Two thirds of social security spending is on cash benefits such as pensions (old age, disabled, orphans and widows), sickness and housing benefits, distributed through the Instituto Nacional de Seguridad Social (INSS). The Instituto Nacional de Empleo (INEM) distributes unemployment benefits. Less than a third of revenue is spent on health services, administered through the regional health services and social services, which are the responsibility of the Instituto de Migraciones y Servicios Sociales (Imserso). Spain has a separate social security system for members of the civil service and the armed forces, and special schemes for farm workers, the self-employed, domestic servants and other groups.

The Spanish Social Security system has been under severe financial strains. An ageing population and increasing unemployment have contributed to a huge increase in spending on healthcare, pensions and unemployment benefits, although there have been cutbacks in government spending in recent years. Most analysts agree that present levels of social security benefits (particular pensions) are unsustainable and payments must be slashed if the system is not to be bankrupted.

In recent years, the record number of social security contributions from employees means the outlook has improved somewhat. A government priority is to increase the pension fund rather than reduce Spain’s high social security contributions.