Guide - Pensions in the Construction Sector

Discover everything you need to know about the employment pension plan in the 2023 Construction Sector Collective Agreement.

1. Why Is a New Obligation Born for Construction Companies?

The simplest way to understand the changes ahead for companies has one reason: the unsustainability of the public pension system. Companies, as already happens with tax collection, are presented as the vehicle to which this task is delegated.

The construction sector has particularities that make it easier to justify why it is one of the first to experience the change: the employment relationship between company and worker frequently involves providing services by the day (and not monthly). Additionally, services are often provided for several companies in the same month or year. However, this also makes it one of the contexts where standardizing this practice is more complicated. Many of these companies do not have an internal organization (HR department) to manage these labor-related matters. Second only to the services sector, it is the sector with the most SMEs (in 2023, 11.44% of SMEs, 335,545 companies), making it a key area of the Spanish economy.

This is the first sector in which a transition to a new pension horizon in Spain has been initiated. It is essentially a first approach to the 3-pillar system well known in multiple countries (such as the Netherlands or Switzerland, among others), where a state system coexists with a professional system in which the company is responsible and a third individual link in which the citizen themselves contracts an individual product.

2. Operation and Conditions

The pension plan operation is developed in the Resolution of September 6, 2023, of the Directorate General of Labor, which publishes the VII General Collective Agreement for the Construction Sector.

If your company is adhered to the General Collective Agreement for the Construction Sector, you are obligated to comply with it.

It is mandatory to make contributions on behalf of the worker in their pension plan retroactively from 2022. There is only one exception: if the company has paid the worker a salary higher than the sum of the gross annual remuneration established in the provincial collective agreement tables plus the contributions set by the agreement. In this case, the company is exempt from having to contribute money.

3. How Do I Calculate the Contributions?

To know how much the company must contribute to the worker's pension plan, a percentage set in the Resolution is used, applied to the salary tables at the provincial level. That is, in each province, the minimum salary tables are used, to which the following percentages are applied:

If the worker has not provided service for the entire year, the corresponding proportional part is calculated based on the months or days they have been linked to the company. The same applies in the case of not having worked full-time, which is prorated based on involvement.

For the specific case of fixed-discontinuous employment contracts, during the inactivity period, the company cannot and will not have to make the contribution for that employee. The employee retains their rights and the money continues generating returns according to the pension plan's investment policy.

4. How to Start Your Pension Plan as a Construction Company?

As explained in the resolution in Article 7.3 (Book Three), Construction Sector companies may choose not to join the sectoral Plan in the case of formalizing their own Employment Pension Plan, provided it does not have inferior conditions for the worker than the minimums established in the agreement. That is, you can freely choose how to do it and not use the agreement's Employment Pension Plan. But workers' rights must be guaranteed, that is, always offering at least the minimum contributions and criteria we have previously explained.

At Arca, we help you adapt to current legislation simply: in a couple of clicks you open your employment pension plan. We take care of the implementation while resolving your employees' questions through our platform. We count on the experience of Caser and Indexa Capital to manage workers' savings in the most efficient way: lower fees, higher returns.

5. Product Taxation

The pension plan allows the employee to deduct income tax annually. It is a way of deferring taxes since instead of paying it in each year's tax return, it is paid at the time of withdrawing the money. It is a favorable advantage for the saver if a cumulative return can be obtained with the financial product when withdrawing it that compensates for what you would have paid each year in income tax on your earnings.

As a company, you are entitled to a deduction in the full Corporate Tax liability of 10 percent for contributions you have made.

To calculate it, you must distinguish between workers who have a salary below or above €27,000 gross. For workers with remuneration below €27,000, it is simple: 10% of the total annual contribution is deductible. For workers with higher remuneration, the deduction will be applied to the proportional part of employer contributions corresponding to those first €27,000 of salary.

Additionally, you must file Form 345 between January 1 and 31 of the year following the contributions made.

6. Early Withdrawal

The capital in the pension plan can only be withdrawn in case of retirement, long-term unemployment, death, and permanent disability. But additionally, from 2025, contributions made more than 10 years ago can also be withdrawn. Let's give an example: in 2035, under current regulations, all contributions made before 2025 can be withdrawn.

For the case of foreign employees who plan to leave Spain, they will be able to withdraw accumulated savings when 10 years have passed since the last contribution. Until then, savings will continue generating returns thanks to the pension plan's investment policy. It remains an interesting option, since while working in Spain they enjoy tax deductions and open a huge range of possibilities to pay less tax on that money when they withdraw it at their new destination. In most countries, the percentage of taxes paid on investments is lower than on employment income, and the pension plan may not be considered employment income in the new country where they are paying taxes (if they decide to withdraw it in another country).