The Law on urgent self-employment reforms brought with it the possibility for self-employed workers to take advantage of a new form of active retirement, which enables them to continue to work on a self-employed basis and receive their entire pension. However, one year down the line, there are still many doubts surrounding this possibility.
Law 6/2017, of October 24, 2017, on urgent self-employment reforms sought to make headway in the recognition of the rights of self-employed workers by implementing new measures in relation to contributions, work-related accidents, retirement and achieving a better work/life balance, among others.
One of the most important measures included in the Law was the possibility of self-employed workers actively retiring, increasing the percentage of their pension that was compatible with work from 50% to 100%. To opt for this measure, the self-employed worker had to prove that he/she had hired at least one employee.
Since the Law came into force, the social security authorities had been allowing self-employed workers to receive their entire pension while they continue to work, provided they can prove that they had hired an employee (irrespective of whether such recruitment was in the same line of business as the self-employed worker) and met other requirements. Many self-employed workers—of all kinds—took advantage of this possibility and continued to provide services while receiving their entire retirement pension.
However, in July 2018, the General Treasury of the General Directorate of Social Security Organization published a criterion according to which, in order to be able to receive their entire pension while continuing to work, the employees hired by the self-employed workers had to be in the same line of business. This change of criterion led, in practice, to the exclusion of the so-called corporate self-employed workers (those included in the self-employed workers system based on their relationship as a partner and/or director of a company in which they exercised effective control). The reason was that it was considered that these types of professionals could not meet the requirement of hiring an employee in their same activity, because the party that acted as the employer in the business activity was not the individual, but rather the related company (legal entity).
Consequently, the so-called corporate self-employed workers could actively retire, in other words, continue to work, but only received 50% of their pension (without the need to hire an employee), which led to a radical change in the expectations of many of such professionals.
Nonetheless, practically at the same time as this change in criteria by the Social Security General Treasury, a groundbreaking judgment was handed down by Oviedo Labor Court number 3. The Court basically acknowledged the possibility of corporate self-employed workers continuing to provide their services while receiving their entire pension on the grounds that the interpretation by the public body prohibiting this possibility was too restrictive and that it was not expressly excluded by law.
This judgement undoubtedly introduces a new element in the debate and adds a new dose of uncertainty to the issue. The matter is obviously far from over and will no doubt continue to be debated in the future. In the meantime, many self-employed workers are hoping for a solution.
Garrigues Labor and Employment Law Department