We are seeing a proliferation of safeguard clauses within the sectors governed by a collective bargaining agreement aimed at increasing salaries. In other words, the parties negotiating collective agreements are agreeing that companies must not "sidestep" inflation, either in part or in full.
This approach was already familiar from the collective bargaining agreement covering the advertising sector, but we are now seeing it spread to other widely applicable collective agreements, such as the collective bargaining agreement for Offices and Professional Services. We therefore cannot rule out that trade unions will succeed in replicating this safeguard clause in future collective bargaining rounds.
Do you know how recent changes to collective agreements could affect your company?
In this video, Almudena, an employment lawyer at Conesa Legal, explains the key developments relating to salary increases, CPI-linked pay reviews, and the risks of incorrectly applying salary absorption and offset rules.
Payslips under the Advertising Sector collective bargaining agreement
The Advertising Sector collective bargaining agreement has contained the following clause for a number of years:
CHAPTER VII Remuneration
Article 38. Remuneration system.
1. The remuneration of employees covered by this agreement comprises the base salary and salary supplements.
Where applicable, the following shall also be added: the personal supplement (ad personam) arising from the provisions of Article 8 (more favourable conditions), and the consolidated seniority personal supplement (ad personam) arising from the procedure set out in Article 27.1 of the previous collective bargaining agreement (Spanish Official Gazette (BOE) No. 48, dated 24 February 2010).
These supplements are not subject to absorption or offset.
2. salary shall be paid on a monthly basis, distributed across 12 ordinary monthly payments and 3 extraordinary payments.
Where a delay in the payment of salaries is attributable to the company, the employee shall be entitled to receive compensation equivalent to interest on the outstanding amount, calculated at 10 per cent per annum.
3. Work of equal value must be remunerated with the same salary, without any discrimination whatsoever.
Can I absorb or offset a voluntary allowance when processing payroll, for example?
MEANING OF THE AD PERSONAM SUPPLEMENT
An ad personam supplement is an amount paid to an employee on account of a specific personal or historical circumstance, not because the role itself has any particular special characteristic.
In plain terms: it is an amount that the company maintains for a particular person because they were already receiving it, because it was recognised for them individually, or because it stems from a previous situation that the parties wish to preserve.
This is why it is called ad personam, a Latin expression meaning "for that person". It is not a general supplement applicable to the entire workforce, but an amount tied to a specific individual.
In practice, these supplements typically arise when a company revises its pay structure, a new collective agreement is signed, or job categories and salaries are reorganised. If an employee was already earning more than what the new structure would assign to their role, the difference can be preserved as a personal supplement.
A simple example:
- An employee was earning €1,600 per month.
- Under the new pay structure, their role would be graded at €1,500.
- To ensure they suffer no loss of salary, the €100 difference is maintained as an ad personam supplement.
The practical significance lies in knowing whether that supplement can be removed, reduced, or used by the company to offset future pay increases. In the collective bargaining agreement for the Advertising sector, this clause is particularly important, as it expressly states that certain ad personam supplements "are neither absorbable nor offsettable".
WHEN ABSORPTION APPLIES
The mechanism of absorption applies when a new pay increase is "absorbed" by amounts the employee was already receiving above the applicable minimum.
To put it plainly: if a collective agreement, legislation, or a new pay scale raises the reference minimum salary, the company may check whether the employee was already earning more than that new minimum. If they were, the company may take the view that no pay rise is required, on the basis that the improvement was already covered by what it had been paying.
A simple example:
- The collective agreement sets a salary of €1,300.
- The company was already paying a member of staff €1,450.
- The collective bargaining agreement raises the salary to €1,400.
- Since the employee was already earning €1,450, the company could argue that the increase is absorbed: the payslip does not go up because the actual salary already exceeds the new minimum.
Absorption therefore acts as a kind of buffer: amounts the company was already paying above the minimum can be used to offset subsequent increases.
That said, this is not always possible. The following must be considered:
- what the collective bargaining agreement provides;
- which pay components are being compared;
- whether a given supplement is absorbable or not;
- and whether there is a clause expressly prohibiting absorption.
This is why the precise wording of the Advertising Collective Agreement matters so much: if the agreement states that a supplement is not absorbable, the company cannot use it to neutralise a subsequent pay increase.
WHEN OFFSET APPLIES
Offset applies when two pay situations are compared and it is permissible for the amount an employee receives in excess under one heading to offset what they would, in principle, be entitled to receive additionally under another.
In plain terms: the company makes an overall comparison between what it would be required to pay under the new rule or agreement and what it is actually paying. If the actual salary is already higher, it may take the view that no additional amount is owed.
A simple example:
- A rule or agreement sets the minimum annual salary at €18,000.
- An employee already earns €19,000 per year across various pay components.
- The company can argue that it is already compliant, since the total annual salary exceeds the required minimum.
The distinction between absorption and offset is a technical one, but in practical terms:
- Absorption looks at whether a new increase is neutralised by an amount the employee was already receiving above the minimum.
- Offset compares amounts or pay components to assess whether, taken as a whole, the employee is already receiving remuneration equal to or greater than what is required.
In practice, both mechanisms are usually referred to together: offset and absorption. Their purpose is to prevent the same pay improvement from being applied twice when the employee was already being paid above the statutory or collectively agreed minimum.
However, just as with absorption, compensation can be excluded if the collective bargaining agreement expressly states that a particular item is not subject to compensation. In that case, that amount must be kept separate and cannot be used to reduce or offset other pay increases.
