Benefits of using a Spanish PEO & Employer of Record
- Expand without an entity
- Flexible and cost-effective solution to outsource payroll and HR functions for international expansion
- In compliance with foreign local laws & regulations
- Minimizes employment liabilities and risks
- Reduced risk, as the risks of being an employer fall almost completely on the employer of record
- Let's you focus on your core business
- You manage your employees
- EoR takes care of registration and contact with local authorities
Employment Contracts Spain
In Spain, employment contracts (lasting more than 4 weeks) must be in writing. This is common in Europe. In principle, employment contracts are presumed to be for an indefinite term. There are, of course, definite contract types as well. The most common definite contract type in Spain is a fixed term contract. The basic rule with an fixed-term contract is that an employee in the same position can only be offered two successive fixed-term contracts for 24 months total, in a 30-month timeframe. If the employee continues to work past the original term of the temporary agreement, the relationship becomes indefinite in time and the employee becomes entitled to the standard severance upon termination.
Spanish PEO and EOR service providers will support you with the set-up of a local employment contract.
Employment Termination Spain - Notice Period Spain
As you may know, employment in Europe is more employee-friendly than employer-friendly in comparison to North America. An example that showcases the employee-friendliness is employment at-will. “Employment at-will” is not an option in Spain. In Spain, The minimum period of notice required for termination of employment in Spain is 15 days. This notice period may be extended by contract or by reference to a CBA. The parties must observe the required notice periods before an employment contract is terminated (except for gross misconduct). You can make payment in lieu of notice.
In Spain, severance pay must be awarded when the employer terminates an employment contract. Currently the amount payable is 20 days' wages per year of service with a maximum of 12 months' salary. An employee who is dismissed for disciplinary reasons is not entitled to severance pay.
As the Spanish PEO and/or EOR provider is the formal employer of your employees in Spain, they are also responsible for terminating the contract while applying the applicable Spanish terms.
Social Security Tax and Payroll Tax for Employers in Spain
In Spain, companies must register each employee’s contract with social security authorities and the national employment service. New contracts must be registered with social security any time before the start of employment, and with the Public Employment Service within ten days following the employee’s start of employment.
Employers in Spain are required to make monthly contributions to Spain's National Security Institute and withhold contributions from their employee's paycheck. The social security contributions include - among others - pension plans, labor accidents and illnesses. The typical contribution rate an employer has to take into account is 29.90% and looks as follows:
- 23.60% Social Security
- 5.50% Salary Guarantee Fund
- 0.60% Professional training
- 29.90% Total employment costs
Click here to have an overview of the social security tax rates for employers in Europe in 2021. On average, the social security tax rate for employers in Europe in 2021 is 20%. This is a lot higher than North American employers are used to.
Average Salary Spain & Average Employment Costs Spain
What are the costs of employing employees in Spain? In 2022, the average annual wage in Spain was $28.294,56. This is lower than the average annual wage in the United States: $53.490,00. As an employer in Spain, the actual employer costs are around 29.90% higher than the gross annual salary. Based on a $28.294,56 annual salary, the employment costs would be $36.782,93
To learn more about the average salaries in Europe and the actual employment costs in Europe, we invite you to read this article on Costs of hiring European employees.
Working Hours Spain
Full-time employment is considered 40 hours weekly, and 8 hours daily. Overtime policy is usually covered by Collective Agreements. The guidelines set out by law are that overtime hours should not exceed 80 hours per year. Overtime can be compensated.
Paid Vacation Leave Spain
In Spain, paid time off is at least 22 business days (30 calendar days) based on full-time employment. The leave can be divided up into more than one period, as long as one of the periods is at least two weeks. For more information on paid vacation days in Europe, please feel free to read our blog on paid vacation days in Europe 2021.
Public Holidays Spain
In Spain. each province has a different number of public holidays, but do not exceed 14 in total. Out of these 14, there are 10 national holidays.
- New Year's Day - 1 January
- Epiphany - 6 January
- Good Friday - 15 April
- Labor Day - 1 May
- Assumption of the Virgin - 15 August
- Hispanic Day - 12 October
- All Saints' Day - 1 November
- Constitution Day - 6 December
- Immaculate Conception Day - 8 December
- Christmas Day - 25 December
Maternity and Paternity Leave Spain
In Spain, mothers are entitled to 16 weeks’ maternity leave. The leave can begin up to 4 weeks before the expected due date and at least 6 weeks must be taken immediately after the birth of the child. During maternity leave, the employee is not paid their salary but a maternity benefit. The maternity benefit is calculated based on the previous month’s contribution and is paid by social security. The maternity benefit is capped at 4,070 EUR per month. If the employee’s salary is generally higher than this amount, the employer can decide to pay the difference, however, this is not mandatory.
In Spain, fathers are entitled to 16 weeks of paid paternity leave. The first 6 weeks must be taken immediately after the birth of the child. leave can be extended by two weeks in the case of multiple births. All 16 weeks are 100% paid by the state.
Payroll in Spain
Employers in Spain are required to pay their workers in 12 monthly payments. In most collective agreements, there are also two extra paychecks, typically in July (vacation pay) and December (Christmas pay). 13th and 14th salaries are usually pro-rated over 12 payments. Employees are paid monthly by the last day of the month.
Why do you need a PEO in Spain?
- Spanish law and regulations are complicated, save yourself time and money by partnering up with a PEO
- Reduce the risks of non-compliance payroll
- As PEO we take responsibility for all employment tasks and compliant payslips, including taxes and other contributions
- As experienced PEO, we’re able to help you out get work permits, visas and onboardings really fast
Learn more about PEO and EOR in Europe:
Get in contact or request a quote
Learn more about PEO and EOR in other European countries:
Monique Ramondt Sanders
Executive Vice President | HR Outsourcing