Employer of Record in Spain

Expanding your business into Spain provides a great opportunity, but it also presents a number of challenges. Velocity Global’s Employer of Record solution gives you the support and expertise to hire talent in Spain and grow your business with trust and certainty. An employer of record in Spain takes care of all hiring, onboarding, payroll, risk mitigation, and compliance procedures for you, so you can focus on what matters most: running your business.

Benefits of hiring in Spain

• Spain is a highly strategic location for international business as it holds longstanding trade partnerships with the European, Middle Eastern, and Northern African markets, and trade ties to Latin America. Spain receives praise as a strong base to conduct business in Europe, the Middle East, Northern Africa, and Latin America due to nearly two dozen trade agreements that provide reciprocal protection and promotion of foreign investments and avoidance of double taxation.
• The Spanish government shows support of free-trade and investment by relaxing business regulations and increasing incentives to attract foreign businesses and investment. Spain’s restructured financial sector, robust tourist economy, efficient transport network, focus on renewable energies, and numerous multinational companies are substantial motivators for international business development.
• Spain has tackled a range of reforms which include giving more autonomy to local regions, diversifying the national economy, improving employment conditions, enhancing social welfare programs, and investing in national research and development.
• Spain’s tech and innovation industry hold some of the country’s best business opportunities. The region of Catalonia represents a major contender of this thriving ecosystem within Spain’s economy. Barcelona is referred to as the country’s startup capital as it’s home to a limitless number of tech leaders.

Challenges of hiring in Spain

• The European Union’s economic forecast for Spain shows a record-setting consumption contraction due to the COVID-19 pandemic, which is expected to remain under significant pressure into the foreseeable future. However, growth rates of GDP are expected to accelerate the return of tourism to pre-pandemic levels.
• Despite Spain’s history of a resilient economy, the country continues to struggle with one of the highest unemployment rates in the European Union. The COVID-19 pandemic worsened the unemployment rate and the government still grapples with containing its impact.
• Sustained employment insecurity resulted in an exodus of workers leaving Spain for other European Union countries because of a high unemployment rate and slow wage growth. The government promised to reverse this phenomenon by introducing a plan to convince workers to return. As more employees return to the workforce, using an employer of record in Spain will help make the onboarding and hiring process seamless.
• The bureaucracy in Spain is known to feel cumbersome to new businesses since construction permits require 13 procedures and 147 days to complete on average.

Cultural nuances and must-knows of doing business in Spain

• Building trust and interpersonal relationships are the keys to a successful business in Spain. Socializing to strengthen personal bonds between colleagues is essential.
• Business communication in Spain is usually formal and avoids confrontation. The Spanish are concerned with how they are perceived. It is advisable to stay modest when describing accomplishments because a reputable character is highly valued.
• When doing business in Spain, allow plenty of additional time for meetings, especially during a presentation. The Spanish enjoy taking their time and detest being rushed.
• The Spanish appreciate a business structure where hierarchy and high-level titles remain central for decisions and meetings.
• In some regions of Spain, the early afternoon tradition of a siesta, meaning nap in Spanish, allows for a midday rest for a couple of hours after lunch.

Minimum wage and salaries in Spain

• The current minimum monthly wage in Spain is EUR1,166 for 2022.

Probation period in Spain

• Probation periods are common but not required by law in Spain. Where there are no special provisions in an applicable collective bargaining agreement or employment contract, probation periods have a maximum period of six months.

Bonus payment in Spain

• There are no bonus requirements for employers in Spain but they are common and vary in calculation and amount. Most commonly, there is a 13th and 14th-month salary bonus per year but they are often prorated to 12 monthly salaries. Most collective bargaining agreements and employment contracts outline bonus structures.

Onboarding in Spain

• Spanish labor law allows for employment contracts to be verbal or in writing. During the term of a verbal contract, either the employer or employee may require the contract to be placed in writing.
• When an employment contract’s duration is more than four weeks, an employer must provide the employee with the following information in writing, within two months from the commencement of employment:
  • Identification of employer and employee
  • Employment commencement date and duration of employment for temporary contracts
  • Location of business
  • Professional group or category
  • Base salary, compensation, and benefits, if any
  • Total working hours
  • Total number of holidays
  • Notice periods
  • Applicable collecting bargaining agreement

Termination and notice period in Spain

• Labor law requires a minimum of a 15 day notice period in Spain prior to termination of an employment contract, by either the employer or employee.
• Employees may be entitled to compensation at the end of their contract. The payment amount depends on the type of contract, reason for contract termination, and length of employment.

