- On 11 October the government and Unidos Podemos signed an agreement on the 2019 budget.
- The pact included raising the minimum wage to €900 a month, one of the most visible measures in the plan.
- It is worth calculating labour costs if the measure were applied, including contributions, and discussing it early with the employment adviser.
On 11 October 2018, the government and Unidos Podemos signed an agreement on the 2019 budget that included raising the minimum wage to €900 a month. It was one of the most visible measures in the draft budget that the government intended to take to Congress, and its approval still depended on adding the parliamentary support needed to get it through.
By its nature, the news interests two very different audiences: workers who receive the minimum wage, because it directly affects their income, and the business owners and families who employ people, because it changes the cost of labour in certain sectors. Beyond whatever view each person takes of the measure, it is a fact that influences budgets, prices and hiring decisions, and is worth knowing in detail. Both those who hire and those who work benefit from understanding it before it takes shape.
What the pact contains
The agreement included raising the national minimum wage to €900 a month. For a company that figure means a higher labour cost, and for a household with domestic help a payroll to review, provided the text is finally approved.
It is worth bearing in mind that an agreement between two political forces is not yet a law. Budgets must be processed and voted on, and may be modified along the way. The announcement serves to anticipate the direction of economic policy, but it does not replace the final rule, and a company’s planning should therefore distinguish between what is approved, what is agreed and what is still only an intention. Acting on what has been agreed as if it were already law can lead to premature decisions; ignoring it altogether can lead to being late.
Who feels it
The minimum wage directly affects the workers who receive it, and indirectly the companies that hire in that bracket and the collective agreements that take that figure as a reference. For retail, hospitality, domestic service or agriculture, the impact can be significant.
In labour-intensive sectors, wages are a very large part of total cost, and any change in the wage floor shows up in the income statement. Moreover, many agreements, contracts and benefits use the minimum wage as a reference, so a change can have knock-on effects. Small firms and self-employed people with staff are often those with the least room to absorb a change of this kind. For them, dialogue with the employment adviser and with customers is especially important, because any adjustment must be made in good time.
Preparing the staff budget
A business owner can calculate how much their labour cost would rise if the measure were applied, including contributions, and consider how much they could absorb or pass on in price. Talking to the employment adviser early avoids surprises. For a family with domestic staff, it is also worth reviewing the contract and contributions. If there are changes, it is better to formalise them in writing and with proper advice.
To do the calculation, it is enough to take the current annual cost of each affected post, add the expected increase and add the proportionate share of employer contributions. With that figure one can decide whether it is possible to adjust prices, improve productivity or reorganise shifts and tasks. The sooner these numbers are worked out, the more room there is to adapt the company without strain and to explain the changes to staff clearly. A well-informed workforce usually reacts with more confidence to adjustments.
Labour costs change by law; planning ahead, rather than being surprised, is the best response.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
