How to hire and pay an employee in Spain – Guide to Spanish payroll and employment law

Hiring employees in Spain involves navigating a complex legal and administrative landscape. This guide provides a comprehensive overview of hiring, payroll, employment law, and benefits in Spain, ensuring compliance while optimising for international business practices.

Hiring an employee in Spain

Recruitment process

1. Advertising roles: Employers must comply with anti-discrimination laws when advertising vacancies. All job postings should avoid bias based on gender, age, religion, or ethnicity.
2. Contracts: Spanish labour law requires written contracts for all employees. There are several types:
   • Indefinite contract (permanent): Default for most hires.
   • Temporary contract: For project-based or seasonal work, limited to a maximum of 24 months.
   • Part-time contract: Pro-rated pay and benefits apply.
   • Training contract: For young professionals or apprentices.

Pre-employment considerations

• Work permits: Non-EU employees require a valid visa and work permit.
• Social security number (Número de Seguridad Social): Every employee must have one to enrol in the Spanish social security system.
• Medical checks: Optional, unless the job poses health risks, such as in manufacturing or healthcare.

Payroll in Spain

Registering as an employer

Before hiring, companies must:

1. Register with the Spanish Social Security General Treasury (TGSS).
2. Obtain a Tax Identification Number (NIF).
3. Enrol with the Spanish Public Employment Service (SEPE).

Payroll components

1. Gross salary: Includes base salary and any applicable allowances or bonuses.
2. Deductions: Mandatory deductions include:
   • Social security contributions (approximately 29.9% of gross salary, split between employer and employee).
   • Personal income tax (IRPF): Progressive rates ranging from 19% to 47%, depending on income.
3. Net salary: The take-home pay after deductions.

Pay frequency

Salaries in Spain are typically paid monthly. Many employers pay an extra month’s salary in July and December, known as the 14-month payment system. Alternatively, this can be prorated across the year.

Payroll process in Spain

Managing payroll in Spain involves several steps to ensure compliance with local laws and regulations. Below is a breakdown of the key stages:

1: Registering as an employer

Before hiring employees, your business must complete the following registrations:

1. Social Security General Treasury (TGSS):
   • Obtain a Código de Cuenta de Cotización (CCC), a unique employer code required for making social security contributions.
2. Tax Authority (Agencia Tributaria):
   • Register for a Tax Identification Number (NIF) for corporate tax purposes.
3. Public Employment Service (SEPE):
   • Enrol your business to comply with employment reporting requirements.

2: Collecting employee information

Gather all necessary details and documentation from employees, including:

• Social security number (Número de Seguridad Social): Mandatory for all workers to participate in the social security system.
• Personal details: Full name, address, tax residency status, and bank details.
• IRPF form: Employees must submit their personal income tax declaration form to determine applicable withholding rates.

3: Calculating payroll

1. Gross salary:
   • Base salary and additional components such as allowances, bonuses, and overtime pay.
2. Deductions:
   • Social security contributions: Split between employer (23.6%) and employee (6.35%) for most industries.
   • Income tax (IRPF): Withheld at progressive rates (19%-47%), based on the employee’s annual income and personal circumstances.
3. Net salary:
   • The final take-home amount after all deductions.

4: Paying employees

1. Pay frequency:
   • Salaries are typically paid monthly, often on the last working day of the month.
   • Some companies adopt a 14-month pay structure, distributing additional payments in July and December.
2. Payment methods:
   • Most salaries are paid directly into employees’ bank accounts via wire transfer.

5: Filing and reporting

Employers must complete the following:

1. Social security contributions:
   • Paid to the TGSS by the 20th of the following month.
2. Tax filings:
   • File and remit withheld income tax (IRPF) to the Spanish tax authorities, usually on a quarterly basis.
3. Monthly payroll summaries:
   • Provide employees with payslips detailing gross pay, deductions, and net salary.
4. Year-end reporting:
   • Issue a Certificado de Retenciones to employees, summarising annual tax withholdings.

6: Recordkeeping and audits

Employers must maintain detailed payroll records for a minimum of five years. These records should include:

• Employment contracts.
• Payslips.
• Tax filings and social security contributions.

Frequent audits by Spanish labour authorities make meticulous recordkeeping crucial to avoid fines and disputes.

Streamlining payroll management

To manage payroll efficiently:

• Outsource payroll: Partner with a local payroll provider familiar with Spanish regulations, or an international payroll provider.
• Use specialised software: Automated systems can handle tax calculations, reporting, and employee payslips – see international payroll software.
• Stay informed: Regularly update processes to comply with new employment laws and tax changes.

Employment law in Spain

Working hours and overtime

• Standard working hours: 40 hours per week.
• Overtime: Capped at 80 hours per year. Employees must either receive a 75% overtime pay premium or equivalent time off.

Leave entitlements

1. Annual leave: 30 calendar days (typically interpreted as 22 working days).
2. Public holidays: 14 days per year, varying by region.
3. Sick leave:
   • Paid by social security after the fourth day of absence.
   • Employers cover the first three days.
4. Maternity/paternity leave:
   • Maternity leave: 16 weeks (100% of base salary, funded by social security).
   • Paternity leave: 16 weeks (same conditions as maternity leave).

Termination

1. Notice period: Varies by contract type but is typically 15 days.
2. Severance pay: Calculated based on the type of dismissal:
   • Objective dismissal: 20 days’ salary per year of service (capped at 12 months).
   • Unfair dismissal: 33 days’ salary per year of service (capped at 24 months).
3. Final settlement: Includes unpaid wages, unused leave, and any severance.

Employee benefits in Spain

Statutory benefits

1. Social security coverage: Includes healthcare, unemployment insurance, and pensions.
2. Unemployment benefits: Employees qualify after 12 months of contributions.
3. Minimum wage: Set annually by the government (€1,080/month in 2025).

Additional perks (commonly offered by employers)

• Meal vouchers: Tax-deductible for employers.
• Commuting allowance: Common in urban areas.
• Private health insurance: Enhances basic public healthcare.
• Training and development: Encouraged by the government and often co-funded.

Key compliance tips

1. Local partnerships: Work with a Spanish payroll provider or employment law advisor to ensure compliance with national and regional laws.
2. Automation tools: Use payroll software tailored to the Spanish market to handle deductions and reporting.
3. Audit regularly: Keep detailed payroll records for five years, as required by Spanish law.

FAQ