The Ministry of Labor, led by Yolanda Díaz, has reached an agreement with the CCOO and UGT unions to increase the Minimum Interprofessional Wage (SMI) in 2025. This increase, amounting to 50 euros per month, will raise the SMI to 1,184 euros gross per month. The increase will be applied in 14 annual payments, totaling 16,576 euros gross per year. If the extra payments are distributed over 12 months, the monthly salary will be 1,381.33 euros.

More than 2.5 million workers in Spain will benefit from this salary increase. It is important to note that the SMI refers to the gross salary, before taxes and Social Security contributions.

How and when will the SMI increase be applied?

The SMI increase will be approved by the Council of Ministers imminently, with retroactive effect from January 1, 2025. This means that workers earning the minimum wage will receive the corresponding adjustment for the months prior to the decree’s publication in their February paychecks. For example, if the approval occurs in February, the workers will receive the increase for January in that month’s paycheck.

Yolanda Díaz has defended this measure as a step forward in improving families’ quality of life, emphasizing that an additional 50 euros per month can make a difference in their food expenses.

The tax debate: Will it affect the IRPF?

One of the contentious points in this negotiation has been the taxation of the SMI under the Personal Income Tax (IRPF). There is a possibility that the SMI increase will cause workers who receive it to start paying IRPF. Currently, the IRPF exemption threshold is 15,876 euros per year, coinciding with the minimum wage before this increase. If the exemption threshold is not updated to 16,576 euros, workers may have to pay up to 43% of the increase in IRPF.

The unions have expressed their concerns and requested that the government ensure the SMI remains tax-exempt. However, the final decision on this matter lies with the Ministry of Finance.

This SMI increase represents a 4.4% rise compared to the 2024 minimum wage. Although unions had proposed a higher increase, between 5% and 6%, they ultimately accepted the government’s proposal in exchange for opening a new round of social dialogue to address the European directive on minimum wages. Meanwhile, the employers’ association has distanced itself from the agreement, considering the increase too high.