In order to receive the 100% retirement pension at the same time as being self-employed, it is not sufficient that the employment contract is made through a community of property or a limited company, the employment contract must be made on an individual basis.
The Plenary of the Social Division of the Supreme Court (SC) has established doctrine in two recent rulings on the compatibility of retirement pension and self-employment. It explains that in order to be able to receive the 100% retirement pension while being self-employed, it is not enough to be a member of a community of property or a director of a limited company, but it is necessary to be self-employed, as an individual, and to have a worker employed.
It is not sufficient that the employment contract was carried out by a community of property or a limited company.
These are judgments number 119/2022 and 120/2022, of 8 February, presided over by the President of the Chamber, María Luisa Segoviano Astaburuaga, and Judge Antonio Sempere Navarro, respectively.
In order to encourage people to stay active for longer, the General Law on Social Security (LGSS) provides for so-called "active retirement". This means that, subject to certain conditions, a person receiving such a pension can combine it with a job, either as an employee or self-employed person.
The general rule is that in such cases the pension is paid at 50%. Exceptionally, however, the Act provides that "if the activity is self-employed and proof is provided that at least one employee is employed, the amount of the pension compatible with work shall be 100 per cent".
The cases now decided by the Supreme Court arise as a result of a person receiving a retirement pension claiming to have employed several people through the community of property of which he or she is a member. Since the status of joint-owner entails personally assuming the responsibilities arising from the community of property, the pensioners considered that they were entitled to "full" active retirement, without any reduction in their pension.
In order to base its decision, which rejected the claims, the Social Court examined the literal wording of the LGSS, as well as the consequences of employment contracts being performed by the community of property and not by one of the co-owners. In concluding that it is the community of property (not the pensioner) who appears as the employer, it ruled out that in such cases there is no entitlement to full payment of the retirement pension.
In both judgments, the judges invoke various arguments to support their position, in line with that defended by the INSS.
Last July, the Social Court had already ruled that the requirement of having employed an employee does not apply when the employee provides services for a capital company of which the pensioner is the majority shareholder and director.
The new judgments of the Plenary, signed by the judges María Luisa Segoviano Astaburuaga (president), Rosa María Virolés Piñol, Antonio V. Sempere Navarro, Ángel Blasco Pellicer, Sebastián Moralo Gallego, María Luz García Paredes, Concepción Rosario Ureste García, Juan Molins García-Atance, Ricardo Bodas Martín and Ignacio Garcia-Perrote Escartín, have an individual opinion signed by three members of the Chamber.
They were introduced by Concepción Rosario Ureste and supported by María Luz García and Juan Molins.
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