The BOE of 19 February 2026 published **Royal Decree 126/2026, of 18 February**, setting the statutory minimum wage (SMI) for 2026 at **€1,221 per month** (in 14 payments) or **€40.70 per day**, equivalent to **€17,094 per year** — exempt from IRPF income tax.
Approved amounts
| Concept | 2025 | 2026 | Change |
|---|---|---|---|
| Monthly (14 payments) | €1,184 | €1,221 | +€37 (+3.1%) |
| Daily | €39.47 | €40.70 | +€1.23 |
| Annual | €16,576 | €17,094 | +€518 |
The SMI is understood to refer to the legally established working hours in each activity, without including the proportional part of Sundays and public holidays. Only cash remuneration counts; benefits in kind cannot reduce the full cash amount.
Retroactivity from 1 January
Royal Decree 126/2026 applies throughout the calendar year, from 1 January to 31 December 2026. This obligates companies to regularise January and February payments, paying the corresponding arrears in the payroll run immediately following publication.
Practically, for a worker earning exactly the 2025 minimum wage (€1,184/month):
- January arrears: €37
- February arrears: €37 × (19/28) ≈ €25 (for the days before publication)
These arrears must appear on the payroll and be included in the Social Security settlement for the corresponding month.
Impact on Social Security contribution bases
The SMI increase raises the minimum contribution base for the General Regime and the Special Regime for Self-Employed Workers (RETA). For employees, the minimum monthly contribution base rises to €1,221. Self-employed workers with earnings in the lowest tranches of the real-income contribution table must verify that their chosen base is not below the new reference.
Domestic workers
For domestic workers, the SMI per hour actually worked is set at €9.55, including the proportional part of extraordinary payments and holiday pay. Employers of domestic workers must adjust their employees’ remuneration and, where applicable, update the Social Security registration with the TGSS.
Collective agreements and salary absorption
Salary scales established in collective agreements that were above the previous SMI continue to apply without modification. However, for collective agreements whose salary tables fall at or below €1,221/month, the new SMI applies automatically as the wage floor, with no possibility of absorption or offset under Article 27.1 of the Workers’ Statute.
This means:
- An agreement that sets minimum pay at €1,200/month in 2026 is automatically overridden by the €1,221 SMI — the employer cannot offset the difference against other pay components.
- An agreement that sets minimum pay at €1,250/month is unaffected — it already exceeds the SMI.
Companies should audit their collective agreement tables to identify any entries that have been overtaken by the new SMI.
IRPF income tax exemption
The full SMI amount for 2026 (€17,094 per year) is exempt from IRPF income tax, as it falls below the filing obligation threshold for taxpayers with a single employer. This has been coordinated with the elevation of the employment income reduction introduced in prior years.
Workers earning exactly the SMI (€17,094 gross per year) are not required to file an IRPF return and do not pay income tax on this income. The employer withholds no IRPF on SMI-level earnings.
Implications for multi-year budget planning
The SMI has increased by approximately €3,000 per year (cumulative) since 2019. For companies with significant concentrations of workers at or near minimum wage levels — in hospitality, agriculture, retail, domestic services and entry-level administrative roles — the trajectory of SMI increases should be factored into multi-year cost projections.
The Government has committed to progressively aligning the SMI with 60% of the average wage, which implies further increases in future years.
Recommendations for companies
- Review payroll: verify that no worker receives remuneration below €1,221/month in 14 payments, including arrears from January.
- Update contribution bases: ensure the minimum bases on Social Security settlement documents (liquidation systems) reflect the new amount.
- Audit collective agreements: identify whether the applicable collective agreement’s salary tables fall below the new SMI.
- Domestic workers: notify the TGSS of the new remuneration if an adjustment is required.
- Payroll budgeting: update labour cost projections for 2026 to reflect the retroactive adjustment and the full-year impact.
- Commission and variable pay structures: verify that variable remuneration structures do not cause total monthly pay to fall below the SMI floor in low-earning months.
BMC advises companies on compliance with employment law obligations and adapting their pay structures. Learn about our employment law services.
