PEO/EOR employment contracts in 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 a 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.
EOR/PEO employment termination and notice period in Spain
As you may know, employment in Europe is more employee-friendly than employer-friendly in comparison to North America. An example that showcases employee-friendliness is employment “at will”. Employment “at will” is not an option through PEO and EOR services in Spain.
In Spain, the minimum period of notice required for termination of employment 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.
PEO/EOR employment in Spain: Salary, employer costs and working hours
What are the costs of employing employees through PEO and EOR 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 through PEO/EOR 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.
Full-time employment through Spain PEO/EOR provider 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 and public holidays in Spain EOR/PEO employment
In Spain PEO/EOR employment, 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.
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 – 7 April
- Easter – 9 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 through PEO/EOR in 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.
Find out everything you need to know about maternity leave in other European countries.
Social Security tax for Spain PEO/EOR employers
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 work start.
Employers through PEO/EOR in Spain are required to make monthly contributions to Spain's National Security Institute and withhold contributions from their employee's paychecks. 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
To learn more about the social security tax in Europe, we invite you to read this article on Social Security Tax Rates for Employers Across Europe.
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