Boasting some of Europe’s most beautiful landscapes, Spain is one of the most important economies in the European Union. Madrid and Barcelona are home to important multinational companies, including Amazon, McDonald’s, Microsoft, and Oracle. Known for its work-life balance, Spain is a talent hotspot for companies looking to hire top talent internationally.
In Spain, you are unable to hire employees without either establishing an entity in the country or partnering with an international PEO or EOR service.
If you’re planning to expand your business in Spain, hiring talented employees within the country is crucial. This means you will need to develop a solid understanding of complex labor and tax laws, or partner with a Spanish EOR service provider that has local experts and entities in-country as a solution.
This article breaks down everything employers need to know about PEO and employer-of-record services in Spain, including what companies need to offer in their compensation and benefits packages to remain compliant with Spanish labor laws.
If your global expansion roadmap includes Spain or Spanish talent, you can either set up a subsidiary in-country to hire talented employees who live in the country and partner with a PEO service provider or 2) use a global employer-of-record service like Via that already has established entities in the country and understands the country’s complex tax and labor laws.
PEO services in Spain provide HR and global payroll services to companies that have an established entity in Spain.
Partnering with a PEO means:
Setting up an entity, which takes months
Outsourcing HR processes, including benefits administration and payroll
Hiring new employees in a short amount of time
PEO services do not take full responsibility for maintaining compliance with Spanish laws. Employers enter into a co-employment relationship with the PEO, which comes with additional risks and liabilities.
To use a PEO service, companies still need to hire local labor experts, open a Spanish bank account, and complete all of the necessary government forms. Businesses will need to pay all the mandatory fees as well.
If you already have an entity or subsidiary and in Spain, using a PEO service can be a good option. However, if you don’t, seeking the services of an employer-of-record, like Via, is likely a better option.
If your business is still growing or you’re just looking to test the Spanish labor market, an employer-of-record can help you streamline the HR, hiring, payments, and compliance process without needing to navigate local bureaucracy.
EOR services like Via:
Manage all HR related tasks
Acts as its own entity to free parent companies from legal issues, including compliance with tax and labor laws
Hires, onboards, pays, and cares for new employees without you having to wait to open an entity. This means hiring employees in a matter of days, as opposed to months
EOR services also help global expansion by allowing companies to:
Test out areas for global expansion: Opening an entity can be expensive, especially if the subsidiary doesn’t work out by meeting your long-term goals. Using an EOR service gives you the ability to test out new areas of expansion without having to invest significant capital and time.
Help you onboard candidates in a new place: Hiring good global talent can be tricky and means you need to be prepared to onboard employees internationally. An EOR can help you manage compliance in other countries.
Scale up quickly: Start-ups and tech units in major enterprises move at a quick pace. If you have to wait months to set up an entity, you may miss out on key business opportunities by being weighed down with the process.
Capital city: Madrid
Largest city by population: Madrid
Currency: Euro (EUR)
Population: 47.35 million
Spain GDP: 1.84 trillion
Payroll frequency: Monthly
Federal Minimum wage: 1,166.70 EUR per month
Spain recognizes 10 national holidays across the nation, including:
New Year’s Day
Spain’s National Day
All Saints’ Day
Spanish Constitution Day
Both new and more senior employees are entitled to 1 month of paid time off per year, which is equivalent to 30 calendar days.
In cases of illness or accident, employees are entitled to their temporary disability benefit for sick pay through their social security fund. This is paid at 60% of their regular salary.
In cases of common diseases or non-work related injuries, employees are entitled to the following:
The first 1-3 days are usually unpaid, unless otherwise stated in the employment contract
For 4-15 days, employees are paid at 60% of their salary by the employer
For 16-20 days, employees are paid 60% of their salary by social security
Starting on day 21, employees are paid 75% of salary by social security
Pregnant employees are entitled to 16 weeks of maternity leave. This leave can be increased up to 18 weeks in the event of complications or multiple births, such as having an infant in the NICU or giving birth to twins or triplets.
Maternity leave has two parts: 6 weeks following childbirth, and 10 weeks after. The remaining leave can be taken for up to 1 year after child’s birth, but must be approved by the employer with 15 days of notice.
Maternity pay comes from the social security system and goes directly to the mother at 100% of her base pay.
New fathers are entitled to 16 days of paid paternity leave. For same-sex couples that adopt, both individuals are entitled to paid leave. 100% of paternity pay comes from the employees social security fund.
Employers can also stipulate other forms of paid leave in the employment contract.
Some standard practices for paid and unpaid leave include:
2 years of unpaid leave to help with a seriously ill or injured family member
2 years of unpaid leave to help with a sick family member
2 weeks of unpaid leave for disabilities in children, foster care, or in the case of adoption
2 days of paid leave for the day of an immediate family member
1 day of leave to move
Up to 15 days of leave for marriage
Paid leave in the case of jury duty or public service with written proof
Like many countries in the EU, The Spanish government provides its citizens with a number of important benefits, which are covered by payroll deductions.