WHAT THE Workers' Statute SAYS ABOUT COMPENSATION AND ABSORPTION
The Workers' Statute governs this matter primarily in Article 26.5. The general rule is that compensation and absorption apply where the salaries actually paid, viewed as a whole and calculated on an annual basis, are more favourable to the employee than those set by the applicable legislation or reference collective bargaining agreement.
The key principle is this: individual payslip items are not always assessed in isolation, what matters is the total salary the employee receives over the course of the year.
Accordingly, if an employee's annual earnings already exceed what the applicable collective bargaining agreement or legislation requires, the company may argue that a further pay increase is not warranted, on the basis that the actual annual salary is already higher.
This rule also connects to the Spanish national minimum wage (SMI). Article 27 of the Workers' Statute provides that a revision to the minimum wage (SMI) does not affect the structure or amount of professional salaries where those salaries, taken as a whole and on an annual basis, already exceed the minimum wage (SMI).
In plain terms: if an employee's annual earnings already exceed the annual minimum wage (SMI), an increase in the minimum wage (SMI) does not automatically mean that every payslip item must be increased. As a general rule, what is assessed is whether the total annual salary meets or exceeds the statutory minimum.
That said, this general rule may be limited by the terms of the collective bargaining agreement itself. If the collective bargaining agreement clearly states that a supplement is neither absorbable nor subject to compensation, that supplement is protected against this mechanism. This means the company cannot use it as a "buffer" to avoid paying a pay increase that is otherwise due.
WHAT THE Supreme Court SAYS ABOUT ABSORPTION
The Supreme Court has held that compensation and absorption are designed to prevent the automatic accumulation of multiple pay improvements arising from different sources, for example, an improvement already being paid by the company and a subsequent increase introduced by legislation or a collective bargaining agreement.
The Supreme Court's general rule is that, in order to compensate or absorb salary items, there must ordinarily be a degree of homogeneity between them. This means that items which remunerate entirely different things cannot simply be merged together.
A simple example:
- Base salary, which covers ordinary work, is not the same thing
- as a hazard allowance, which compensates for working under particularly dangerous conditions,
- or a sales commission, which depends on performance.
Where the pay components are substantially different in nature, it may be argued that one cannot be used to offset the other.
That said, the Supreme Court itself has nuanced this position. It has held that the homogeneity requirement does not operate rigidly in all cases, since regard must be had to what the applicable collective bargaining agreement or agreement provides. Where a collective agreement expressly permits certain components to be offset or absorbed, that provision may be valid, provided it does not infringe upon non-waivable rights.
On the question of the minimum wage (SMI), the Supreme Court has been particularly clear: to determine whether the minimum salary threshold is met, the salary must be assessed as a whole and on an annual basis, unless a statutory provision or collective agreement clause prevents such offsetting. In Supreme Court ruling No. 272/2022, of 29 March 2022, the Court recalls that Article 27.1 of the Workers' Statute covers salary in its entirety and on an annual basis, and that, with respect to the minimum wage (SMI), offsetting and absorption may only be blocked on grounds of heterogeneity where this has been expressly agreed in the collective bargaining agreement.
Also relevant is Supreme Court ruling No. 317/2020, of 13 May 2020, in which the Court examines whether an allowance may be offset against other amounts, and emphasises the importance of assessing the true nature of the supplement and what has been collectively agreed.
Does a voluntary allowance fall within the scope of offsetting and absorption?
Yes, a voluntary allowance agreed in the employment contract may be subject to offsetting and absorption, but this depends on how the contract is worded and what the applicable collective bargaining agreement provides.
General rule
Where a voluntary allowance is an amount paid by the company above the collectively agreed salary and has not been expressly protected, the company will generally be entitled to use it to absorb or offset future pay increases.
Example:
- Collective agreement rate: €1,500/month.
- Contract: collective agreement salary + voluntary allowance of €200.
- Total received: €1,700/month.
- The collective agreement rate rises to €1,600/month.
In this scenario, the company could argue that it does not need to pay €1,800, but may instead maintain the existing €1,700, on the basis that the €100 increase is absorbed by the voluntary allowance.
When absorption would NOT apply
Absorption should not apply if the contract or collective agreement expressly states that the allowance is:
- non-absorbable;
- non-offsettable;
- consolidated;
- guaranteed;
- independent of future pay rises;
- or linked to a specific separate purpose, for example, on-call availability, night work, performance targets, special responsibility, language skills, etc.
In that case, there are grounds to argue that the allowance must be maintained separately and that the pay increase must be applied in full regardless.
Practical key point
The key question is: Was the voluntary allowance agreed as a general enhancement of the salary, or as remuneration for something specific?
- If it is a general voluntary enhancement, it is more likely to be absorbable.
- If it compensates a specific function, condition or additional effort, it is more arguable that it cannot be absorbed.
- If the contract expressly states that it is non-absorbable and non-offsettable, it is much better protected.
Conclusion on absorption and offsetting when processing employees' payslips:
The practical conclusion is as follows: a company may attempt to apply absorption and offsetting where the total annual salary already exceeds the applicable minimum, but that possibility is reduced or eliminated where the collective agreement expressly protects a particular pay component by declaring it non-absorbable and non-offsettable.
This is why safeguard clauses matter so much. When a collective agreement establishes that certain supplements cannot be absorbed or offset, it prevents the company from using those amounts to neutralise future pay rises. In plain terms: it ensures that the improvement is paid in real terms and does not simply disappear into amounts the employee was already receiving before.
Payroll Specialist and Employment Lawyer.
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