided that they are employed within the territory; employed individuals over 18 years of age who meet the legal requirements; working partners of Associated Labor Cooperatives; students; and public, civil, and military employees.
  2. For the purposes of this Act, the following are explicitly included in the previous paragraph: employees and partners working with capitalist commercial companies; drivers of passenger vehicles in the service of individuals; civilian personnel officials of state agencies, services, or entities; civilian personnel officers in the service of agencies and Local Government entities, provided they are not covered by a special law or another compulsory scheme; individuals providing paid services on the premises of religious institutions or providing services to agencies or offices of the Church whose mission is to assist in the practice of religion; individuals providing paid services to charitable or social service institutions; personnel hired by Notaries, Property Registries, and other offices; probationary officials; state officials transferred to the Autonomous Communities; members of local authorities; and members of the General Assemblies of the Provinces, Canary Islands Councils, and Balearic Island Councils, excluding unemployment protection and the Wage Guarantee Fund; directors and managers of capitalist corporations; Trade Union representatives; and any other individuals who, by Royal Decree upon the proposal of the Minister of Labor and Social Affairs, are assimilated under paragraph 1 of this article.

Article 98. Exclusions:

The following types of work do not lead to inclusion in the General Scheme:

  1. Work performed occasionally through so-called friendly services, benevolent acts, or good neighborliness.
  2. Work leading to inclusion in any of the Special Schemes for Social Security.

The Spanish Social Security System comprises the following arrangements:

  1. General Scheme: This is the most widely applied scheme and serves as a residual scheme for others. The obligation to contribute arises from the commencement of work and continues throughout the employment relationship between employer and employee. It persists even in situations of temporary disability, risk during pregnancy, risk during breastfeeding, maternity and paternity leave, or probationary periods. The obligation to contribute ceases upon termination of employment, provided that the worker is notified within six calendar days. If notification occurs after six days, the obligation to contribute continues until the General Treasury of Social Security is informed of the termination, unless proven otherwise by stakeholders. Contributions to Social Security, known as quotas, are calculated based on a percentage of the employee’s contribution base or the contribution rate corresponding to each contingency covered. The contribution base is calculated by adding the employee’s monthly salary, including bonuses and other periodic payments, to their regular wages. Annual contribution bases establish minimum and maximum contribution levels for different groups. The contribution rate is shared between the employer and employee, except for contributions related to Occupational Accidents and Occupational Diseases and the Wage Guarantee Fund, which are borne exclusively by the employer. Contribution rates are set annually by the State Budget Law. The employer is responsible for paying both their own contributions and those of their employees, deducting the latter from their wages at the time of payment. Contributions must be paid within one month of accrual. Late payments may incur surcharges and default interest.
  2. Special Regimes: These regimes apply to specific activities due to their nature, particular conditions of time and place, or production processes. They include:

Ø Agrarian:

This special regime covers workers whose primary income comes from agricultural activities, including both crop and livestock farming. It encompasses individuals employed by others, self-employed individuals, and farm owners. The Special Agricultural Workers Scheme requires contributions but not enrollment in the General Scheme of Social Security, provided that individuals are registered in the Agricultural Census. Agricultural entrepreneurs must pay contributions for their employees, similar to those of other workers. Employed individuals contribute for common contingencies and occupational risks. Employees are entitled to similar benefits as workers in other schemes. However, self-employed individuals are not eligible for unemployment benefits. They are also entitled to benefits related to risk during pregnancy and breastfeeding. This regime does not include the possibility of partial retirement. Self-employed agricultural workers can opt for the Special Scheme for Self-Employed Agrarian Workers if they meet certain requirements: being over 18 years old, owning a farm where 50% of annual income comes from agricultural activities (with at least 25% earned directly), not exceeding a maximum contribution base of 75% of the farm’s net income, having no more than two permanent employees, not exceeding a specified number of working days, personally working on the farm, and dedicating more than half of their working time to agricultural activities.

Ø Self-employed:

Self-employed individuals are required to register with the Social Security Treasury within 30 days of starting their activity. They are responsible for paying their own contributions. Contributions for temporary disability, industrial accidents, or occupational diseases are voluntary. Contributions for common contingencies are mandatory and calculated by applying a percentage set annually based on a contribution base chosen by the worker within established limits. Payments must be made to authorized financial institutions or collection offices within the corresponding month, either through contribution forms or direct debit. Generally, self-employed individuals have the same benefits as members of the General Scheme of Social Security, with some exceptions: they are not eligible for early retirement before age 65 (except in specific cases) and are not entitled to unemployment benefits.

Ø Domestic Workers:

This regime applies to domestic workers employed in the residence of one or more heads of household and receiving a salary. It also includes caregivers, gardeners, and other individuals performing household tasks. If employed by a single person, the employer is responsible for registering the worker with Social Security. However, if employed by multiple heads of household, the worker must handle the registration process. Contributions are due in the month following the corresponding debt. There is a single contribution rate and base for all workers under this scheme. As with other self-employed individuals, domestic workers are not entitled to unemployment benefits.

