Employer of record in Spain

When hiring international employees in Spain, it’s crucial to understand local specifics. For example, Spanish employees receive 14 public holidays annually, including national and regional holidays. These details are vital when expanding and managing payroll in Spain.

We’ll explore these aspects and explain how an employer of record (EOR) service can simplify managing HR administration, employee benefits, and work permits, among other crucial tasks.

Spain at a glance

Currency:

Euro (€)

Official languages:

Spanish (Castilian), Catalan, Galician, and Basque

Employer taxes:

Averaging 29.9%

Public holidays:

14

Key considerations for hiring in Spain

Decentralized labor market regulations

Spain has a decentralized labor market system in which regulations vary by region. While there are national laws governing employment, individual autonomous communities may have additional rules and agreements. Employers must be aware of these regional differences and ensure compliance with both national and local labor laws.

Economic stability and growth

Spain is part of the European Union and has a well-developed economy and diverse industrial base. The country has been recovering from the economic challenges of the past decade, like the depression after the 2007-2008 financial crisis and the recent pandemic, with steady growth driven by sectors like tourism, manufacturing, and services.

Spain’s strategic location and modern infrastructure make it an ideal gateway to the European market. Its extensive transportation network, including high-speed rail, significant ports, and advanced logistics capabilities, sets Spain apart and facilitates efficient access to Europe and beyond.

Spain’s economy benefits from a skilled workforce with solid expertise in digital skills, innovation, and technology. The government has also implemented various incentives to attract foreign investment, making Spain a favorable environment for business expansion.

Collective bargaining agreements

Collective bargaining agreements in Spain (CBAs) play a significant role in Spain’s labor market. These agreements, negotiated between employers’ associations and trade unions, can set terms and conditions of employment that are more favorable than the statutory minimums. Employers know the applicable CBAs in their industry and region and ensure compliance with their provisions.

EOR vs. legal entity in Spain

Employer of record in Spain

Employer of record companies in Spain are third-party services that manage the legal responsibilities of employing workers for another company. The EOR becomes the official employer, taking care of payroll, taxes, benefits, and legal compliance, while the employees perform their roles for the client company.

This setup allows businesses to hire employees in Spain without setting up a local entity, pay workers globally, and ensure payroll security.

Pros

• Companies can start operations in Spain quickly
• The EOR ensures adherence to Spain’s complex labor laws
• Payroll, taxes, and mandatory benefits are all managed
• Companies can easily adjust their workforce size

Cons

• Companies have less direct oversight of employment contracts and HR processes
• EOR services come with additional fees

Legal entity

Setting up a legal entity in Spain involves formally registering a company and hiring employees directly. This approach provides greater control and autonomy and involves higher costs, administrative challenges, and legal responsibilities.

Pros

• Companies can fully manage employment contracts, company policies, and HR decisions.
• A legal entity helps build a strong, long-term presence and brand in Spain.

Cons

• Establishing a legal entity is time-consuming and requires significant financial investment.
• Companies must continuously navigate Spain’s complex labor regulations, which can be demanding.
• It requires specialized knowledge.

» Learn more about mandatory payroll benefits

Work permits

Employers should be aware that employees must obtain a work permit before applying for their work and residence visas at the Embassy or Consulate in their country of origin. Here are the key types of work permits available:

• Entrepreneur visa: This visa is designed for individuals wanting to start an innovative business in Spain. It’s initially valid for one year, but authorities can renew it for two more years. To qualify, you must submit a favorable report from the Economic and Commercial Office or the Directorate-General for International Trade and Investments.
• Highly qualified work permit: This permit is for professionals in specialized or managerial roles. It’s valid for one year and can be renewed.
• EU blue card: This card is for highly skilled professionals and allows them to live and work in Spain and other EU countries. It’s valid for one year and renewable.
• Working holiday visa: This visa is available to young adults from countries with agreements with Spain (Australia, New Zealand, Canada, Japan, and South Korea).
• Intra-corporate transfer visa: This visa allows employees of multinational companies to work in Spain for up to three years. Dependents can also obtain visas.
• Residence authorization for internship: This permit allows students to work in Spain under an internship agreement. It’s valid for six months to two years, depending on the internship contract.
• Digital nomad visa: This visa allows remote workers to live in Spain for up to one year and is renewable for up to five years.
• Seasonal worker visa: This visa is valid for the duration of the work contract, up to nine months per year, for those working in Spain on a seasonal basis.
• Self-employment visas: These visas allow freelancers to establish a business in Spain. There are two types: self-employed individuals and professional freelancers.