Annual leave in Spain

• In Spain, employees are entitled to a minimum of 30 days of paid leave per year. An employment contract or collective bargaining agreement can increase an employee’s annual paid leave.

Parental and maternity leave in Spain

• Maternity leave in Spain for birth or adoption includes 16 weeks’ paid leave at full pay, funded by the social security system. The mother is required to take six of these weeks immediately after childbirth. The remaining 10 weeks can be organized by the mother’s discretion until the child is 12 months old.
• Partner leave for birth or adoption also includes 16 weeks’ paid leave at full pay, funded by the country’s social security system.

Sick leave in Spain

• Temporary disability benefits cover an employee’s loss of income due to any sickness, disease, and non-work-related or work-related injuries. The maximum duration of this benefit is 365 days but it can be extended for another 180 days.
• During the first three days of sick leave in Spain, the employer pays an employee’s salary. Beginning the fourth day, employees are eligible to receive payment from the social security system.

Regional and national holidays in Spain

• Spain has 14 public holidays in a calendar year, which are not included in the minimum paid leave entitlement but are taken in addition to annual leave. The following are national holidays in Spain, although more and alternate holidays are observed differently by region.
  • New Year’s Day (January 1)
  • Epiphany (January 6)
  • Good Friday (April, the specific day fluctuates each year)
  • Labor Day (May, the specific day fluctuates each year)
  • Assumption of Mary (August, the specific day fluctuates each year)
  • Fiesta Nacional de España (October 12)
  • All Saints’ Day (November 1)
  • Constitution Day (December, the specific day fluctuates each year)
  • Immaculate Conception (December 8)
  • Christmas Day (December 25)

• In Spain, the legal framework for the social protection system is obtained from Spain’s Social Security Act of 1994. The social security system of national insurance contributions covers expenses resulting from accidents and injury, illness and disease, disability, medical care, parental leave, unemployment, and retirement pensions. All residents of Spain who pay insurance contributions to the country’s social security system are eligible to receive its benefits.

• In Spain, individuals are considered residents for tax purposes if they are present in Spain for at least 183 days in a tax year. Individuals who are Spanish residents are subject to Spanish income tax on all employment earnings, regardless of whether or not the earnings come from work within Spain.

Tax thresholds in Spain

• The following tax rates set by the Spanish government apply in 2022. However, each region in Spain may set its own rates. There is a dual system: the state tax and the regional tax.
  • For €0 – €12,450, state tax is 9.5% and regional tax is 9.5%, totaling 19%
  • For €12,450 – €20,200, state tax is 12% and regional tax is 12%, totaling 24%
  • For €20,200 – €35,200, state tax is 15% and regional tax is 15%, totaling 30%
  • For €35,200 – €60,000, state tax is 18.5% and regional tax is 18.5%, totaling 37%
  • For€60,000 – €300,000, state tax is 22.5% and regional tax is 22.5%, totaling 45%
  • For €300,000+, state tax is 23.5% and regional tax is 23.5%, totaling 47%
• The corporate income tax rate in Spain is 25%.
• Contributions for social security insurance are calculated on the basis of an employee’s monthly wage. As of 2022, Spain’s current social security rate charged on income for employers is 29.9% of the employee’s net taxable income and the employee pays 6.35%, which is deducted from the employee’s salary.

Health insurance in Spain

• According to the European Commission, all individuals insured under the Sistema Nacional de la Seguridad Social (Spain’s National Social Security System) and their beneficiaries are entitled to public medical healthcare. In order to qualify as insured in Spain, individuals must be employed or self-employed, a contributor to the Spanish National Social Security System, or a permanent resident.

Pension in Spain

• The required age for eligibility to receive a government pension in Spain is currently 65 with a minimum of 15 years in national insurance contributions to Spain’s national social security system. At least two years of contributions must have taken place within the 15 years prior to retirement.
• The pre-tax pension rate for a full government pension in Spain is 81% of gross annual salary, the highest within the European Union. Spanish government pensions are funded by contributions from employees at 4.7% of their salary and employers at 23.6% of an employee’s salary.

• An employer of record in Spain helps you easily comply with all payroll laws and regulations.

Tax due dates in Spain

• The Spanish tax year is the calendar year. The tax filing deadline is June 30 of the current year for the previous year.

Payroll cycle in Spain

• The payroll cycle in Spain is monthly payments made at the end of each month.

Average working hours in Spain

• The maximum working week is 40 hours, as an average over a year.

Overtime in Spain

• Overtime is voluntarily accepted by employees and cannot exceed 80 hours per year.