Employer of Record (EOR) Spain

An Employer of Record (EOR) is the official employer of a worker in Spain. Often known as a Global Professional Employer Organization (Global PEO), this role covers a broad range of employment responsibilities. It ensures the worker complies with local labor laws and regulations, manages payroll, taxes, statutory benefits, and drafts employment contracts.

Roles and Responsibilities of Employer of Record (EOR) in Spain

The Employer of Record (EOR) in Spain is accountable for:

• Ensuring the worker’s employment adheres to Spanish labor laws.
• Managing the local payroll process smoothly.
• Handling the filing of employment-related taxes and necessary documents.
• Issuing accurate payslips to the worker.
• Ensuring timely salary payments to the worker.

Simplify your global expansion with our Global PEO services – a seamless solution without the need for entity setup. Our Employer of Record (EOR) in Spain ensures legal presence, compliance, and intellectual property protection, allowing your business to concentrate on its core activities. Facilitate smooth global mobility and work visas while building a diverse and effective global workforce. Partner with Mercans, your Employer of Record in Spain, for a compliant and efficient employment experience for your international team.

Things you need to know before hiring in Spain

Employment Contracts

Under the Spanish Workers’ Statute Law, employment contracts can be formalized either orally or in writing. However, certain types of contracts—such as temporary, part-time, and training contracts—must be documented in writing. If these contracts are not provided in writing, they will be deemed as permanent and full-time. Employers must notify the Spanish Public Employment Service (SEPE) of all employment contracts within 10 days of the contract’s start date. Additionally, if the company has a legal representative of the workforce, a basic copy of all written contracts (excluding senior management contracts) must be provided to them.

As of the recent updates established by Royal Decree-Law 32/2021 of 28 December (effective from 31 March 2022), the types of employment contracts under Spanish law are: a. Permanent employment contracts b. Fixed-term employment contracts, including:

• Temporary contracts due to production circumstances (foreseeable or unforeseeable)
• Substitution contracts
• Permanent discontinuous contracts
• Internships, which must now be registered with social security (effective from October 2023)

Termination of the employment contract

Employment relationships can be terminated by:

• Mutual agreement
• Voluntary termination by the employee
• Expiration of a fixed-term contract
• Death, severe disability, or retirement of the employee
• Objective dismissal (individual or collective)
• Disciplinary dismissal

In the case of fixed-term contracts or those terminated due to production circumstances, employees are entitled to a severance payment of 12 days’ salary per year of service. For objective dismissals, the severance is 20 days’ salary per year of service, with a maximum of 12 months’ salary.

If individual dismissals are deemed unfair due to inaccurate grounds, the severance compensation may increase to 33 or 45 days’ salary per year of service, with a maximum of 24 or 42 months’ salary.

Collective Bargaining Agreement

Under Spanish regulations, employment conditions and other aspects of the employee-employer relationship are governed by a collective bargaining agreement (CBA). Employers are required to apply the most relevant CBA for their primary activity. Each CBA may offer more favorable conditions to employees compared to the general provisions outlined in the Spanish Workers’ Statute Law.

Working Hours

Employees can work up to an average of 40 hours per week annually. The working day should not exceed nine hours, and employees must receive a rest period of at least 15 minutes if working continuously for six hours. Additionally, there must be a minimum of 12 hours between the end of one working day and the start of the next. Night shifts are defined as work performed between 10:00 p.m. and 6:00 a.m.

Overtime

According to the CBA or, in its absence, the individual contract, overtime may be compensated either financially or with additional rest time. The total number of overtime hours cannot exceed 80 per year.

Probation Period

In Spain, the probation period, also known as the trial period, provides employers with an opportunity to assess the abilities and suitability of a new employee before making a permanent commitment. This period allows either party to terminate the employment contract freely, without needing to provide a reason, prior notice, or indemnity. Here, Mercans outlines the essential aspects of probation periods in Spain to help employers navigate this crucial phase of employment.