Applying for a work visa in Spain

Processing times can take up to two months. Successful applicants must also obtain a Foreign National Identity Card (TIE) upon arrival in Spain, which they must carry at all times.

Payroll and taxes

Payroll cycle: Monthly, bi-weekly, weekly

13th and 14th salary: Mandatory

» Explore the benefits of an automated payroll system

Minimum wage

Spain has a government-mandated minimum wage that ensures no worker is paid less than the stipulated rate. Authorities periodically review and update this wage to account for economic changes and cost of living adjustments. The current minimum wage rates are as follows:

• General workers are paid €37.80 per day and €1,134.00 per month.
• Domestic workers earn €8.45 per hour and €1,080.00 per month.
• Contingent and temporary workers are paid €51.15 per day.

The annual minimum wage in Spain is calculated based on 14 payments per year, resulting in a total of €15,120. For workers who receive 12 payments per year, the monthly minimum wage is adjusted to €1,080.

Employment contracts

When engaging in EOR services in Spain, it’s essential to ensure that the employment contracts adhere to local labor laws and regulations. Here are the key elements to include in these contracts:

• Personal information of both the employer (EOR) and the employee.
• The legal addresses of the EOR and the employee.
• The employment terms.
• The job description.
• Salary and benefits.
• The regular working hours per day or week.
• Arrangements for overtime and how it will be compensated.
• The length of the probationary period and the terms.
• Paid vacation days per Spanish labor laws.
• The procedures for terminating the employment contract.
• Any clauses related to confidentiality.

Mandatory employee benefits

Spanish employees are entitled to several mandatory benefits, including:

• Social security contributions
• Paid vacation
• Paid holidays
• 13th salary
• Sick leave
• Maternity/paternity leave
• Parental leave
• Unemployment benefits
• Severance pay
• Workplace accident insurance

Non-disclosure agreements (NDAs)

Both unilateral and mutual NDAs can be enforceable on employees in Spain, provided they meet specific legal requirements.

Unilateral NDAs

These are agreements where only one party, usually the employer, discloses confidential information to the other party, who agrees to keep that information confidential.

Unilateral NDAs are common in employment contracts and can be enforceable if the agreement is in writing. The confidential information must be clearly defined, and the duration of the agreement should be reasonable and not excessively long. The contract should also specify the consequences of breaching the NDA, such as legal action or termination of employment.

Mutual NDAs

Mutual NDAs are agreements in which both parties agree to keep each other’s confidential information confidential. They are often used in situations where both parties are sharing sensitive information.

For a mutual NDA to be enforceable in Spain, it must meet similar conditions as the unilateral NDA, including being in writing, clearly defining the confidential information, and specifying the consequences of breaching the agreement.

Using an EOR to onboard new employees in Spain

Before the first day:

• An employer of record (EOR) can assist foreign companies in navigating Hungarian labor laws and regulations, ensuring compliance throughout the hiring process.
• The Spanish EOR can handle the drafting and execution of employment contracts, adhering to local standards and requirements.
• The employer of record in Spain can initiate onboarding through their workforce management OS by collecting necessary employee information and documents.
• The EOR can also help with the application for work permits and visas if required.
• The human resource integration system can create employee profiles, set up payroll, and configure benefits packages.

The first day:

• The EOR can provide a comprehensive orientation program introducing new employees to the company’s culture, policies, and procedures.
• Through the workforce management OS, new hires can complete any remaining paperwork and access digital copies of their contracts and other essential documents.
• The employer of record can facilitate the setup of necessary tools and equipment, such as company email accounts, access cards, and software licenses.
• The human resource integration system can enroll employees in training programs and schedule any necessary first-day meetings or introductions.

The first week:

• The Spain EOR can monitor the new employees’ progress and provide support as they settle into their roles.
• The workforce management OS can assign tasks, set goals, and track performance.
• The human resource integration system can help schedule check-ins with managers and HR representatives to ensure a smooth transition.
• The EOR can address questions or concerns during the first week and guide company policies and procedures.

