How will the Intergenerational Equity Mechanism (MEI) affect your 2026 pay slip?

There has long been concern about the public pension system, and the Intergenerational Equity Mechanism (MEI) was created to sustain it. This mechanism has been in place since 2023, but its percentage has been increasing year after year. In this article, we explain what the MEI is and how it will change your pay slip in 2026.

What is the Intergenerational Equity Mechanism (MEI)?

The MEI is a percentage applied to payroll to bolster Social Security revenues so that pensions can be paid in the future.

The mechanism will be applied until 2032, and if the objective has been met by that year, it will be reviewed and a decision will be made as to whether to continue applying it until 2050 or to eliminate it.

Why was the MEI created?

In Spain, the pension system has been jeopardised by several factors:

• Declining birth rates, meaning that fewer children are being born each year and the population is ageing.
• Increased life expectancy. People are living longer than they used to, so they receive pensions for a longer period of time.
• An increase in the number of people reaching retirement age. Due to the ageing population, more and more people are retiring and receiving a pension, and the number of retirements is expected to increase progressively over the coming years.

The MEI is expected to raise around €3 billion to contribute to the Social Security reserve fund.

Characteristics of the MEI

The MEI has three essential characteristics:

• It is applied sequentially. If it were necessary to use the money collected, it would be done sequentially and considering other complementary actions.
• It is temporary. Its application to the payroll and contributions of self-employed workers has a limited time frame because it is scheduled to end in 2032. And, as we have seen, it is aimed at meeting pension payments due to the retirement of the baby boom generation.
• It is contingent. The money obtained through the MEI will be used to fund the Social Security reserve fund and will only be applied if pension expenditure differs from what was forecast.

How is the MEI applied to your payroll?

The percentages applied and to be applied by the MEI to payroll are as follows:

In 2025, they were 0.8%.

In 2026, they will be 0.9%.

In 2027, 1%.

In 2028, 1.10%.

In 2029, it will be 1.2%.

From 2030 to 2050, the same percentage is expected: 1.2%.

Who pays for the MEI?

Part of these percentages is paid by the company and part is paid by the employee. In 2026, the distribution will be as follows:

0.75% is paid by the company.

0.15% is paid by the employee.

How will the MEI affect your 2026 payslip?

The MEI affects both companies, because it increases the total cost of employees, and employees themselves, because it means an additional deduction from their payslip. You will therefore be able to see it in the section of your payslip relating to deductions.

How does the MEI apply to self-employed workers?

Another important thing to note is that the MEI also applies to self-employed workers, meaning that the contribution base will increase progressively. In 2026, it will stand at 0.9% of the contribution base.

Examples of MEI application to different salaries

Let's look at several examples of salary amounts so that you can clearly understand the amount you will have to pay:

• If your salary is €1,500 per month, you will have to pay €13.50 per month for the MEI.
• In the case of a salary of €2,000, the MEI amount is €18 per month.
• If your salary is €2,800 per month, the MEI amount is €25.2 per month.

Pros and cons of the MEI

Right now, there are many opinions for and against the MEI, as it is unclear whether it will be effective for its intended purpose.

Workers see their paychecks reduced, which will also reduce their ability to save and consume. As for companies, it is seen as something that could slow down competitiveness, and in the case of self-employed entrepreneurs, it is seen as a mechanism that penalises their activity.

Younger workers see it as a system to which they contribute, but which will not directly benefit them.

On the other hand, it is expected to be a solid guarantee for future pensions, so we will have to wait and see what its real effects are.

Frequently asked questions about the MEI in 2026

To clarify how the MEI works, we will answer the most frequently asked questions on the subject:

Will I earn less in January 2026 because of the MEI?

Yes, because the percentage will increase from 0.8% in 2025 to 0.9%, so you will notice a slight difference in your monthly pay.

Does what I pay for the MEI affect my pension?

Not directly. What the MEI achieves is to increase the Social Security reserve fund and guarantee future pensions if necessary.

How much will be paid for the MEI in 2026?

As we have seen, 0.90% of the salary will be withheld for this purpose. One part (0.75%) is paid by the company and the other part (0.15%) by the employee.

Why was the MEI created?

Because there are several factors in Spain that affect the viability of pensions in the future (ageing population and longer life expectancy, among others), so it was decided to increase the reserve fund in order to guarantee future pensions.

As you have seen, the MEI will increase in 2026 and we will see a reduction in payroll. If you have any questions about this or any other employment matter, contact our team of employment lawyers in Madrid so that they can analyse your case and advise you on what you need.