Spain PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Spain to companies willing to enter the Spanish market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Spain.  However our solution allows you to start the operations in Spain within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. .

Spain fast facts

Population, million:47,4
Land area: 505,990 km²
Capital: Madrid
Local currency: EUR

Spain is a sovereign state mostly located on the Iberian Peninsula in Europe. The country’s mainland is bordered to the south and east by the Mediterranean Sea except for a small land boundary with Gibraltar; to the north and northeast by France, Andorra, and the Bay of Biscay; and to the west and northwest by Portugal and the Atlantic Ocean.

Spain is the only European country to have a border with an African country (Morocco). With an area of 505,990 km2 (195,360 sq mi), Spain is the largest country in Southern Europe, the second largest country in Western Europe and the European Union, and the fourth largest country in the European continent. By population, Spain is the sixth largest in Europe and the fifth in the European Union. Spain’s capital and largest city is Madrid; other major urban areas include Barcelona, Valencia, Seville, Málaga and Bilbao.

Hiring, Negotiating and Doing Business in Spain

Necessity of written employment contract

There is no general requirement for an employment contract to be in writing, except for temporary contracts lasting for more than four weeks.

If the contract is not in writing, employees must be provided with certain written particulars of employment, including details identifying the following matters (Royal Decree 1659/1998 of the 24 July and section 8.5, Workers’ Statute):

• Name of the company.
• Date on which employment begins.
• Remuneration.
• Place of work.
• Hours of work.
• Holiday and holiday pay entitlement.
• Collective agreements applicable to the employment relationship.
• Professional group to which the employee belongs.

Spain Employment Contract

Types of employment agreements

Under Spanish law, the employment contract is an agreement under which people (employees) voluntarily offer their physical or intellectual services for payment to an employer. To this effect, section 1.1 of the Workers’ Statute applies to people who render their services voluntarily under the management of another person (natural or legal), where the person rendering services is the employee and the person (natural or legal) receiving the services is the employer).

Spain working hours

The Spanish working time regulations state that employees must (Workers’ Statute):

• Not work (on an annual average) more than 40 hours a week.
• Not work more than nine hours a day.
• Be given at least 12 hours’ rest before starting the next day’s work.

There are exceptions for certain industries (for example, agricultural work), management executives and other specified employment relationships.

Rest breaks

Whenever the duration of the continuous working day exceeds six hours, a rest period of not less than 15 minutes must be given during that period. This rest period is considered as working time where this is established by either a collective bargaining agreement or the employment contract. For workers under the age of 18 years, the rest period must be a minimum of 30 minutes long and must be given whenever the duration of the continuous working day exceeds four and a half hours.

Vacation leave in Spain

Annual or holiday leave in Spain is generous, and employees are entitled to a minimum of 22 business days (30 calendar days) per year.  The leave can be divided up into more than one period, as long as one of the periods is at least two weeks.

Unlike some countries, payment in lieu cannot be made for vacation days, unless the employment contract is terminated.  Therefore, employees should take the leave as it accrues each year.

Sick leave: 

Entitlement to time off

Employees are entitled to a maximum of 18 months’ sick leave in cases of illness or injury. Once the 18-month period has expired, employees can be designated as permanently ill and claim a social security pension.

Entitlement to paid time off

Employees receive social security payments during the sick leave period (up to a maximum of 18 months). The amount of social security payment varies depending on the employees’ salary and their position in the employer’s organisation. Some employers, on their own initiative or under the provisions of a collective agreement, supplement the social security payment to match the employee’s current salary.

Spain Maternity Leave

Pregnant employees can take a maximum of 16 weeks’ maternity leave. They must take the leave immediately after the birth. Maternity leave is increased where there are:

• Multiple births (by two weeks for each additional child, to be counted from the second child).
• Medical complications.

Maternity leave can also be increased where the child is disabled. If the mother dies whilst taking maternity leave, the remaining leave is transferred to the father).

Pregnant employees and those who have recently given birth are entitled to time off for, among other things, attending antenatal clinics and breastfeeding, in addition to the 16 weeks’ maternity leave.

Social security benefits are paid to employees on maternity leave. Employees must generally satisfy a qualifying period of paid employment to receive benefits, depending on their age:

• Employees under 21 years old: no qualifying period applies.
• Employees aged between 21 and 26 years old: a qualifying period of 90 days’ paid employment within the previous seven years. However, benefits will be received if the employee has had 180 days’ paid employment during the whole of her life.
• Employees aged over 26 years old: a qualifying period of 180 days’ paid employment within the last previous seven years. However, benefits will be received if the employee has had 360 days’ paid employment during the whole of her life.

The monthly benefit is equal to 100% of the mother’s average monthly salary.

Spain Severance Laws

Notice periods

Where employees are dismissed on disciplinary grounds, there is no duty to give them notice of dismissal.

Severance payments

If a dismissal is made on disciplinary grounds and a judge subsequently rules that the dismissal is unfair, the employer will have the following options:

• Reinstatement of the employee in their job position and payment of the accrued salaries up to the date of notification of the court’s decision.
• Payment of a severance payment equivalent to:
  • 45 days of salary per year for services for the period of time worked up to 12 February 2012; and
  • 33 days of salary per year worked for services for the period after 12 February 2012.

In any event, the amount of severance payment must not exceed 720 days’ salary (unless the period of employment calculated that occurred prior to 12 February 2012 exceeds this amount, in which case that higher calculation will apply, though this is also limited to no more than 42 months’ salary in any event). The severance payment for employment contracts entered into after 12 February 2012 will be equivalent to 33 days of salary for each year worked, with a cap of 24 months’ salary.

Spain Tax

Employment income withholding table for 2018, 2019 and 2020

Regional tax. Regional tax is applied in a similar way as the state tax. The rates vary, depending on the autonomous region in which the employee works (Spain is divided into 17 autonomous regions). Under Law 39/2010, each autonomous region must approve its own scales in order to determine the employee’s gross taxable income, the applied rate and the regional tax amount.

Payroll taxes

Employers are required to withhold a percentage of their employees’ salaries and benefits as a payment on account of their personal income tax (PIT). The rate of withholding is a progressive rate of between 19% and 45%, depending on the employee’s personal circumstances and income.

Social security contributions

Employers are required to pay social security contributions. The rate of the contributions under the general social security contribution regime is the fixed rate of 29.9% plus a variable rate for occupational accidents (e.g. 1.5% for office work).

Employees are also required to pay social security contributions. Under the general social security contribution regime, the rate of social security contributions is 6.35%. Employers should deduct this amount from the amounts that they pay to employees.

The rates of social security contributions stated above should be applied on the employee’s total monthly gross employment income, whether in cash or in kind, with a minimum monthly contribution base of between EUR 1,050.00 and EUR 1,547.00, depending on the employee’s professional category, and a maximum monthly contribution base of EUR 4,070.10.

Both parts of the social security contributions (employer and employee) should be paid by the employer to the Social Security Treasury.

Additional Benefits in Spain

Employees receive 15 days (including weekends) for marriage, 2 days for the death of a family member, and 1 day for home relocation.

Spain Holidays

In addition, there are also national, state and local public holidays which are granted as paid days off in Spain.  There are 10 national public holidays, and two to three times as many at the local and regional level, so that will depend the location of employment.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.