Taxes
2026 minimum wage increase: the real impact on your payslip and contributions
The rise in the minimum wage affects more workers than it seems, even those already earning above it. We analyse the effect on social security contributions, income tax withholding and the tax-exempt bracket.
Key takeaways
The minimum wage still sets the threshold exempt from income tax withholding, so its increase can reduce the withholding applied to salaries close to that level.
- The minimum wage increase automatically raises the minimum contribution bases, slightly increasing the social security cost for companies with employees in that bracket.
- The Tax Agency updates the income threshold exempt from tax withholding each year based on the minimum wage and the worker's family circumstances.
- Workers with salaries slightly above the minimum wage may see their effective income tax withholding reduced without any change to their gross salary.
Effect on Social Security contributions
Minimum contribution bases are tied to the minimum wage, so every increase also raises the contribution floor applicable to the lowest professional groups, increasing the contribution for both the worker and the company.
For small businesses with several employees in the minimum bracket, this cumulative effect can mean a significant increase in annual labour costs.
How income tax withholding changes on your payslip
The Tax Agency reviews the income threshold from which withholding applies each year, using the current minimum wage as reference and adjusting it based on the number of children and declared family situation.
If your gross salary was just above the previous minimum wage, your effective withholding is likely to decrease after the increase, even without your company giving you a raise.
Quick tips
- Check your January payslip to see if the income tax withholding percentage has changed compared to the previous year.
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