Ø Coal Mining:

This scheme covers all employees involved in coal mining, land exploration, or any activities related to coal extraction. Registration is done with the Social Security Treasury, following a similar procedure to the general scheme. However, many of the applicable regulations differ. The calculation of the percentage for common contingencies varies each year, depending on factors such as the number of accidents suffered by workers in each category.

Ø Seafarers:

This scheme includes all employees and self-employed individuals engaged in fishing, maritime activities, or related tasks. Registration is handled by the Social Marine Institute (ISM) and is mandatory within six days before starting the activity. Contribution groups vary depending on employment status (employed or self-employed) and the type of vessel. Employed seafarers are entitled to unemployment benefits. Another distinctive feature is that healthcare is provided by the Social Marine Institute.

Ø School Insurance:

Fees for this special scheme are collected through educational institutions where covered teachers work. They are collected alongside tuition fees for the school year. Coverage extends to students under 28 years old in cases of school accidents, permanent total disability, death, contracted diseases, or family misfortunes (death of the head of the family, financial ruin, bankruptcy, etc.). Educational establishments must deposit the collected fees into authorized financial institutions within the following timeframe: from the student’s enrollment until the last day of the month following the enrollment deadline. The institutions must then submit the payment receipts to the General Treasury of Social Security, which requests the corresponding quotas from the Department of Education Promotion within the Ministry of Education and Culture.

3. Right to Protection: Registration of Employers, Affiliation, Registration and Deregistration of Workers, Contributions, Collection, Legal Regime of Protection, Protected Situations

Registration establishes the legal relationship with Social Security, while deregistration terminates it. Changes refer to administrative acts communicating modifications to worker data, address, or employment status within the Social Security System. Applications for registration, deregistration, and data modification must be signed by the employer or, in the case of self-employed individuals, by the worker themselves. Employed workers must always sign the application.

Contribution refers to the economic resources that obligated parties must provide to the Social Security System. The obligation to contribute arises from the commencement of work activity. Failure to submit a registration application does not exempt individuals from their contribution obligations once they meet the requirements for inclusion in the relevant scheme. The obligation to contribute persists throughout the employment period, including situations such as temporary disability, risk during pregnancy and breastfeeding, maternity and paternity leave, fulfillment of public duties, performance of union representation duties (unless it leads to leave or cessation of activity), authorized leaves and permits, special agreements, contributory unemployment, unemployment assistance (if applicable), and other cases established by the regulations governing each regime. The obligation ceases upon termination of employment, provided that deregistration is communicated promptly. The Social Security Administration’s right to determine and collect contributions, including enforcement actions, is subject to a statute of limitations of four years.

Collection management of contributions is carried out by the General Treasury of Social Security through its collection agencies or partners. Obligated parties must submit payment documents to the designated collaborating institution. However, even if contributions are not paid, the corresponding contribution documents must be submitted to the Provincial Directorate of the Treasury for Social Security or the relevant Social Security Administration office within the statutory period. Submitting documents without payment within the deadline allows for the compensation of economic benefits through the delegated payment scheme (partnership required) but not for the application of contribution discounts. Late document submissions incur surcharges of 3%, 5%, 10%, or 20%, depending on whether payment is made within the first, second, third, or after the third month following the deadline, respectively. Unless otherwise specified, Social Security contributions are paid monthly within the calendar month following their accrual, except for the Special Regime for Self-Employed Workers (payment in the same month) and the School Insurance Scheme (payment with tuition fees).

Article 38 of the Consolidated Text of the General Social Security Law (TRLGSS) outlines the situations protected by the Social Security system:

  1. Healthcare in cases of maternity, occupational illness, or accidents, whether or not work-related.
  2. Professional rehabilitation for individuals affected by the situations mentioned in the previous paragraph.
  3. Benefits in situations of temporary disability, maternity, paternity, risk during pregnancy and breastfeeding, contributory and non-contributory disability, retirement (contributory and non-contributory), unemployment (contributory and assistance levels), death and survival, as well as contingencies and special situations established by Royal Decree upon the proposal of the Minister of Labor and Immigration. Cash benefits for disability and retirement, in their non-contributory forms, are awarded according to the regulations outlined in Title II of this Law. Unemployment benefits, both contributory and assistance levels, are awarded according to the regulations outlined in Title III of this Law.
  4. Family benefits, both contributory and non-contributory. Family benefits not covered by an employer are awarded according to the regulations outlined in Title II of this Law.
  5. Social services that may be established for re-education, rehabilitation, and assistance for individuals with disabilities and the elderly, as well as other deemed appropriate.

Types of benefits: Unemployment, temporary disability, disability, retirement, healthcare, and family protection.

