Payroll Services in Spain

Mercans is your go-to partner for top-notch payroll in Spain (Managed & SaaS) services. Our commitment to delivering exceptional payroll solutions in Spain is unwavering. With years of experience in the payroll industry, Mercans ensures accurate and compliant payroll services in Spain, making us the preferred choice for businesses of all sizes. Trust Mercans for timely and accurate payroll transactions, along with the convenience of multi-currency payments in the Spanish market. As your dedicated local payroll provider in Spain, we boast a team of in-country payroll specialists with deep knowledge of local laws, offering comprehensive support for a seamless payroll experience tailored to your business needs.

Payroll Services in Spain

Here’s a glimpse into how Mercans expertly handles key activities, safeguarding both compliance and operational efficiency:

Tailored Services

• Payroll Management: Accurate calculations covering health, pension, taxes, and deductions. Inclusion of overtime, bonuses, and occasional allowances. Monthly file creation for social security contributions.
• Payment Processing: Timely generation and delivery of payment slips. Efficient management of social benefits and contributions. Streamlined handling of payroll receipts and interfaces.
• Employee Benefits Administration: Maintenance of a comprehensive vacation schedule. Skillful consolidation of layoff and vacation-related information. Generation of magnetic media for electronic processing.

Regulatory Compliance

• Thorough preparation of annual Income and Withholdings Certificates.
• Accurate calculation of fixed semiannual withholding percentages on salaries.

Social Security Administration

• Holistic payroll management covering social security aspects. Issuance of certificates and secure payment receipts. Expert management of social security payments.

Advanced Reporting

• Strategic generation of legal reports and security studies. Systematic staff pick for payroll automation. Comprehensive processing of payroll reports, including tax returns.

Convenient Employee Portals

• Prompt delivery and processing of news. Efficient delivery of forms and receipts. Access to an online payroll portal for enhanced employee convenience.

Consultative Approach:

• Continuous consultation via a robust process control platform. Timely delivery of meticulously prepared payroll files. Consolidated reporting for a comprehensive overview.

Everything you need to know before running payroll in Spain

Working Hours and Overtime

On November 30, 2023, Spain’s new labour minister unveiled an ambitious plan to transform the workweek, including a reduction in working hours and a minimum wage increase. By 2025, the working week will be reduced from 40 hours to 37.5 hours without affecting workers’ pay. This change is poised to benefit over 12 million private sector employees who currently work 40 hours a week. Notably, 16.7% of private employees already work 37.5 hours or less per week.

The transition will be gradual: in 2024, the maximum working week will be reduced to 38.5 hours, and by 2025, it will be set at 37.5 hours. This adjustment equates to an annual reduction of 150 hours, decreasing from 1,950 to 1,800 hours per year.

Overtime

In Spain, labor laws stipulate that the standard maximum workweek is 40 hours. Any time worked beyond this limit is classified as overtime, which must be compensated at a higher rate. While overtime is permissible, it must not exceed an annual cap of 80 hours.

Overtime compensation in Spain is calculated at 1.75 times the employee’s regular hourly rate. To determine this rate for employees working a 40-hour week over five days, follow these steps:

• Divide the employee’s monthly salary by 30 (the number of days in a month).
• Then, divide the result by 8 (the number of working hours in a day).

This calculation gives you the regular hourly rate, which you can then multiply by 1.75 to find the overtime pay rate.

Minimum Wages

As of January 1, 2024, the minimum wage in Spain is set at €1,134.00 per month, effective in June 2024. These amounts are provided before tax and are listed in Euros. The minimum wage varies by category, ensuring fair compensation across different types of employment.

Minimum Wage by Category:

These rates ensure that workers across different employment categories receive appropriate and fair compensation.

13th Month Salary

In Spain, it is a common practice to provide 13th and 14th salaries. These additional payments are typically divided into 14 installments, with the extra salary disbursed in July and December.This practice ensures that employees receive extra financial support during the mid-year and holiday seasons.

Payroll Cycle

Payroll in Spain is typically done monthly, and employees are paid once per month.

Payroll Requirements

Payment Frequency

Employees in Spain must receive their salaries on a monthly basis. Generally, the payment should occur between the 25th of the current month and the 5th of the following month. According to the applicable collective bargaining agreement (CBA), employees may receive their gross annual salary either in 12 monthly payments or in 14 payments, which include additional payments for summer and Christmas. The exact number of extra payments can vary depending on the specific CBA.