General Provisions

Termination During Probation:

• Freedom to Terminate: Both the employer and the worker have the right to terminate the contract during the probation period without alleging or proving any cause. This can be done without prior notice and without any indemnity to either party.
• Protection for Pregnant Employees: The termination of a contract by an employer is deemed null and void if it involves a pregnant employee, from the start of the pregnancy until the beginning of maternity leave, unless there are grounds unrelated to pregnancy or maternity.

Conditions for Validity:

• Prior Employment: If the employee has previously performed the same functions at the company under any type of employment contract, the probation period is considered null and void.
• Written Agreement: The probation period must be agreed upon in writing. This ensures clarity and compliance with legal requirements.

Duration of Probation Periods

The duration of the probation period can vary based on the type of employee and the nature of the employment contract. In the absence of specific provisions in a collective labor agreement, the general rules are as follows:

Specialists:

• College and Junior College Graduates: The probation period for specialists holding college or junior college degrees can be up to six months.

Other Employees:

• Standard Employees: For non-specialist employees, the maximum probation period is two months.
• Small Companies: In companies with fewer than twenty-five employees, the probation period for non-specialist employees can be extended to three months.

Temporary and Fixed-Term Contracts:

• Short-Term Contracts: For temporary fixed-term contracts with a duration of less than six months, the probation period cannot exceed one month.

Special Employment Contracts:

• Training and Other Special Contracts: Specific trial periods apply to training contracts and special employment contracts, such as those for domestic workers and senior managers. These periods are outlined in the relevant legislation governing each contract type.

13th Month Salary

13th-month pay, as the name suggests, is an additional monthly salary provided to employees beyond their regular annual salary. It is designed to act as a bonus or supplementary income and typically follows one of three structures:

• Mandatory Benefits: Legal requirements imposed by the government.
• Common Benefits: Voluntarily provided by employers as part of their benefits package.
• Collective Agreements: Negotiated terms within labor unions or employee groups.

Who Qualifies for 13th-Month Pay?

In Spain, the 13th-month pay is generally mandated, meaning most employees are entitled to this benefit. There are a few important considerations:

• General Eligibility: All employees are typically eligible, regardless of whether they are paid directly through payroll or via an Employer of Record (EOR) arrangement.
• Exceptions: Some high-level executives may be exempt from receiving the 13th-month pay, depending on the specific regulations or company policies.

The eligibility criteria are usually governed by the labor laws of the country where the work is performed. Therefore, even if an employer is based in a country that does not mandate the 13th-month pay, such as the United States, they might still be required to provide it to employees working in countries like Spain where it is obligatory.

Termination, Severance Pay and Notice Period

Termination of employment in Spain involves adhering to specific legal requirements, ensuring fair treatment of employees and compliance with labor laws. Severance pay serves as a crucial financial safeguard for employees, providing support during the transition period following termination. Understanding these regulations is essential for foreign employers operating in Spain to uphold fair labor practices and corporate integrity.

Severance Pay in Spain

Severance pay in Spain is mandated by law and is calculated based on the employee’s length of service. It ensures that employees are compensated fairly upon termination, mitigating sudden income loss. According to Spanish labor law:

• Calculation Method: Employees are entitled to receive 20 calendar days of salary per year of service.
• Limitation: The maximum severance pay is capped at 12 months’ salary.
• Payment Obligation: Employers must promptly disburse severance pay upon serving written notice of termination to the employee.

Notice Period Requirements

The notice period in Spain varies depending on the circumstances of termination:

• Minimum Notice: Employers are required to provide notice of termination, the duration of which depends on the reason for termination and the length of the employee’s service.
• Mutual Agreement: Both parties may mutually agree on a shorter notice period.

Legal Framework and Compliance

• Workers Statute: Governed by the Workers Statute, Spanish labor law outlines the legal framework for employment termination and severance pay.
• Collective Agreements: Supplementing the statutory provisions, collective agreements may further specify terms related to severance pay and notice periods.

