The Portuguese minimum wage is set to increase again in 2024. The 7.895% surge will be the largest yearly increase ever registered.
According to the statements of the Prime Minister, and of the Minister of Labor, the minimum wage is expected to increase once again at the beginning of 2024. It will be the biggest increase ever in relative, and absolute terms.
Starting in January, the national minimum wage will go from 760 euros to 820 euros. This represents a 60 euro increase.
Note, however, that the values of 760 (current minimum wage) and 820 (future minimum wage) are not what the company pays or would pay, nor what gets or would get to the worker’s hand. The numbers 760 and 820 represent the values of the gross salary.
Currently, with the 760 gross salary, a company needs to spend 940.5 euros per month to pay a minimum wage, and the worker will only get 676.4 euros (liquid wage). In short, the real cost of the 760 gross wage, for the company, is 940.5 euros, and the real immediate value, for the worker, is 676.4 euros.
When it comes to the incoming 820 minimum gross wage, the company will have to spend 1014.75 euros per month, per salary, and the worker will only get 729.8 euros. So, the real cost, for the company, is 1014.75 euros, and the real immediate value, for the worker, is 729.8 euros.
Where does the difference go? According to the Portuguese legal system, minimum wage workers are not subject to taxes. Because they receive the minimum wage, they do not need to pay the Personal Income Tax (IRS). Although, there is money going somewhere.
The difference between what the company pays, and what the worker gets, in this case, is the value of the Single Social Fee (Taxa Social Única – TSU). This monthly fee, which is deducted from the gross monthly wage, works like an insurance.
Social Security, which is the governmental body to which the value of the Single Social Fee goes, is the institution responsible for the management of the Portuguese social protection system. Its objective is to promote social wellbeing and justice, by protecting the citizens in situations of vulnerability.
In short, the purpose of the social security system is to ensure complete social and economic protection in situations such as temporary or permanent incapacity, unemployment, oldness, disease, illness, and death, among others.
Even though the real immediate value of the wage for the worker is less than what the company actually spends on it, its real value should be the liquid value plus the perceived value of the existence of such insurance. This is why experts are requesting a software that enables workers to see what the company actually pays and what is deducted.
The Single Social Fee is deducted in two steps. First, the company itself has to pay a part of the fee, corresponding to 23.75% of the salary. If we’re talking about the 760, the company would have to pay a fee of 180.5 euros.
Then, the worker would have to pay an 11% fee on that same salary. So, now, for each 760 salary, the company and the worker have to pay a Single Social Fee of 180.5 euros and 83.6 euros, respectively. When it comes to the 820 gross salary, the company will have to pay 194.75 euros, and the worker 90.2 euros.
The 60 euro increase in the gross minimum wage corresponds to a 20.85 increase in the value received, per wage, by Social Security. The Single Social Fee per wage/worker will go from a total of 264.1 euros in 2023, to a total of 284.95 euros in 2024.
According to some, who have advocated for a reduction, the Single Social Fee is too demanding. Especially when it comes to the burden for the companies. However, according to the Government, it cannot be lower than what it is. If it were, the social protection system would not work.