Pay Slip Requirements

Companies in Spain are required to prepare and distribute employee pay slips on a monthly basis. 

Company Formation in Spain

Starting a business in Spain involves several key steps to ensure legal compliance and smooth operations. Below is a step-by-step guide to help you through the process:  

• Obtain Your NIE Number: The first step for foreigners is to obtain an NIE number, which is necessary for tax registration and opening a bank account in Spain.
• Decide on a Business Name: Prepare a list of at least three names you want for your business and submit them to the Spanish Corporate Register to check availability. The approved name will be used officially on business documents.
• Establish a Business Bank Account: Open a corporate bank account for your business. If you are forming a Limited Liability Company (LLC), you must deposit EUR 3,000 as an initial capital contribution.
• Draft the Shareholder’s Agreement: Create a shareholder’s agreement detailing each stakeholder and the number of shares they own.
• Sign the Public Document at the Notary: Visit a notary public to sign the public incorporation deed, making the business formation official.
• Acquire the Corporate Tax Identification Number: Obtain the corporate tax identification number from the Spanish Tax Office.
• Sign Up for Social Security: Register your newly established company with the regional social security office.

Eligibility Criteria to Register a Company in Spain

• Minimum Capital: The minimum capital required for company registration in Spain is EUR 3,000, making it relatively affordable to start a business. There is no minimum capital required for opening a branch office.
• Residency Requirements: There are no residency requirements for key management executives during the company registration process. Foreigners can fully own and manage businesses.
• Minimum Shareholders: A minimum of one shareholder is required for both private and public limited companies. Branch offices do not have a minimum shareholder requirement.
• Number of Directors: No minimum number of directors is required for branch offices. However, a limited liability company must have at least one director, while a private limited company can have up to 12 directors. A public limited company’s board must consist of at least three members.

Payroll Compliance in Spain

In Spain, employers are obligated to submit the following statutory filings. Mercans assists you in completing the necessary filings as per the Spanish local laws.

Statutory Filings and Contributions

Social Security Filings (Registration, Deregistration, Notification of Change)

• Initial Step: Obtain a Código de Cuenta de Cotización (CCC) to identify the company for Social Security interactions.
• Sistema RED: Employee registration through the electronic platform Sistema RED, facilitating various procedures such as affiliation, contribution, and collection of social security contributions.
• SILTRA: Utilized within Sistema RED, SILTRA aids in managing and submitting social security data like employee details, contract information, and contribution bases.

• Registration: Up to 60 days before work commencement, with a six-day deadline from the start date.
• Deregistration: Within three calendar days after work cessation.
• Data Modifications: Within three calendar days.
• Effectiveness: Registrations take effect from the start date if submitted on time; otherwise, they are effective from the application date unless contributions are paid within the regulatory period, backdating the registration.

Social Security Filings (Monthly Contributions)

• RNT (Relación Nominal de Trabajadores): Includes registration, deregistration, and contribution bases, highlighting those eligible for reduced contributions.
• RLC (Relación de Liquidación de Cotizaciones): Shows payment made and breakdown of monthly contributions, authenticated with an electronic fingerprint.

Government Requirements

Registration Procedures

• One letter indicating the legal form of a Spanish organization or the nature of a foreign organization.
• A seven-digit number.
• A control character.

Pension Requirements 

Registration Requirements

• Applicability: Pension registration requirements do not apply separately. Social security registration (as detailed above) encompasses pension-related obligations.

Social Security Contribution Schemes

In Spain, several contribution schemes fall under the umbrella of the Spanish Social Security system, including general, artist, agricultural, self-employed, domestic, and personnel schemes. Among these, the general system is the most significant and prevalent. It ensures individuals receive adequate protection for contingencies outlined in Spanish regulations related to their professional activities.

• Employee Affiliation: Presently, companies have the option to request affiliation numbers on behalf of their employees, streamlining the process.
• Voluntary Private Pension Plans: Companies retain the option to voluntarily enroll in specific private pension plan schemes, offering additional retirement benefits beyond the state-provided system.

Tax Benefits for Pension Contributions

• The general deduction limit for pension plan contributions has been increased by €8,500 annually, supplementing the existing €1,500 limit. This increase applies when the additional contribution stems from either company contributions or employee contributions to the same social welfare instrument, provided the employee’s contribution does not exceed the company’s contribution.