Employee Onboarding

To onboard employees in Spain, companies must meet the following requirements:

• Contract: Provide a valid employment contract detailing terms and conditions, including job position, working hours, salary, contract type, duration (if temporary), and other relevant details.
• Personal Documents: Both employer and employee must have Tax Identification Numbers (NIF) in Spain. Foreign employees will also require a Foreigner Identification Number (NIE). Employers must obtain a copy of the employee’s identification document (National Identity Card or NIE) and their bank account details for salary payments.
• Social Security Registration: Employees need a Social Security number for interactions with the Spanish Social Security system. If an employee does not have one, the employer must apply for it through the RED system. Employees can also apply themselves via the General Social Security portal. Employers must complete the registration online through Sistema RED within six calendar days of the employee’s start date.
• Work Permit: For foreign nationals, ensure that all necessary work permits or residence authorizations are obtained to legally work in Spain.
• Modelo 145: This form is used to declare tax information related to an employee’s personal and family situation. Employers must provide this form to new employees to ensure accurate income tax withholding.
• Collective Agreements: Check if the industry or job position is governed by a collective agreement (Convenio Colectivo) that specifies employment conditions such as salary scales, working hours, and benefits.

Employees vs Independent Contractors

In today’s diverse work environment, distinguishing between employees and independent contractors is crucial for effective workforce management and compliance. This section delves into the fundamental differences that define these two categories, examining aspects such as their legal definitions, work arrangements, payment structures, and tax responsibilities. By unpacking the nuances of dependence, benefit entitlements, and job security, we aim to equip both employers and workers with the knowledge needed to navigate their roles and relationships in the labor market.

Read below for a detailed comparison:

Social Security in Spain

Employers in Spain have a legal obligation to cover social security contributions for their employees under the general social security contribution regime. These contributions are calculated based on the employees’ total monthly gross employment income, including both monetary and non-monetary forms.

Contribution Rates

• Employer Contributions: Employers must pay a fixed rate of 30.48% of the employee’s gross salary towards social security contributions. Additionally, there is a variable rate applied to cover occupational accidents, typically around 1.5% for office work.
• Employee Contributions: Employees are also required to contribute to social security at a rate of 6.47% of their gross salary. This amount is deducted by the employer from the employees’ gross pay before disbursal.

Contribution Bases

The social security contribution bases vary based on the professional category of the employee:

• Minimum Monthly Base: Ranges between EUR 1,323 and EUR 1,847.40, depending on the employee’s professional category.
• Maximum Monthly Base: Capped at EUR 4,720.50.

Range of Contributions

• Minimum Contribution: For lower brackets, the minimum contribution starts at EUR 751.63.
• Maximum Contribution: Employees in upper brackets contribute up to EUR 4,495.50.

Intergenerational Equity Mechanism

Since 2023, Spain has implemented an intergenerational equity mechanism affecting contributions for common contingencies. This mechanism imposes a 0.6% to 0.7% contribution on the base, aimed at supporting retirement pension coverage.

These contributions, both from employers and employees, must be remitted to the Social Security Treasury by the employer to ensure compliance with Spanish labor laws and regulations.

Payroll in Spain

Minimum Wages

The minimum wage remains set at €1,134.00 per month before tax. This rate has been in effect since January 1, 2024, reflecting the Spanish government’s commitment to ensuring fair compensation for all workers.

Here is a breakdown of the minimum wage across different categories:

• Domestic Workers:
  • Per Hour: €8.45
  • Per Month: €1,080.00 (effective since January 1, 2023)
• Contingent and Temporary Workers:
  • Per Day: €51.15
  • (Please note that specific hourly rates are not specified for contingent and temporary workers.)
• General Workers:
  • Per Day: €37.80
  • Per Month: €1,134.00 (effective since January 1, 2024)

These rates are crucial for employers and employees alike, providing a baseline for fair compensation across various sectors. We encourage all businesses to ensure compliance with these regulations to uphold labor standards and support economic stability in Spain.

