The 2026 SMI operates in a singular context: it is the first year in which the reduction of the maximum working week to 37.5 hours is fully operational, which modifies the denominator of the labour cost-per-hour equation. In addition, 2026 is the year of full entry into force of the substantive obligations under the AI Act for high-risk systems, introducing new compliance cost vectors that must be assessed alongside wage pressure.
The SMI in the 2026 collective bargaining cycle
The annual SMI-setting process required by Article 27 of the Workers’ Statute involves prior consultation with the most representative trade union and employers’ organisations. In recent years, SMI negotiation has been shaped by the Government’s commitment to progressively bring it to 60% of the average wage, in line with Directive (EU) 2022/2041 on adequate minimum wages.
For 2026, the starting point is the 2025 SMI (€1,184 per month). The Article 27 ET criteria — CPI, national average productivity and labour’s share of national income — point towards a moderate increase, which labour market analysts estimate at around 3-5%, which would place the SMI between €1,220 and €1,243 per month. However, tripartite negotiation may modify these estimates depending on the economic and political context.
The double impact of reduced hours and the SMI
The reduction of the ordinary maximum working week from 40 to 37.5 hours, in force since 2025, has a multiplier effect on the cost of labour per effective hour. For a worker remunerated at the SMI, the cost per effective hour in 2026 is higher than in 2024 for two simultaneous reasons: the increase in the nominal SMI and the reduction in computable annual hours.
Taking the 2025 SMI of €1,184 per month and a 37.5-hour week (1,712 annual hours), the cost per effective hour is €8.30 per hour, compared with €7.46 per hour under the 2023 SMI (€1,080 per month) at 40 hours (1,826 annual hours). This 11.3% increase in effective hourly cost over two years has a direct impact on business models intensive in labour, particularly in sectors where average effective hours approach the legal maximum.
Managing salary structure: practical recommendations
Companies with large workforces in sectors with high proportions of workers in the SMI range must conduct a salary structure audit in 2026 that addresses the following elements:
Wage compression analysis. As the SMI rises, salaries in the lowest categories approach those in intermediate categories, reducing the pay differential that acts as an incentive for upskilling and internal promotion. This phenomenon — known as wage compression — requires many companies to review their overall pay band structure, not just the minimum.
Review of SMI-linked wage supplements. Some collective agreement supplements are calculated as a percentage of the SMI or of the agreement’s minimum base salary. When the SMI rises, these supplements carry their own increase, with a multiplier effect on total cost that must be quantified before collective bargaining.
Impact on fixed-term and fixed-discontinuous contracts. Seasonal contracts and fixed-discontinuous contracts, particularly common in hospitality, agriculture and tourism, are especially affected by the coincidence of the SMI increase with the entry into force of the 37.5-hour week, since their remuneration is typically calculated on collective agreement tables that must be updated simultaneously for both reasons.
Underlying question: competitiveness and labour costs
The debate over the SMI’s impact on employment and competitiveness remains open in Spain. Bank of Spain studies (2019, 2022) have found statistically significant — though moderate in magnitude — effects of SMI increases on employment among lower-skilled workers, particularly in regions with weaker labour markets. Trade unions and several academic economists argue, conversely, that the employment impact is marginal and that the net effect on domestic demand and inequality reduction is positive.
What is clear for businesses is that the SMI’s upward trend is structural and will continue operating in coming years. Medium-term labour cost planning must incorporate this variable as a permanent factor, and investment in productivity — automation, digitalisation, training — is the most robust strategic response to maintaining competitiveness in an environment of rising labour costs.
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Regulatory Framework: Key Legal Instruments Governing the SMI
The Spanish minimum wage operates within a specific constitutional and statutory framework that defines both the mechanism for its determination and the consequences of non-compliance.
Real Decreto Legislativo 2/2015, de 23 de octubre (Estatuto de los Trabajadores — ET), Article 27: This is the primary legal provision governing the minimum wage. Article 27.1 ET mandates that the government sets the SMI annually by Royal Decree, after prior consultation with the most representative trade union confederations and employer associations. The set rate must be sufficient to cover the basic needs of a worker and their family. The ET expressly prohibits any wage — whether set by employment contract, collective agreement, or employer decree — from falling below the applicable SMI. When a collective agreement sets wages below the SMI, those provisions are automatically replaced by the minimum statutory rate.
Real Decreto 145/2024, de 6 de febrero (SMI 2024, in force through 2025 pending update): This Royal Decree fixed the SMI at 1,134 euros per month in 14 payments (15,876 euros annually) for 2024. The 2026 SMI is set by a subsequent Royal Decree following the same procedure. The Royal Decree defines the SMI not only in monthly terms but also as a daily rate (for day workers) and an hourly rate, and establishes that it applies regardless of whether the worker is paid by time or by piece-rate.
Real Decreto Legislativo 8/2015, de 30 de octubre (LGSS) — Impact on Social Security Contributions: The SMI is not merely a wage floor — it also serves as the reference for the minimum Social Security contribution base for most workers. An SMI increase typically triggers an automatic increase in the minimum contribution base, raising total labour costs even for employers who already pay wages above the new SMI. For businesses with workers at or near the minimum contribution base, the total cost impact of an SMI increase is therefore greater than the wage increase alone.
Real Decreto Legislativo 5/2000, de 4 de agosto (LISOS) — Enforcement: Non-compliance with the SMI is classified as a serious infringement (infracción grave) under Article 7.1 LISOS, sanctioned with fines of 751 to 7,500 euros per affected worker. Systematic non-compliance across multiple workers can be classified as a very serious infringement with fines of up to 187,515 euros. In addition, workers are entitled to claim back-pay for all periods during which they were paid below the SMI, with a one-year statute of limitations under Article 59 ET.
Common Mistakes Businesses Make with SMI Compliance
Mistake 1: Confusing the nominal SMI increase with the actual cost impact. The headline SMI increase announced each year refers to the gross monthly or annual wage. The actual increase in employer labour costs is higher because: Social Security contributions are calculated as a percentage of gross wages, so an SMI increase raises both the gross wage and the associated contributions. Overtime bonuses, shift premiums, and other pay supplements expressed as multiples or percentages of base salary automatically scale upward. Collective agreements that define pay grades as multiples of the SMI require immediate recalculation across all pay bands.
Mistake 2: Applying collective agreement wage tables that have not been updated to reflect the new SMI. Many sector collective agreements are negotiated on multi-year cycles and may not update their wage tables annually. When the SMI exceeds a collective agreement’s minimum wage for a particular category, the SMI automatically supersedes the agreement — but the employer must identify and correct this proactively. Employers who continue paying collective-agreement wages that are below the current SMI are in breach of Article 27 ET even if they are technically compliant with the collective agreement.
Mistake 3: Failing to recalculate annualised salary agreements when SMI increases during the contract year. Workers whose employment contracts specify an annual gross salary rather than a monthly rate may find themselves below the SMI threshold if the SMI increases mid-year and the annual salary is not adjusted. Employers should review annual salary agreements whenever an SMI Royal Decree takes effect mid-contract-year to ensure compliance for the remainder of the year.
