Is it possible to be retired and work at the same time? Is retirement compatible with holding the position of director or board member of commercial companies?
As a general rule and in accordance with the provisions of article 213 of the General Social Security Law (LGSS), "the enjoyment of the retirement pension will be incompatible with the work of the pensioner, with the exceptions and in the terms that are legally or regulatorily determined", understanding work to mean any work activity, whether on behalf of others or on one's own account, paid or for profit of the pensioner that gives rise to his inclusion in any of the schemes of the Social Security system.
The only exceptions to the aforementioned general incompatibility are the following:
Partial retirement
This special retirement option allows individuals to access pension status while simultaneously working part-time, with a contracted schedule of between 25% and 50% of a standard full-time schedule, and a proportional reduction in the pension amount. For example, an employed person who, upon retirement, reduces their working hours by 75%, continuing to work 25% of the standard schedule, would begin receiving 75% of their retirement pension.
Flexible retirement
This system allows retirees to combine their pension, once it has been granted, with part-time work. The retiree must work between 50% and 75% of their full-time hours, with the pension amount reduced in inverse proportion to the reduced working hours. For example, a retired worker might sign a part-time contract for 75% of their full-time hours, starting work at 75% of their full-time hours while continuing to receive 25% of their pension.
Self-employed workers with income not exceeding the minimum wage
Receiving a retirement pension is compatible with engaging in self-employment where the total annual income does not exceed the minimum interprofessional wage (SMI), which for 2016 was set at €9,172.80. Those who carry out these economic activities will not be required to contribute to Social Security.
Active retirement
This new system establishes the possibility of combining the enjoyment of contributory retirement benefits with the performance of any work, whether self-employed or employed, full-time or part-time, provided that the following requirements are met:
1. Access to the pension must have taken place once the applicable age has been reached. For example, in 2016, this requirement will be met by those who retire at age 65 after having at least 36 or more years of contributions, or by those who retire at age 65 and 4 months otherwise.
2. The percentage applied to the respective regulatory base for the purpose of determining the amount of the pension due must reach 100%. That is, the maximum pension to which each worker is entitled must have been reached, which in 2016 was achieved when at least 35 years and 6 months of contributions were accrued.
The pension amount during the period of active retirement will be equivalent to 50% of the amount resulting from the initial recognition, once the maximum public pension limit (which for 2016 is set at 2,567 euros) has been applied, if applicable, or the amount being received at the time of the start of compatibility with work, excluding, in any case, the minimum supplement, whatever the working day or the activity carried out by the pensioner.
Maintaining ownership of the business
Finally, retirement pensions are also compatible with exercising the functions inherent to business ownership. When the business is a corporation and the retiree is a member of its governing body (director or board member), they can combine receiving their retirement pension with exercising the powers inherent to that legal ownership of the business, but without directly intervening in the ordinary management and administration of the company. This management must be delegated, either internally to another member of the governing body (executive director), or externally to a senior manager (manager or CEO) with general powers to administer, direct, and enter into contracts regarding all matters that constitute or form part of the normal or ordinary course of business.
Thus, the only thing a retired non-executive director or director can do in the exercise of their position to ensure it is compatible with receiving their retirement pension is to guide and oversee the actions of the person in charge of the ordinary management and administration of the company, in addition to those other legally non-delegable powers (such as calling general meetings, informing partners or shareholders, preparing and signing the annual accounts and drafting the management report or depositing the accounts in the Commercial Registry).
Whether the position of director or board member is paid or unpaid is not, in itself, relevant for the purposes of reconciling its exercise with receiving a retirement pension. What is relevant is that the retired director or board member does not carry out any activity that requires mandatory registration with any of the Social Security schemes, since it is precisely this registration that is incompatible with receiving a retirement pension. Therefore, if the retired director or board member does not have effective control of the company, in principle, mandatory registration with Social Security should be ruled out, even if the position is paid, provided that they are a non-executive director or board member, that is, one who does not perform management or executive functions within the company. However, the remuneration system for the position of director or board member may not consist of a fixed and periodic payment (monthly, quarterly, semi-annually, annually, etc.). To be compatible with receiving a retirement pension, it may only consist of a fixed amount per attendance at each meeting of the shareholders' meeting or the board of directors, that is, as attendance fees. This is because a fixed remuneration, not linked to meeting attendance, implies that the director performs some activity beyond those inherent to the position and which cannot be delegated, which would require mandatory registration with the corresponding Social Security system, thus rendering it incompatible with the retirement pension.
Martí Milán Romera,
Labor Law Area
Àmbit Assesor
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