Payroll Cycle

Payroll management is a crucial aspect of organizational operations, ensuring timely and accurate compensation for employees. In Spain, the payroll cycle refers to the period over which an organization pays its employees, determined by the chosen pay frequency.

Frequency

In Spain, the standard payroll frequency is monthly. Employees typically receive their salaries on the last day of each month. This regularity helps in maintaining financial stability for both employees and employers.

13th Month Cycle

A unique feature of payroll in Spain is the mandatory 13th and 14th month salary payments. This means that employees receive an additional salary payment in July and December each year. This practice is commonly structured so that the annual salary is divided into 14 installments, ensuring that employees receive an extra salary payment in those specified months.

These additional payments are outlined in employment contracts and collective agreements, providing clarity and predictability for both parties involved. This system helps in budgeting and financial planning for employees while also contributing to consumer spending during key times of the year.

For further information or assistance regarding payroll management and compliance in Spain, feel free to reach out to Mercans. We are dedicated to supporting organizations in navigating payroll regulations effectively.

Overtime Pay

Overtime pay in Spain refers to working hours that exceed the normal agreed-upon working hours. These regulations are crucial for both employers and employees to ensure fair compensation and adherence to labor laws.

• Voluntary Nature: Overtime work in Spain is generally voluntary, except when it is stipulated in a collective agreement. Employees have the right to accept or decline overtime work without facing repercussions.
• Compensation: Employees are compensated for overtime either through additional pay in their paycheck, which must be at least equivalent to normal working hours, or by receiving compensatory rest periods within the next four months. This flexibility aims to balance the needs of employers and the well-being of employees.
• Maximum Hours:There is a maximum limit of 80 overtime hours per year per employee in Spain. This restriction aims to safeguard employees from excessive work hours while allowing flexibility for occasional additional work.
• Exclusions: Time spent on activities aimed at preventing or remedying incidents, as well as other extraordinary and urgent damage, is not considered overtime. This exclusion recognizes the necessity of such work in specific circumstances.
• Recording and Documentation:Employers are required to maintain a daily record of hours worked by employees, including overtime hours. This record is used to calculate overtime pay accurately and must be reflected in the employee’s payslip for transparency and compliance.

For more detailed guidance on overtime regulations or assistance with payroll management in Spain, please contact Mercans. We are committed to helping organizations navigate these regulations effectively and ensure compliance with labor standards

Mercans’ payroll capabilities

Payroll Cycle 

Experience the efficiency of Mercans’ comprehensive payroll cycle management. Our services ensure timely and accurate payments to both employees and contractors, all in the local currency. Trust Mercans to streamline your payroll processes, making the entire cycle seamless and tailored to Spain’s requirements.

Payroll Setup, Payroll Processing, and Payroll Administration 

Mercans offers comprehensive payroll solutions tailored to your needs. From meticulous payroll setup to precise processing and efficient administration, we manage every step with a commitment to accuracy and compliance. With Mercans, your payroll is in expert hands, allowing you to focus on your core business functions.

Statutory Filings and Payments 

Navigate Spain’s regulatory landscape effortlessly with Mercans. Our dedicated team takes charge of statutory filings and payments, ensuring your business stays compliant with all legal requirements. Rely on Mercans for accurate and timely submissions, providing you with peace of mind in meeting your statutory obligations.

Personal Income Tax in Spain

The Spanish system of direct taxation for individuals comprises two primary taxes: Spanish Personal Income Tax (PIT) for residents and Spanish Non-Residents’ Income Tax (NRIT) for non-residents earning income in Spain. Residents are generally liable for PIT on their global income, while non-residents are taxed only on income sourced within Spain.

• Taxable Income Categories:
  • General Taxable Income: Includes income from employment, lottery prizes, and other sources not classified as savings income.
  • Savings Taxable Income: Covers income from dividends, interest, capital gains, and certain capitalization transactions.

