An Employer of Record (EOR) in Spain acts as the legal employer for workers, handling payroll, benefits, and other employment tasks on behalf of the actual employer. Also known as a Global PEO, it simplifies hiring without the need for entity setup.
Discover the key considerations and essential details you should be aware of before you hire your remote team in Spain.
On this page: Employment Contracts | Employment Laws | Social Security | Personal Income Tax
Employment Contracts in Spain
An employment agreement in Spain is a commitment between an employer and an employee. The employee agrees to provide specific services under the employer's direction in exchange for compensation.
The agreement can be in writing or verbal, but legal provisions mandate a written format, especially for certain cases like workers hired in Spain for foreign companies and fixed-term contracts exceeding four weeks. All contracts must be written in Spanish. While it's possible to draft it in two languages, the Spanish language will take precedence in case of any discrepancies or conflicts.
At any point, either party can request a written contract. Its establishment is optional, but if chosen, it must be documented, with a maximum duration specified in collective agreements—up to six months for skilled technicians or two months for other workers.
Employment contracts can be indefinite or fixed-term. The default is indefinite and full-time unless stated otherwise. Temporary contracts have defined minimum and maximum durations. These contracts confer rights on the worker, creating obligations for the employer and vice versa.
For contracts under four weeks, the employer must inform the worker in writing about essential elements. Legal representatives and the public employment service also need to receive contract details within 10 days, regardless of the format.
Employment Laws and Key Aspects of Spanish Work Code
In Spain, employment matters are governed by various regulations overseen by key government entities. The primary authority is the Spanish Ministry of Labor, a vital body responsible for formulating and implementing labor policies, ensuring compliance with employment laws, and safeguarding the rights of workers. Additionally, specific aspects of employment, such as unemployment benefits and services, fall under the purview of the Servicio Público de Empleo Estatal (SEPE), also known as the State Public Employment Service. Understanding the roles of these entities is crucial for comprehending the intricate landscape of employment laws in Spain.
Employment Laws in Spain include:
- The Workers' Statute: Serving as the primary legal framework, this statute delineates the fundamental rights and responsibilities of both workers and employers.
- The Social Security Act: Encompassing a comprehensive system, this act outlines social security benefits designed to support workers throughout their employment in Spain.
- The Unemployment Protection Act: Focused on unemployment scenarios, this act establishes regulations governing the provision of unemployment benefits, offering a structured approach to support those in transitional employment phases.
Key Aspects of Spanish Work Code
Trial Period
During the trial period, the worker has the same rights and responsibilities as a permanent employee. Termination during this period can happen without cause and notice, unless otherwise agreed. The trial period counts for seniority, and temporary disability interrupts it if mutually agreed.
For companies with under 25 employees, the trial period cannot exceed three months for non-skilled technicians. It's not allowed if the worker previously performed the same role in the company under a different employment form.
Minimum Wages
As of 2024, the existing monthly minimum wage in Spain stands at €1,134.00.
Working Hours
In Spain, the usual work week consists of 40 hours, typically distributed over five days. The maximum allowable working hours per week are 48, and any hours worked beyond this threshold must be compensated as overtime.
Notice Period
When employees resign in Spain, the notice period is a minimum of 15 calendar days, applicable to most indefinite contract employees not in their probationary period. The maximum notice period varies; some contracts or collective bargaining agreements (CBAs) may extend it, especially for senior management or those with over 5 years of service, up to a maximum of 3 months.
Common practice sees employees giving notice periods ranging from 1 to 3 months, exceeding the minimum of 15 days, based on their seniority and position.
For employers terminating employment, the minimum notice is 15 calendar days, applying to most indefinite contract employees not dismissed for disciplinary reasons or during their probationary period. Employers may choose to give more notice, with a maximum of 30 days, though it's not legally required.
Payroll Cycle
In Spain, payroll cycles are commonly monthly, with employees receiving their salaries once a month. Payments are typically issued between the 25th of the month to which the pay relates and the 5th of the following month. However, companies may opt for more frequent payments, such as bi-weekly or weekly, based on their internal policies and chosen payroll provider. The specific date of salary payment can vary, with some companies choosing the last day of the month and others opting for an earlier day in the week.
