The Spanish Social Security system is very similar to the National Insurance in the UK, the object is to provide a pension at retirement (age 65+), the right to receive health care, unemployment benefits, sick pay, industrial injury compensation, invalidity, death benefits and maternity leave at what is deemed to be a sufficient level of assistance.
The benefits during unemployment and at retirement depend on the amount of contributions that have been made and of course there is a distinction between employed workers and self employed. Self employed do not benefit from unemployment, but they can have a second party time job as employees on which would give the benefit of unemployment.
If you are definitely intending to work and retire in Spain, you can apply to the DSS Overseas Dept. to get your UK benefits transferred over to Spain in order to increase your level of benefits. All family dependants will benefit from the health care even if they are not working.
If you are already claiming an unemployed jobseeker's allowance, a pension or certain other benefits at the time of leaving the UK, you may even be able to get these benefits transferred to Spain.
The largest part of contribution for the employed workers is made by the employer; the employee has his smaller contribution deducted from wages, whereas the self employed has to find his entire contribution.
Everyone working in Spain is expected to pay the corresponding amount of Social Security, including foreign nationals working in Spain. Whereas it is the responsibility of the employer to register his workers with the Department of Social Security it is the duty of the self employed to arrange this for themselves. Naturally this cannot be done without a NIE number, which needs to be obtained first. It is advisable to engage the services of a gestor to do this for you and be certain that it is done correctly and avoid errors that could result in the payment of fines.
The contributors can be summarised as follows:
3. Self Employed
The rate paid for employees, as paid by employers and employees, depends on the classification given to the type of job performed and the hours worked. Although the contributions paid by the self employed are geared to income and classification, there is a minimum level of contribution that must be paid even when income is zero (currently about ┬Ç250 per month).
Details of the Social Security system in Spain can be found at great length on the S.S. web page that is also available in English and other languages at www.seg-social.es, just click on the corresponding flag at the top right hand corner.
Anyone employed in Spain for a minimum of 6 months and losing his job under normal circumstances is entitled to unemployment benefit according to the level of contributions made. You are not entitled if you leave of your own free will. In 2008 the benefit for minimum contributions would have been ┬Ç750 per month.
If you have been in continuous employment for a minimum of six years, the maximum period during which you can receive the unemployment benefit is 2 years.
To claim unemployment one must register with INEM, the Unemployment Office, within 15 days of losing the job.
Workers who receive cash in hand for their services are not entitled to any of the benefits stated above, not even health care. Cash in hand is not advisable, especially if discovered by the authorities. Unless the employer is willing to register such workers as employees it is advisable that they consider registering themselves as self employed, not just to get the health care but to be able to work for a pension at retirement.