PIT Rates and Tax Brackets for 2023

The following table outlines the progressive tax rates and brackets for Spanish Personal Income Tax (PIT) applicable for the tax year 2023:

• Deductions and Allowances: PIT allows for various deductions and allowances, such as those for dependents, contributions to pension plans, and other specific circumstances.
• Non-Residents’ Income Tax (NRIT): Non-residents earning income in Spain are subject to NRIT, which is generally withheld at source by the payer. NRIT rates vary depending on the type of income and applicable tax treaties.

Understanding these tax rates and categories is crucial for individuals managing their tax obligations in Spain, ensuring compliance with Spanish tax laws and optimizing tax efficiency where possible.

Spain Employee Hiring Cost

When hiring in Spain, employers should consider the comprehensive costs beyond the gross annual salary. For instance, with a gross annual salary of EUR 10,000.00, the annual employer costs amount to EUR 4,301.00, making the total annual cost EUR 14,301.00. Additionally, there are specific statutory requirements to budget for, such as the annual PRL Training cost of EUR 11.00 and a one-time Medical Exam cost of EUR 80.00 during onboarding. These calculations are estimates that factor in local taxation and compliance costs, which can vary based on individual employee details. It’s crucial for employers to account for these additional expenses to ensure accurate financial planning and regulatory adherence when hiring in Spain.

	Spain
Gross annual salary	EUR 10,000.00
Annual employer costs	FUR 430100
1) PRL Training	EUR 1100
2) WFH Allowance	EUR 500.00
3) Mandatory Disability Fund Contribution	EUR 492,00
4) Common Contingencies	EUR 2.418.00
5) Unemployment	EUR 550 00
6) Social Fund for the Guarantee of Salaries	EUR 20.00
7) Professional Education	EUR 60.00
8) Temporary Diseases and incapacity, Death and Survival	EUR 150.00
Total annual cost	EUR 14301.00

Employee Benefits in Spain

Mandatory Employee Benefits in Spain

These benefits are governed by collective bargaining agreements (CBAs).

Supplementary Employee Benefits in Spain

Health Insurance

Private medical insurance in Spain complements public healthcare services and is highly valued for its attractive tax treatment. While the public system covers basic needs, delays in testing and non-urgent surgeries can occur. Basic policies provide access to a network of healthcare providers, while comprehensive plans offer 80%-90% reimbursement for out-of-network expenses and include dental coverage.

Typical coverage includes

• Non-Hospital Services: Medical consultations, home visits, physiotherapy, podiatry, medical tests.
• Hospital Services: Surgeries, ambulance services, daily hospital stay payments.
• Additional Benefits: 24/7 medical assistance hotline, local travel insurance (for trips under 90 days).

Health insurance usually covers employees and can extend to their dependents. Employer contributions often cover employees’ premiums entirely, while dependents’ premiums may be fully covered, shared, or paid fully by the employee, deducted from their paychecks.

Life and Personal Accident Insurance

Employers typically provide group life insurance covering all employees, with premiums fully paid by the employer. Standard coverage includes:

• Death Benefit: Usually twice the annual salary (doubled for accidents), or a fixed amount.
• Total and Permanent Disability Benefit: Typically twice the annual salary (doubled for accidents), or a fixed amount.

Eligibility for benefits depends on Social Security-defined disabilities, such as absolute or total permanent disabilities, independent of Social Security benefits.

Short-Term Sickness Benefits

Supplemented up to 100% of the base salary, typically covered by CBA liability or employer discretion.

Retirement Scheme

Spain operates a pay-as-you-go system for public retirement pensions, with a gradual increase in ordinary retirement age to 67 by current legislation. The pension amount is calculated based on years of Social Security contributions and the earnings base.

