New social security rules for independent workers

THE GOVERNMENT recently changed the salary basis for social security payments from independent workers. Every independent worker, who doesn’t pay social security for any other social security system, must choose to pay according to “Esquema Obrigatório” or according to “Esquema Alargado”.

The difference between the two options is the following: monthly payment is higher on the “Esquema Alargado” (32 per cent) than “Esquema Obrigatório” (25,4 percent), but the first one will cover illness.

Until June of this year, the minimum wage was the basis for their social security payment. The minimum salary basis for the social security payment was 374,70 euros (minimum salary for 2005), but, since July, the minimum salary basis for that payment became 562,05 euros. Therefore, the minimum salary basis for social security payment increased by 50 per cent!

An independent worker, who was paying according to “Esquema Obrigatório”, would pay 95,17 euros a month. Since July, that independent worker has to pay 142,76 euros – this represents an increase of 50 per cent. This is obligatory for those who, as independent workers, earn more than 6.744,60 euros a year (18 times the minimum wage for 2005).

Independent workers earning below that figure will have 90 days to request a reduction in the social security payment according to their income.

In the future, the social security payment system for independent workers should be revised because every contributory system should be fair for everyone. A good choice would be to establish scales, like we have for IRS (Individual Income Tax) and, that way, an independent worker, who would have, for example, 50,000 euros income, instead of paying a minimum 1.713,12 euros for his social security yearly (12 times the minimum payment shown above), would pay more according to their income. That person is obliged to pay the same yearly amount as a person who would have 15,000 euros of income as an independent worker. The social security represents 11 per cent in this case, but for the person who has 50,000 euros of income his/her social security represents around three per cent!

Naturally, the contribution for each individual must be the same in percentage and not in amount, otherwise each individual’s level of contribution is totally different. Naturally, the less each independent worker pays for his/her social security, the fewer benefits will be available on retirement. In addition, government services need to be paid everyday and everyone must contribute.