Extensions and modifications to self-employed aid

The pandemic has caught us all by surprise, including the entire government and administration. Faced with an unprecedented situation, it has been challenging to activate and manage all aid for businesses and self-employed individuals, as well as for the general population. At this point, the sector's needs have been further analyzed, and the effectiveness of the aid has been verified. Therefore, in addition to extending them, some of them have also been modified with the aim of being more useful and reaching more people.

2020 Data

In the balance of a year of pandemic from the IX Covid-19 Barometer prepared by ATA, it is concluded that the losses of self-employed workers last year amounted to €65 billion. This is an average of €20,000 in losses per entrepreneur.

Regarding loans from ICO, 944,588 loans guaranteed with a guarantee of €87,085.8 million were approved. Financing was received by 591,535 companies, with 99% being self-employed and SMEs. Specifically, 255,808 self-employed workers and 269,812 micro-enterprises obtained loans totaling €31 billion. Likewise, 74% of the approved operations corresponded to businesses with fewer than 10 employees, demonstrating the capillarity of the Aval Line.

2021 Updates

An extension of COVID-19 aid to self-employed individuals has been approved until May 31st, with the participation of the main associations of self-employed workers. Although it took time to convene the dialogue table, an agreement was quickly reached. This agreement extends the current aid with some modifications, with more flexible conditions and fewer requirements to access the benefit.

It is aimed at self-employed individuals who experience a temporary suspension of all their activity and has the following characteristics:

• The benefit for cessation of activity is 50% of the minimum contribution base, which can be increased by 20% if the self-employed individual is a member of a large family.
• The requirement of having previously received benefits has been eliminated to access the benefit, as well as the ban on self-employed individuals who had children during the state of alarm or who were on sick leave.
• Self-employed workers will continue to contribute to Social Security, but they are exempt from paying contributions.
• The benefit compatible with activity can be requested by those whose turnover is reduced by half in the first quarter of the year (previously it was 75%).
• If there are earnings from work as an employee, they are compatible up to 1.25 times the minimum wage.
• In addition, the gradual increase in professional contingency and cessation rates has been suspended until May 31st.
• For seasonal self-employed workers, their benefit remains at 70% of the minimum base if they do not have earnings exceeding €6,650 in the first quarter. The requirement to be registered with Social Security has been reduced to two months, as the previous requirements were almost impossible to meet.
• If the requirements for this benefit or for ordinary cessation are not met, there is still the option to apply for an extraordinary aid: the amount is 50% of the minimum contribution base, and contributions are also exempted. The income limit in the first half of the year is 1.2 times the minimum wage.

With these modifications, the number of self-employed individuals who can benefit from this aid will increase to 800,000, 1 out of every 4 registered in the RETA.

New Challenges

Having achieved the above, self-employed associations continue at 120% and are already working on new challenges to negotiate with the Ministry of Finance: exemptions or deferrals of taxes, extensions in the filing of income tax returns and self-assessments, etc., as well as ensuring that home utility expenses are deductible for those self-employed individuals who have been forced to telework as a result of the pandemic. Companies can deduct these expenses for salaried workers in the event of confinement, they argue. It is a rather broad issue, so we recommend taking a look at the article by Autónomos y Emprendedor, which you will find by clicking on this sentence.

From UPTA, a system of non-repayable grants is proposed to rescue self-employed individuals from the sectors most affected by restrictions. These grants would be tiered, depending on the loss of turnover.

What Will the New Contribution System Look Like? 2/3 of self-employed individuals contribute above their actual income, according to calculations by the Minister of Inclusion, José Luis Escrivá. His department is currently working on a proposal in which new self-employed workers choose their contribution base based on their income forecasts. This system will be flexible, can be modified throughout the year, and regularized one year later, with the possibility of reimbursing excess contributions. Being tiered, it will be a progressive system that will imply that a large number of self-employed individuals reduce their contributions.

Other Planned Reforms

Similarly, work is underway on incentives to align the effective and legal retirement age, and on the maternity supplement. In addition, a mechanism for pension revaluation is being designed that will take into account years of negative inflation. The most delicate issue is the increase in the years of pension calculation from 25 to 35 years, and an extension of the maximum contribution base is also envisaged, arguing that individuals with high incomes have a longer life expectancy.