13th and 14th Month Salary
It's noteworthy that Spain mandates 13th and 14th-month salary payments, commonly known as "pagas extraordinarias" or "bonus payments." Employers have flexibility in their distribution: either dividing the annual salary into 14 equal installments throughout the year, including bonus payments in July and December, or pro-rating them into regular monthly payments.
The calculation of these extra payments is typically one-fourteenth of the employee's gross annual salary, covering base salary, commissions, bonuses, and other regular earnings. This practice is obligatory by law for most employees with indefinite contracts under the Spanish Workers' Statute.
Exceptions may apply, including employees with temporary or probationary contracts and certain public sector roles subject to specific regulations. Collective bargaining agreements might also stipulate different conditions. It's important to note that these "bonus" payments are subject to income tax, similar to regular salary, with the tax rate potentially varying based on the employee's income level and other factors.
Overtime Pay
In Spain, ensuring fair compensation for employees working beyond regular hours is a crucial aspect of employment regulations. Employees can work a maximum of 80 overtime hours annually, excluding cases compensated with rest time or work required to prevent or repair urgent damage.
The standard overtime pay rate is at least 75% higher than the regular hourly rate, although contracts or Collective Bargaining Agreements (CBAs) might stipulate higher rates. Employees typically have the option to choose between financial compensation and equivalent paid rest time for overtime, unless specified otherwise in their contract or CBA. Overtime during the night or on public holidays may attract higher pay rates than regular overtime.
It's important to note that not all overtime needs to be paid; situations involving the prevention or repair of urgent damage are mandatory for compensation. Financial compensation for overtime is limited to 80 hours per year, with additional overtime compensated with rest time.
Personal Income Tax in Spain
The personal income tax system in Spain operates progressively, where the tax rate increases as income rises. Your taxable income includes earnings from various sources like salaries, pensions, investments, and rental income. National tax rates vary across income brackets, starting at 19% for incomes up to €12,450 and reaching 47% for amounts over €300,000. Some regions may have slight deviations in tax rates, but they are generally insignificant. Deductions and exemptions, such as those for medical expenses or charitable donations, can apply. Typically, employers or income providers withhold taxes at the source, and individuals can pay through the General State Administration (AEAT) or regional government tax authorities. Familiarity with these aspects ensures compliance with Spain's personal income tax regulations.
Tax Rates (National):
- Up to €12,450: 19%
- €12,451 to €20,200: 24%
- €20,201 to €35,200: 30%
- €35,201 to €60,000: 37%
- €60,000 to €300,000: 45%
- Over €300,000: 47%
| Overview | |
| Continent | Europe |
| Country | Spain |
| Capital | Madrid |
| Time zone | UTC±00:00 (WET) — Canary Islands |
| Total Time zones | 2 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | 30th Jun |
| Financial Year | 1st January to 31st December |
| Date format | dd/mm/yyyy |
| Currency | Euro (EUR) |
| VAT | the standard rate is 21% |
In Spain, leveraging the services of an Employer of Record (EOR) is essential for businesses venturing into the local employment landscape. The EOR takes charge of intricate compliance matters, manages payroll intricacies, and handles administrative complexities, allowing companies to focus on their core objectives without being burdened by regulatory intricacies. This collaborative approach ensures that employees are onboarded with contracts aligning with Spain's labor laws and practices. As the Spanish business environment evolves, the role of an EOR becomes increasingly vital, offering businesses a streamlined entry and growth path in Spain while maintaining compliance and fostering a conducive work environment.
Southern Europe: EOR Greece | EOR Italy | EOR Spain | EOR Portugal
Social Security in Spain
Spain operates a robust social security system with a range of benefits and contributions aimed at safeguarding the welfare of its residents. The key elements of this system include:
Benefits:
Contributions (in percentages):
Program
Employer Contribution
Employee Contribution
Common Contingencies (Illness, etc.)
24.7
4.8
Unemployment
3.7
1.55
Occupational Accidents and Diseases
1.5
0.1
Intergenerational Equity Mechanism
0.6
0.6
Solidarity Contribution (High Earners)
1.7
0
Total
32.2
6.45
These contributions from both employers and employees ensure the sustainability of the social security system in Spain.