Payroll Taxes in Spain

Social Security Contributions in Spain

On January 30, 2024, Order PJC/51/2024, issued on January 29, was officially published in the “B.O.E.” (Official State Gazette), outlining the legal framework governing social security contributions, unemployment benefits, cessation of activity protections, the Wage Guarantee Fund, and professional training for the fiscal year 2024. These regulations came into effect on January 1, 2024.

Maximum and Minimum Contribution Bases for 2024

• Maximum Base: EUR 4,720.50 per month.
• Minimum Base: The minimum interprofessional wage, augmented by one-sixth, unless explicitly stated otherwise.

Until the minimum interprofessional wage for 2024 is announced in the Official State Gazette, contribution bases will remain provisional until a new ministerial order definitively approves them.

Contribution Rates for Common Contingencies

• Contribution rates for common contingencies under the General Social Security Scheme remain unchanged. However, the additional contribution associated with the intergenerational equity mechanism has been raised to 0.70%.

Special Categories and Social Security Schemes

The Order also establishes minimum and maximum bases, as well as contribution rates, for groups covered under the General Scheme with specializations, and for various special social security schemes (such as those for agricultural workers, seafarers, artists, and bullfighting professionals).

Self-Employed Workers

Contribution bases for self-employed individuals are determined based on net income, as outlined in the first transitional provision of Royal Decree-Law 13/2022 of July 26, which introduces a new contribution system for self-employed workers and enhances protection in cases of cessation of activity. Additionally, the ninth transitional provision of Royal Decree-Law 8/2023 of December 27 is also referenced.

Personal Income Tax in Spain

Personal Income Tax (IRPF) is a levy imposed by the State on residents of Spain. It assesses income earned throughout the fiscal year, taking into consideration each individual’s personal and familial circumstances.

Income Components for IRPF

Taxable income encompasses various sources, including:

• Income from Work: This comprises earnings or benefits, whether in cash or in kind, derived from personal labor, employment, or statutory relationships, excluding income from economic activities like wages, salaries, unemployment benefits, or pensions.
• Income from Real Estate and Movable Capital: Gains or benefits from assets, goods, or rights owned by the taxpayer, not utilized for business or professional income generation.
• Income from Economic Activities: Profits from activities such as manufacturing, trade, services, agriculture, or freelance work.
• Capital Gains and Losses: Profits or losses from the sale of assets or investments.
• Income Allocations Established by Law: Other sources of income as defined by legislation.

Additionally, there are personal and family allowances aimed at covering essential needs, which are exempt from taxation. Certain types of income are also expressly exempt under IRPF regulations.

Obligation to Pay IRPF

IRPF must be paid by individuals who are resident in Spain or who meet specific residency criteria outlined in the law.

Tax Rates

The tax rate depends on the type of income. Savings income is taxed at a lower rate compared to general income. General income is subject to a progressive tax scale, meaning the percentage of tax increases with higher income levels, benefiting individuals with lower earnings.

For the 2023 tax year, the progressive tax brackets are as follows:

• Income up to €12,450: 19% withholding.
• Income from €12,450 to €20,199: 24% withholding.
• Income from €20,200 to €35,199: 30% withholding.
• Income from €35,200 to €59,999: 37% withholding.
• Income from €60,000 to €299,999: 45% withholding.
• Income over €300,000: 47% withholding.

It’s important to note that these rates are applied incrementally, not uniformly across all income. For instance, if an individual earns €22,000 per year, different tax rates apply to different portions of that income.

2024 Projections

As of now, there have been no changes to the tax brackets for the 2024 tax year, which will affect tax returns filed in the 2025 income tax campaign.

Employee Benefits in Spain

Health Insurance

Private medical insurance in Spain serves as a valuable complement to the public healthcare system, often cherished by employees due to its favorable tax treatment. While the public system remains a primary choice for many, there can be delays in non-urgent procedures and testing.

Coverage Overview

Basic Private Health Policy: Grants access to a network of medical providers, including doctors and hospitals. Enhanced policies offer 80%-90% reimbursement for out-of-network medical expenses and often include dental coverage.

Typical Coverage Includes

• Medical consultations (general physicians and specialists)
• Home medical visits
• Physiotherapy
• Podology
• Medical tests

• Surgical interventions
• Ambulance services
• Daily hospital stay allowance

Additional Benefits

• 24-hour medical assistance hotline
• Local travel insurance for trips under 90 days

Health policies typically cover all employees and may extend to their dependents. Premiums for employees are commonly fully covered by employers, while dependents’ premiums may be entirely covered, shared with the employee, or fully paid by the employee, with dependent costs deducted from paychecks.

