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Economy

What are the implications of raising the minimum wage?

30 НОЯБРЯ 2023
Темы
Portugal Curiosidades Finanças Salários
The increase in the Minimum Monthly Wage has some implications, not only for Portuguese people's wallets, but also for Social Security benefits and deductions.
What are the implications of raising the minimum wage?
Source: Freepik
Author: Redaction

At the beginning of next year, the biggest increase ever recorded in the Guaranteed Minimum Monthly Wage (RMMG) will be applied, reaching 820 euros, an increase of around 60 euros compared to the current value.

Although a pay rise is always welcome in the wallets of the Portuguese, this increase has some implications, which you will learn about throughout this article. 

It's worth remembering that we're talking about the basic amount that employees should receive as minimum remuneration for their work. This amount is only earned by those who have an employment contract and is paid 14 times (12 times corresponding to the months of the year, once corresponding to the vacation allowance and once corresponding to the Christmas allowance). However, the minimum wage does not include food allowances, time off, diuturnities, subsistence allowances or other components that must be paid separately.

At the moment, the minimum wage corresponds to 760 euros per month in mainland Portugal, 785 euros in the Autonomous Region of Madeira and 798 euros in the Azores. According to the Decree Law published this month, in 2024 this figure will rise to 820 euros, an increase of 7.9% which is, so far, the biggest increase ever.

The guaranteed minimum monthly wage is laid down in the Labor Code (article 273) and is updated annually by the government, after consultation with the social partners and employers' and trade union confederations. Updating the minimum wage must take into account various factors, such as price policy, workers' needs and the rising cost of living.

Impact of raising the minimum wage

In addition to impacting workers, the rise in the minimum wage also affects a number of situations that use this figure as a reference, such as social security benefits.

This means that some aspects may be affected, such as:

  • Compensation for collective dismissal: the value of the basic salary for calculating compensation cannot exceed 20 minimum wages and the overall compensation cannot exceed 240 wages;
  • Wage garnishment: the amount corresponding to the minimum wage is considered ungarnishable, except in the case of alimony;
  • Social benefits: the Corrected Annual Gross Income (RABC), which is used to calculate social security benefits, subsidies and tax deductions, as well as to contest rent updates, is affected.

What happens to deductions?

Workers earning the minimum wage have a number of benefits, including exemption from paying personal income tax (IRS). They can also deduct IRS if the value of the food allowance is more than 6 euros, if it is paid together with the salary, or 9.60 euros, if it is paid by meal card.

As for Social Security, you must contribute 11% of your salary. This means that, with a salary of 760 euros a month, you are paying 83.60 euros, and your net salary is 676.40 euros. With the increase to 820 euros, you will pay 90.20 euros into Social Security, and your net income will be 729.80 euros.

Is it possible to pay less than the minimum income?

Paying workers less than the minimum wage is only possible in the following situations:
  • Part-time workers, for example;
  • Trainees or other workers undergoing certified training, who can earn 20% less for a maximum of one year;
  • Workers with reduced capacity or disabilities, whose reduction corresponds to the difference between full capacity for work and the coefficient of effective capacity for the contracted activity.

Follow these and other topics in SUPERCASA News.
Темы
Portugal Curiosidades Finanças Salários
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