To bridge potential gaps, corporate pension schemes are highly valued, especially by higher-salaried employees, serving as an effective retention tool. Recent legislation (Law 12/2022) promotes occupational pension plans with incentives and tax benefits, including open public promotion funds and simplified plans.

Work Permit in Spain

Foreign nationals seeking employment in Spain must obtain a work permit, which is influenced by economic, social, and regulatory factors unique to the country. The primary goal is to safeguard job opportunities for Spanish citizens, particularly in sectors with high unemployment rates, such as youth employment. Work permits ensure that foreign workers fill roles where local expertise is scarce, thereby supporting Spain’s economic development goals.

Types of Work Visas

In Spain, various types of work visas cater to different employment scenarios, including:

• Temporary Work Visas: Issued for specific job contracts or projects.
• Seasonal Work Visas: Granted for work during peak seasons, such as agriculture or tourism.
• Highly Qualified Professional Visas: For individuals with specialized skills and qualifications.
• Entrepreneur Visas: Aimed at individuals starting a business in Spain.
• Intra-Company Transfer Visas: For employees transferred to a Spanish branch of their company.

Requirements

To obtain a work permit in Spain, applicants typically need to fulfill the following criteria:

• Job Offer: A valid job offer from a Spanish employer or contract is usually required.
• Qualifications: Depending on the visa type, applicants must demonstrate relevant qualifications and experience.
• Background Checks: Comprehensive background checks may be conducted to verify qualifications and ensure security.
• Health Insurance: Proof of adequate health insurance coverage in Spain.
• Financial Means: Evidence of sufficient funds to support oneself during the stay in Spain, if applicable.

Application Process

The application process for a work permit in Spain involves several steps:

• Job Offer: Obtain a job offer from a Spanish employer willing to sponsor the work permit.
• Documentation: Gather necessary documents, including passport, job contract, qualifications, and health insurance.
• Submission: Submit the application along with required documents to the relevant Spanish authorities.
• Approval: Await approval from the authorities, which may involve background checks and verification of qualifications.
• Social Security Registration: Once approved, register with the Social Security system to access benefits and comply with labor laws.

Mercans’ Expertise

Mercans specializes in navigating Spain’s work permit requirements, offering comprehensive support to streamline the application process and ensure compliance with local regulations. Our services include:

• Application Handling: Managing the entire work permit application process.
• Coordination: Liaising with Spanish authorities on behalf of employers and applicants.
• Social Security Compliance: Ensuring registration with the Social Security system.
• Expert Guidance: Providing expert advice and support throughout the process.

By leveraging Mercans’ expertise, employers can focus on their core business objectives while ensuring smooth and compliant entry of foreign talent into the Spanish workforce.

EOR Solutions in Spain

Mercans provides comprehensive Employer of Record (EOR) solutions tailored for businesses operating in Spain. Whether you have identified your ideal candidates or need assistance in talent acquisition, our services cover every aspect of the employee lifecycle, ensuring strict adherence to Spain’s labor laws and regulations.

• EOR Services and Recruitment: For businesses seeking seamless talent acquisition, our EOR and recruitment services offer a holistic solution. Leveraging our extensive network and expertise, we assist in identifying, onboarding, and retaining top talent, facilitating your expansion into the Spanish market.
• Visa Sponsorship and Global Mobility: Simplify expatriate employment complexities with our visa sponsorship and global mobility services. We manage the relocation of your international workforce, ensuring full compliance with Spain’s immigration and employment laws.
• Assistance on Record (AOR) for Contractor Payments: Our Assistance on Record (AOR) services streamline contractor payments, guaranteeing precision and compliance with local regulations.
• Transitioning Freelancers to Employees: Mercans facilitates the smooth transition of independent contractors to permanent employees in Spain, ensuring legal compliance throughout the process.
• HCM Integration: Seamlessly integrate Mercans’ EOR services with your Human Capital Management (HCM) system in Spain for real-time data exchange, enhanced compliance, and operational efficiency. Rely on our expertise for unified and efficient workforce management and payroll operations.