Life and Personal Accident Insurance

Group life insurance is a standard offering for all employees, with employers typically covering the full premium. Key coverage areas include:

• Death Benefit: Often twice the annual salary (doubled for accidental deaths) or a fixed amount.
• Total and Permanent Disability Benefit: Equal to two times the annual salary (or doubled for accidents), or a fixed sum.

Eligibility for these benefits is determined by two categories of disability:

• Absolute and Permanent Disability: Declared by the Social Security system, indicating the inability to perform any paid job.
• Total and Permanent Disability: Also determined by Social Security, suggesting the inability to perform the current job but potential for alternative employment.

These benefits operate independently from Spain’s Social Security death/survivor or permanent disability benefits.

Short-Term Sickness Coverage

Short-term sickness benefits are often supplemented up to 100% of the base salary either by collective bargaining agreements or voluntary employer decisions.

Benefits of Payroll Outsourcing in Spain

Outsourcing payroll services in Spain presents several advantages tailored to the dynamic needs of businesses in the country. Here are the key benefits:

• Ensuring Compliance with Complex Regulations: Spain has intricate labor laws and regulations that require meticulous adherence. By outsourcing payroll services, businesses can ensure compliance, minimizing the risk of errors or penalties due to non-compliance with legal requirements.
• Enhanced Scalability and Flexibility: Payroll outsourcing offers unmatched scalability and flexibility to adapt to the changing needs of businesses in Spain. Whether a company is expanding its workforce or facing regulatory changes, outsourcing providers can seamlessly adjust their services to accommodate these fluctuations.
• Access to Advanced Technologies and Expertise: Outsourcing providers leverage cutting-edge software solutions to streamline processes, enhance data security, and improve efficiency in payroll management. Their professionals possess extensive knowledge of tax regulations, deductions, and reporting requirements, ensuring accurate and timely processing.
• Cost Savings and Competitive Pricing: Outsourcing payroll leads to significant cost savings by eliminating the need to hire and train in-house staff. Moreover, providers often offer competitive pricing models tailored to the specific needs of businesses, optimizing cost-effectiveness while maintaining quality service.
• Supporting Business Growth: Outsourcing payroll services enables businesses to focus on core objectives while benefiting from accurate, compliant, and cost-effective management. With specialized expertise, advanced technologies, and scalability, outsourcing providers play a crucial role in supporting the growth and success of businesses.

Additionally, our outsourcing services emphasize high safety standards, incorporating industry-leading security measures to safeguard sensitive data. We hold ISO 27001 and ISAE3402 certifications, ensuring stringent adherence to information security protocols.

Furthermore, we offer flexibility and scalability tailored to each client’s unique needs, adapting to changing business environments. Our collaborative Cloud-based platform promotes efficiency and accessibility across teams, facilitating seamless collaboration and communication.

In summary, outsourcing payroll services in Spain offers businesses strategic advantages by providing expert support, advanced technologies, and cost-effective solutions to streamline payroll management and drive business growth.

Payroll Solutions in Spain

Optimize Payroll Processing in Spain with Mercans’ Comprehensive Solutions. Our versatile models ensure adherence to local regulations, enable seamless multi-currency transactions, and integrate effortlessly with HCM and ERP systems to ensure precise payments.

Discover Our Versatile Solutions

• SaaS (Software as a Service): Tailored specifically for large enterprises managing payroll across diverse international landscapes. Our SaaS model streamlines operations, maximizing efficiency and accuracy.
• Managed Services: Customized solutions designed for mid-sized and large enterprises handling payroll across multiple countries. Our managed services offer on-demand HR expertise, ensuring security, reliability, and compliance at every step.
• HRMS (Human Resource Management System): Ideal for growing mid to large businesses, our HRMS provides a comprehensive suite of functionalities, including payroll and benefits management. With personalized features, our HRMS delivers effective solutions tailored to your unique needs.

Streamline Payroll with Mercans’ Technology and Integrations

• Discover Innovation: Dive into the world of cutting-edge technology with Mercans, powering our advanced global payroll solutions. Explore the innovative technology behind our services: here
• Effortless Integrations: Enhance efficiency and connectivity by seamlessly integrating your Human Capital Management (HCM) systems with Mercans’ solutions. Unlock the power of integration with us. here  
• Awards and Accolades: Partner with a recognized leader in the industry. Mercans has been honored for its dedication to providing outstanding payroll services. Learn more about our awards and recognitions. here