Active retirement in RETA: What are the requirements for hiring an employee?

With regard to active retirement under the RETA(), which allows 100% of the pension to be compatible with the activity and which activity and which requires the hiring of an employee, the SC() has declared that the purpose of the rule requires that the activity for which the employee is hired be directly related to the activity carried out. It therefore concludes that a self-employed worker is not entitled to receive 100% of the pension when the hiring of an employee relates to a domestic worker.

The case: Active retirement of a self-employed worker

A worker included in the RETA, who is engaged in the repair and maintenance of motor vehicles, applies to go into active retirement at a rate of 50%.
motor vehicles, requests to go into active retirement with a percentage of 50%. Subsequently, after hiring a part-time domestic employee, he requested that his pension percentage be increased to 100%, as he fulfilled the condition of having a dependent worker.

As a result, a Social Security claim was filed. Both the court of first instance and the appeal recognised the right to receive 100% of the active retirement pension. Both decisions interpret that it is not necessary for the worker to be employed in the same activity as the active retiree, since the literal wording of the law does not make such a requirement and although an internal note from the INSS(*) states otherwise, it is not binding.

The question which arises is whether, in the event of the active retirement of a self-employed worker, he is entitled to receive the right to receive a pension in the event of the active retirement of a self-employed worker.
self-employed worker, he is entitled to receive 100% of the corresponding pension for having hired an employee as a domestic worker.

To resolve the question, the SC, which regulates retirement pensions or active ageing, establishes the possibility of making 50% of the retirement pension compatible with work. It also states that, if the activity is carried out on a self-employed basis and it can be shown that at least one employee is employed, the amount of the pension compatible with work will be 100%. With regard to the RETA and taking into account the different criteria for interpreting the rules, the SC concludes that the appeal must be upheld and the reasons given are as follows:

a) The purpose of the rule has been to favour the preservation of the level of employment: that employment is not destroyed by the mere fact of the employer’s retirement.
employment is not destroyed by the mere fact of the employer’s retirement. The retirement of the natural person employer is a cause for termination of the contracts of his workers with a compensation of one month’s salary, so in order to avoid this situation.

b) To obtain 100% of the pension, two conditions must be fulfilled:

• the activity is carried out on a self-employed basis and it must be shown that at least one employee is employed.
• The SC points out that taking into account the purpose of the rule means that such activity must be directly related to the activity carried out by the self-employed worker who is allowed this specific type of retirement. Related to that carried out by the self-employed worker who is allowed this specific form of retirement. An interpretation to the contrary – to allow hiring as an employee in an activity other than that which has given rise to inclusion in the RETA – would clearly go against the purpose of the law and could lead to factual situations that are incompatible with the purpose of the rule.
• Moreover, as the case law of the SC has pointed out, the full compatibility of the retirement pension in the amount of 100% with self-employed activity constitutes an exception to the general rule of incompatibility, which prevents it from being interpreted extensively, which would be the case if the hiring were allowed to be carried out in an occupation not linked to the business activity of the self-employed worker who is the beneficiary of such active retirement.

In the case in question, the employment as a domestic employee is not a job linked to the entrepreneurial development of the self-employed worker; it is an employment linked to the status of “owner of the family home”.
business development of the self-employed worker; it is a hiring linked to the condition of “owner of the family home”. This status in itself does not even entail the employer’s obligation in this special employment relationship.

If you have any doubts regarding this issue, please do not hesitate to contact us, by telephone to Isabel Torre Carazo or by e-mail to itc@btsasociados.com, we will be delighted to help you.

RETA(*) Special Regime for Self-Employed Workers

SC(*) Supreme Court

INSS(*) National Institute of Social Security