Spain's Yolanda Díaz pushes larger firms, hitting the 50-employee wall

Business reform: why the 50-employee mark stalls growth

Yolanda Díaz has placed business reform at the heart of her political agenda. In a public statement, she argued that it is time to address Spain’s "great pending task," summarizing the goal in one sentence: "We need larger companies with greater worker participation." This diagnosis is widely accepted by many economic analysts. The proposed solutions, however, are not. And the first obstacle has a number: 50.

What Yolanda Díaz proposes for Spanish businesses

The proposal starts from a reasonable premise: the productive fabric consists mostly of tiny companies, and size determines the capacity to invest, implement technological improvements, and leverage economies of scale. With more scale, the argument goes, productivity and wages trinc. What is missing is the concrete reform that would help the 80% of companies grow. Describing the problem is one thing; moving the needle is another.

On the other side, distrust is total. Critics argue that those calling for larger companies simultaneously propose raising the corporate tax and the wealth tax, measures that work in opposite directions. Growth requires retained earnings, investment, and assumed risk. If the fiscal framework penalizes all three, the incentive fades.

The 50th employee: works councils and equality plans

Here lies the crux. Crossing the 50-employee threshold triggers, as noted in the debate, a series of obligations: establishing a works council, creating an impact assessment plan for gender equality, and adding further administrative burdens. The conclusion drawn is almost mechanical: employers prefer to stay at 49. It is not a string of ideological arguments, but arithmetic of costs, time, and litigation risks.

One step below, the jump from micro-enterprise to small business is also costly. Equality plans, prevention plans, administrative and legal reporting requirements. Each rule adds to the previous ones without removing any. Growing ceases to be an ambition and becomes a penalty.

Opening licenses and other barriers that discourage growth

Municipal bureaucracy takes the cake, according to accounts from the debate. For metallurgical activities, an opening license can take up to two years to be granted. Legalizing electrical and photovoltaic installations depends on industry inspectors appearing, with no set deadline. And the prior paperwork has multiplied.

Given this landscape, part of the small business sector responds by subcontracting. There are self-employed individuals with limited liability companies and partners who acknowledge their workload could support hiring two or three people and making the leap. They don’t. They prefer distributing the load among other companies rather than assuming fixed structures. And it is not laziness: the expected return does not compensate for the administrative cost.

Do higher taxes help companies grow?

The corporate tax rate stands at 25%, as pointed out in the debate. Against this, a tiered proposal circulates: 10% up to €1 million in turnover, 15% above €5 million, and a maximum of 20% beyond that, suggested by one participant. With this, they argue, capital is attracted and growth rewarded rather than punished. Ireland, the Netherlands, or Malta appear in the conversation as mirrors of what actually attracts headquarters.

The practical case shared is revealing. A self-employed person since 2014 sets up a micro-enterprise in 2022 and hires three people. He seeks to apply the 15% rate foreseen for new company creation during the first two years. The Tax Agency (Hacienda) responds no: it considers it a continuation of activity and applies the 25% rate from the start. An incentive designed to reward the leap, neutralized by administrative interpretation.

SMEs and self-employed: who really sustains employment

More than 80% of the country’s companies are SMEs and self-employed workers, generating nearly 90% of jobs, according to calculations used in this field. The J.P. Morgan Chase data cited points similarly: 33 million small businesses — fewer than 500 employees — of which 88% have less than 20 employees, collectively representing 50% of the working population.

The underlying suspicion is different. It is noted that large companies delegate much of their production to SMEs through subcontracting, distancing themselves from labor risk while keeping the profitable part of the business.

The Productivity Council and the ghost of state-owned enterprises

Among the measures mentioned in the discussion accompanying the discourse appears a future Productivity Council. The reaction is mocking: nothing is known to be more unproductive than a council dedicated to productivity. Alongside it runs the suspicion that the real objective is large state-owned enterprises funded with public money, politically controlled, and filled with loyalist positions. Another current proposes exactly the opposite: cutting the political apparatus and eliminating temporary advisors.

The shared diagnosis is that there is a problem with company size. Agreement breaks down on how to fix it. And at the exact point where it breaks — the 50-employee threshold, the license taking two years, the incentive deactivated by Hacienda — there is still no answer that isn't raising another tax or creating another agency.