In Spain, the social security system handles almost all of employee benefits, unless companies choose to give supplemental benefits to their employees.
Both employers and employees are required to make social security contributions.
Employer contributions breakdown as follows for a total of 29.9% of each employee’s salary.
23.6% for Social Security
5.5% for Unemployment
0.2% for Salary Guarantee Fund
0.6% for Professional training
Employee contributions, which add up to 6.4%, break down as follows:
4.7% for Social Security
1.5% for Unemployment
0.1% for Professional Training
Law 3–Equality between men and women
Royal Decree on Urgent Measures to Reform Labor Market
Royal Decree on Measures to Improve Hiring
Royal Decree on Statue of Workers
Royal Decree on Social Security
In Spain, employees are protected by robust government regulations. Written employment contracts are mandatory, per Spain’s employment laws and regulations. Companies need to make sure that a strong collective agreement that highlights every aspect of employment is drafted and agreed upon between employer and employee.
Spain already provides employees with a large amount of benefits through their social security system. However, adding supplemental benefits like private health insurance, reimbursements for tuition, travel stipend, and meal/grocery vouchers can help companies attract top employees.
If you partner with Via, we provide your company bullet-proof employment contracts that comply with Spanish laws and protect your business’s IP, or intellectual property.
Probation periods are not mandatory in Spain. Trial periods must be set in the employment or collective agreement upon hiring.
The standard probation period is 2 months for new employees, or 6 months for more senior positions.
In Spain, the standard working week in Spain is Monday-Friday, with 40 hours per week.. The typical work day in Spain is 8:30-9 a.m.-2 p.m. with a closure for siesta. Then employees return around 4 or 5 p.m. and work until 8 p.m.
Through the Spanish Worker Statue Royal Decree, employees are required to record all their working hours and break times, in order to avoid employers being penalized for working over the standard allowance.
Employees must be compensated if working more than 40 hours in 1 week. The statutory maximum number of overtime an employee can work in 1 year is 80 hours. The amount and payment for overtime must be regulated and agreed upon in the employment contract.
The termination process in Spain will vary based on the collective agreement and the reason for termination.
The general notice period in Spain is 15 days. If an employer chooses to not give notice, they can pay the employee in lieu of notice.
Severance pay is only applicable when the employer terminates the employee without written notice.
Many employers choose to pay in lieu of notice. Indemnity is calculated based on the employee’s annual salary at the time of termination.
Employer have to follow these guidelines to properly terminate and give employees notice in Spain:
Employers must provide written notice that states the reason for dismissal
Employers must provide compensation of 20 days of salary per year of service for up to 12 months of salary, payable upon delivery of written notice.
Employees must receive 30 days of notice for termination of contract
If a dismissal is considered unfair, the employer must pay compensation equivalent to 45 days of pay per year of service for a maximum of 42 months of salary.
Hiring talented employees in Spain can be challenging without using a global PEO or EOR service like Via.
Becoming your own employer-of-record in Spain requires you to have a strong legal team and in-depth knowledge about labor laws, as well as understanding employment contracts. To maintain compliance with benefits and payroll, you will need to hire an outsourced payroll service or build your own HR team after establishing a subsidiary or entity.
For companies who hope to hire a large number of Spanish employees, opening an entity with an HR team is a logical step on the road to global expansion. Most of the time, however, using a global third-party EOR service like Via is the smartest decision.
Opening a subsidiary in Spain comes with quite a few risks and requires you to pay employees internally and have your own Human Resources team. Both of these steps will be time consuming and require a large amount of resources, since you will need on-the-ground experts who can assist with opening a new bank account, finding an office, and registering with the correct local government institutions.
For this reason, companies that are wanting to go forward with hiring in Spain quickly can streamline the process by partnering with an EOR service like Via who already has an established entity in Spain.
For companies that want to build a large team in Spain and have the time to open their own entities, using a PEO service could be one solution.
PEO companies act as co-employers and manage the HR process. The co-employment model means the parent company is still held liable for compliance issues, such as issues related to termination or immigration.
The PEO service usually passes complex problems related to termination or immigration over to the parent company.
When using an EOR service like Via, your organization does not need to open a bank account or register with local government bodies. Via takes care of that paperwork for you, including navigating local laws and paying employees in Euros, the country’s official currency.
EOR services help major corporations looking to scale up operations in Spain, as well as scaling startups, SMBs, and other entrepreneur-led businesses.
Many companies looking to expand in Spain (or other parts of Europe) do not know how to get started with the process. Via makes hiring Spanish talent and building your global team seamless and fast. Via helps you manage local HR processes for direct employment such as work visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-or-record/entity in Spain, Via assumes full responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Spain with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.