Beyond the first week:

• The EOR can continue to provide ongoing support and resources to help foreign companies manage their Hungarian workforce effectively.
• The workforce management OS can monitor employee performance, track time and attendance, and generate reports.
• The human resource integration system can facilitate the administration of employee benefits, such as healthcare and pension plans.
• The EOR can assist with compliance issues, such as updating contracts and policies to reflect changes in Hungarian labor laws.
• The EOR can also guide employee development, training, and career progression opportunities.
• In case of any disputes or disciplinary issues, the EOR can offer support and advice to ensure a fair and compliant resolution.

How EORs protect companies’ IP in Spain

Here are some key steps companies can take to protect their IP when employing foreign workers in Spain:

• Have employees sign NDAs to protect confidential information and prevent them from disclosing sensitive IP-related details to third parties.
• Include clauses in employment contracts that specify that any IP employees create during their employment belongs to the company. This ensures that the company retains ownership of any IP developed by its employees.
• Train employees about the importance of IP protection and best practices for safeguarding IP.
• Limit access to sensitive IP to only those employees who need it to perform their duties. To protect IP further, technology solutions such as encryption and password protection are used.
• Regularly monitor and audit access to and use of IP to detect any unauthorized access or use.
• If employees work remotely, ensure they use secure methods to access company systems and data, such as VPNs and secure cloud storage solutions.
• Seek legal advice from IP professionals specializing in Spanish IP law to protect your company’s IP.

How EORs comply with local labor laws in Spain

Foreign companies can comply with labor laws in Spain by adhering to the following country-specific considerations:

• Ensure that all employment contracts comply with Spanish law, including provisions on working hours, wages, and benefits. Contracts should be in Spanish.
• Pay employees at least the minimum wage set by Spanish law.
• Ensure that employees do not exceed the maximum working hours allowed by Spanish law, typically 40 hours per week. Employers must pay for overtime according to legal requirements.
• As Spanish law requires, employees should receive the statutory minimum vacation days and holidays.
• Comply with Spanish health and safety regulations to provide a safe working environment for employees. This includes implementing measures to prevent accidents and occupational diseases.
• Register employees with the Spanish social security system and make the necessary contributions for healthcare, pensions, and other social security benefits.
• Follow the correct procedures when terminating an employee’s contract, including providing notice and adhering to any statutory requirements for severance pay.
• Be aware of any applicable collective bargaining agreements that may apply to your industry or region in Spain. These agreements can set additional wage requirements, working conditions, and other employment matters.
• Ensure that all employment-related documents and communications are in Spanish.

» Talk to Papaya’s country experts about compliance

Offboarding employees in Spain

Foreign companies can comply with local legal considerations for terminating employees in Spain by following these guidelines:

• Provide employees with the required notice period before terminating their employment. The notice period is typically 15 days for employees with less than one year of service and increases with the length of service, up to a maximum of three months.
• In cases where severance pay is required, ensure the amount complies with Spanish law. The amount of severance pay depends on the reason for termination and the length of service, ranging from 20 days’ salary per year of service for unfair dismissals to a minimum of 12 days’ pay for objective dismissals.
• Before terminating an employee, consult legal counsel to ensure the termination is justified and follows the correct legal procedures.
• Document all aspects of the termination, including the reasons for termination and any discussions or agreements reached with the employee.
• If the company is subject to a collective bargaining agreement, ensure compliance with any specific requirements for terminating employees outlined in the contract.
• The termination shouldn’t be based on discriminatory or retaliatory reasons, as this can lead to legal action against the company.
• In some cases, such as collective dismissals, you may be required to notify the labor authorities before terminating employees. Consult with legal counsel to determine if this requirement applies to your situation.
• Respect the rights of terminated employees, including their right to receive all outstanding payments and entitlements, such as accrued vacation pay and any other benefits due to them.
• If your company has a work council, consult them before deciding on terminations. Work councils have the right to be informed and consulted on certain employment matters, including terminations.

Use an EOR to hire employees in Spain today

Spain’s labor laws and regulations can be challenging to navigate for foreign companies entering the market. Navigating employment contracts, ensuring compliance with social security contributions, and managing mandatory benefits involve many complexities.

Partnering with Papaya Global can streamline the process, offering expertise in Spain’s legal landscape. Papaya’s in-depth knowledge of Spanish labor laws and cultural norms allows for seamless handling of payroll payments, recruitment, and compliance procedures.

Utilizing Papaya’s technology-driven platform ensures efficient management of all workforce aspects in Spain, maintaining transparency and compliance at every stage. Papaya Global provides a reliable international payroll solution, facilitating your smooth and successful business expansion into the Spanish market.

» Allow Papaya to handle your international payroll

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