Payroll in Spain

Expand into Spain with a Global Payroll Provider

  • Leverage our experience and ensure in-country Payroll in Spain compliance
  • A single, centrally managed payroll system that delivers a fluid and consistent service to you and your employees.

  • A dedicated team and account manager so that you always have a central point of contact.

  • Pay every employee accurately and on time.

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Guide to becoming an Employer in Spain

Not only is Spain the fourth-biggest country in the European Union by population, but it also has strong linguistic links to most of Central and South America; so it isn’t surprising that Spain is an exciting place for international businesses to grow into as they strive for global presence.

Spain’s economy has been through a lot since it returned to democracy just over four decades ago. It was particularly badly hit by the global financial crisis of the late 2000s, and the onset of the COVID-19 pandemic put huge pressure on its large tourism industry, with millions of annual visitors unable to travel. However, having invested so much in modernisation and infrastructure, Spain is well-placed to recover and thrive in the years ahead.

Today, Spain enjoys a good economic mix, beyond its obvious tourist appeal. It’s a major manufacturer of cars and related automotive products, a significant exporter of medical supplies, and a key conduit for fruit and vegetable sales across the European Union. Add in a relatively low-wage society, with employees in Spain earning on average 40% less than their French counterparts – and the opportunities to build a profitable business footprint in Spain are clear.

This guide focuses on all things payroll in Spain, and what you need to know if you’re looking at expansion in Spain and need a Spanish payroll provider…

Establishing your business in Spain

Every business operating in Spain needs to register with the Registro Mercantil Central (RMC), which is the Spanish national trade registry. This applies to corporations (S.A.), limited companies (S.L.) and even branch offices of companies headquartered abroad. Expect the process of registration to take up to eight weeks, in which time you should brush up on Spain’s specific labour regulations.

The Spanish financial year is aligned with the calendar year, although businesses are free to define their year-end at the end of a month of their choice.

During recent times it has been observed that authorities are requesting employers to complete the process electronically through Social Security e-office.

Companies’ digital certificates can be used to complete the process smoothly which should be authorised by Social Security office.

Most of the certificates are digitally certified by National Coinage and Stamp Factory – Royal Mint.

Employment Law in Spain

Working hours in Spain are limited to a maximum of nine per day and 40 per week. However, collective bargaining is strong in Spain, and these limits can be varied by negotiation. Collective bargaining agreements are more common in some industries and some areas of Spain than others, so it’s worth researching this for your business and planned location before you start.

New contracts need to be registered with social security and public employment services. Probation periods are generally two months, with longer periods in place for small businesses and technical employees. Notice periods are generally 15 days (although this can be extended through collective bargaining), and between three and six months for senior management.

What is the Minimum Wage in Spain?

Payroll in Spain should occur at least monthly, and often takes place even more regularly than that if defined as such by collective bargaining. The minimum wage stands at €1125 per month as of the start of 2022, but as it has been increased regularly in recent years, expect further increases to follow in the near future.

Bonuses are awarded in Spain, and although there are no strict rules governing them, collective bargaining once again plays a leading role. In particular, many employers are required to make 13th-month and 14th-month payments in July (ahead of the summer holidays in August) and in December (ahead of the holiday season).

Severance pay is 33 days’ salary per year worked, up to a maximum of two years’ salary.

Minimum Wage inSpain

What are the Social Taxes in Spain?

Income tax rates in Spain vary across different regions and autonomous communities, although not by huge amounts. Generally speaking, tax rates start around the 20% mark for earnings around the minimum wage mark, increasing beyond that to top rates of between 40% and 50% for the highest earners. Additionally, each region (there are 17 across Spain) levies their own regional tax. These taxes must be withheld by employers and remitted to the relevant authorities.

VAT runs at 21%, with reduced rates of 4% and 10% applied to specific staple goods like food, books, medicines and some cultural events. The corporation tax rate is 25%.

Social security contributions should be made at 29.9% by employers and 6.35% by employees, with contributions withheld and remitted by employers in the same way as income tax.

Income Tax inSpain

Spainish National Holidays & Annual Leave

The standard minimum for paid annual leave in Spain is 22 business days/30 calendar days, but you won’t be surprised to learn that collective bargaining can increase these figures at certain businesses.

Spain’s system of national and regional holidays is extremely complex. There are dozens of holidays served by individual regions, some are served by most regions but not all of them, and which regions observe which holidays can change year to year. The holidays that are usually observed by all or the vast majority of regions are:

  • New Year’s Day
  • Epiphany (6 January)
  • Good Friday
  • Labor Day (1 May)
  • Assumption of Mary (a Monday in mid-August)
  • National Fiesta (12 October)
  • All Saints’ Day (1 November)
  • Constitution Day (6 December)
  • Immaculate Conception (8 December)
  • Christmas Day

Sick pay starts on the fourth day of absence, with the employer paying 60% of salary up to and including day 20. Beyond this, payments increase to 75%, but employers can then claim this back from the social security authorities.

Maternity Leave in Spain

Maternity leave entitlement is 16 weeks and must encompass the six weeks after the birth. Maternity pay is 100% of salary and is covered by the social security authorities. Additionally, working mothers of children under eight can also apply to reduce their working hours to between 12.5% and 50% of their previous levels, and continue to be paid the same pro-rata. Paternity leave entitlement is five weeks.

Why become an Employer in Spain

The recurring theme running through this guide is that while Spain has many clearly defined employment regulations in place, collective bargaining can significantly alter many of them. This potentially means that the playing field regarding payroll and compliance can be different for almost every company operating in Spain; but while this is a negative; the positives to becoming an employer in Spain far outweigh these issues; especially with suitable payroll and HR support on hand.

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Published date: 11th Feb 2022
Review date: 11th Feb 2023