This week, the Government has taken a decisive step towards implementing the ‘solidarity fee’ on January 1, 2025. The fee is a surcharge that will be imposed on workers with salaries higher than the maximum contribution base, which is currently set at €54,000 per year. The purpose of this fee is to fund public pensions.
The application of this fee was already planned as part of a pension reform approved in 2021, but the regulatory developments needed to implement it were approved by the Government in a meeting this week. The solidarity fee will apply to the amount of salary that exceeds the maximum contribution base. This amount, which was previously exempt from Social Security contributions due to the base cap, will now be taxed at rates of 5.5%, 6%, and 7% based on different salary thresholds.
The distribution of the solidarity fee between the company and the worker will be in proportion to their respective contribution rates for common contingencies. For example, workers earning between €70,000 and €100,000 per year will have to pay an additional €7,500 each year to Social Security. The objective of these measures is to strengthen Social Security income and address rising expenses and demographic shifts.
The Government aims to increase Social Security income by implementing the solidarity fee alongside other measures like the Intergenerational Equity Mechanism (MEI), which was introduced in 2023. Despite facing challenges such as rising retirees and higher pension payouts, these measures aim to improve social security’s financial sustainability for future generations.
In conclusion, the implementation of the ‘solidarity fee’ marks a significant step towards addressing retirement savings challenges and ensuring financial sustainability for social security programs across Europe.