Provision requirements are intended to cover:

  • Healthcare: To preserve and restore the health of individuals covered by Social Security, including cases of common illness, occupational disease, non-occupational accidents, work-related accidents, and maternity. Coverage extends to the working individual, their children, and dependents. It includes the provision of medical and pharmaceutical services, physical therapy, prosthetics, and orthotics to restore and maintain health.
  • Maternity: A financial benefit paid to employees during the postpartum rest period following childbirth, adoption, or foster care. Requirements include registration with Social Security, 180 days of contributions in the previous five years, and a registered birth. The benefit amounts to 100% of the contribution base (BR) for 16 weeks, during which the employment contract is suspended.
  • Risk during Pregnancy: Protection for the health of the mother and fetus during pregnancy. Requirements include registration with Social Security, 180 days of contributions in the previous five years, and a job change due to risks to the fetus’s health or the impossibility of continuing work. The benefit amounts to 75% of the BR for 16 weeks, during which the employment contract is suspended.
  • Permanent Injuries: A financial benefit paid to employees who have suffered injuries, mutilations, or deformities resulting in a permanent decrease in physical capacity. Requirements include discharge from medical treatment and the injury being listed in the compensation scale table. The benefit amount ranges from €36.06 to €673.13, depending on the severity and established scale.
  • Adoption: A financial benefit paid to employees during the rest period following adoption or foster care. Requirements include registration with Social Security, 180 days of contributions in the previous five years, and a registered adoption or foster care agreement. The benefit amounts to 100% of the BR for 16 weeks, with an additional two weeks per child in the case of multiple adoptions. The employment contract is suspended during this period.
  • Temporary Disability: A financial benefit paid to workers temporarily unable to work due to illness or injury. Requirements vary depending on the cause of disability:
    • Common Illness: Registration with Social Security and 180 days of contributions in the previous five years. The benefit amounts to 60% of the BR for the first 20 days and 75% from day 21 onwards, with a maximum duration of 12 months (extendable by six months).
    • Non-occupational Accident: Registration with Social Security. No minimum contribution period is required. The benefit amounts to 75% of the BR from the day following the accident, with a maximum duration of 12 months (extendable by six months).
    • Occupational Disease and Accidents: Registration with Social Security. No minimum contribution period is required. The benefit amounts to 75% of the BR from the day following the diagnosis or accident, with a maximum duration of 12 months (extendable by six months).
  • Permanent Disability: A financial benefit paid to workers who, after receiving treatment, experience significant anatomical or functional impairments that reduce or eliminate their work capacity. The degree of disability must exceed 33%, and there are various legally established grades:
    • Permanent Partial Disability for the Usual Occupation: The worker can still perform their usual occupation but with reduced capacity. They receive a monthly pension for 24 months, calculated based on their BR.
    • Permanent Total Disability for the Usual Occupation: The worker cannot perform their usual occupation but can engage in other professions. They receive a monthly pension of 55% of their total BR.
    • Permanent Absolute Disability: The worker is unfit for any type of profession. They receive a monthly pension of 100% of their BR.
  • Retirement: A financial benefit received by workers upon reaching the retirement age of 65, provided they have contributed for at least 15 years, with at least two of those years within the 15 years preceding retirement. The pension amount is calculated based on the number of years contributed and the BR.
  • Contributory Unemployment: A financial benefit for individuals who are unemployed or working reduced hours. Requirements include having worked as an employee and contributed for at least 12 months in the past six years. The benefit amounts to 70% of the BR for the first 180 days and 60% thereafter. The duration depends on the contribution period.
  • Unemployment Assistance: An extension of unemployment benefits granted to individuals facing unemployment and lacking income above the Minimum Wage (SMI). Requirements include being registered as unemployed for at least one month, not being eligible for contributory unemployment benefits, and having an income below 75% of the SMI. The benefit amounts to 75% of the SMI, excluding any proportional share of additional payments.
  • Family Protection: A financial benefit received by workers or pensioners to support dependent children. Requirements include registration with Social Security, pensioner status, or orphan status (with deceased parents), having a third child, and not exceeding established income limits. The benefit amount varies depending on age, disability status, and income.
  • Death and Survival Protection: A financial benefit provided upon the death of a worker or pensioner to cover funeral expenses and support their families. Requirements include a minimum contribution period of 15 years for workers and pensioner status for retirees. The benefit helps cover funeral expenses and provides a monthly pension to eligible beneficiaries:
    • Widow/Widower: A monthly pension ranging from 48% to 70% of the deceased’s BR, provided they were legally married or in a registered partnership.
    • Orphans: A monthly pension of 25% of the deceased’s BR for natural or adopted children under 18 years old, or up to 25 years old if disabled or unemployed. Disabled children receive the pension for life.
    • Family Members: A monthly allowance of 20% of the deceased’s BR for family members under 18 years old or disabled who lived with the deceased for at least two years and were financially dependent on them, provided they are not eligible for a public pension.