Employee Benefits and Compensation in Spain: A Comprehensive Guide

When you want to build your workforce in Spain, offering reasonable benefits and compensation packages is imperative. The Spanish laws mandate employers to offer these plans to promote employee well-being. Furthermore, you must comply with the rules and regulations while offering such plans.

This guide will help you understand various aspects of benefits and compensation package in Spain.

Employee benefits are the non-cash benefits offered to employees apart from their regular compensation. In Spain, it is mandatory to provide benefits to your employees. These benefits usually cover rent, health insurance, meals expenses, paid leaves, etc.

From an employer’s perspective, these benefits are useful in attracting and retaining valuable talent. Furthermore, such benefits elevate an organization as a desirable workplace for employees.

Spain has elaborate Labor laws for protection of employees. The “Workers Statute” (Estatuto de los Trabajadores) is one of the key legislation of Labor Law that regulates employee and employer relationships. It also includes regulations regarding collective bargaining agreements. 

Other important legislations of labor laws are:

• The Spanish Constitution (December 17, 1978)
• Law 31/1995 on Work Risk Prevention
• Law 5/2000 on Labour Infractions and Sanctions
• Law 3/2007 on Equality between Men and Women
• Royal Decree law on urgent measures to reform the labor market (February 10, 2012)
• Law 3/2012 of on urgent measures for labor reform (July 6, 2012)
• Royal Decree law 16/2013 on measures to improve hiring
• Royal Decree 2/2015 on the Workers’ Statute
• Royal Decree 8/2015 on Social Security

Significant Amendments 

The Royal Decree-Law 3/2012 of 10 February has brought significant changes in the labor law and developed a framework for efficient employment relationships management,  stable employment and job creation.

The other major amendment happened on 28th October, 2015 that approved Royal Decree 2/2015 (the Workers’ Statute).  The labor reform of 2012 modified the process of carrying out collective layouts and changed the hierarchy of priority in collective bargaining agreements to help improve employment and employment relationships.

Some of the other latest developments happen in Spain Labor Law include

• Spanish Data Protection Act 2018 that regulates and protects personal data and digital rights.
• Royal Decree- Law 17/2019 of 25 January to regulate social security rights
• Royal Decree Law 6/2019 of 1 March regarding equal treatment and opportunities for men and women
• Royal Decree-Law 28/2020 of 22 September for regulating remote working

Deciding and offering benefits packages requires a lot of analysis. The package must be competitive, cover the workforce’s needs and remain within the allocated budget. Moreover, certain factors decide the benefits your employees should receive, like job role, tenure and salary package.

A desirable employee benefits program is reasonable for both you and the employees. The following steps will ensure employers draft a plan that fits  the budget and cover the employee’s needs:

1. Outline  goals and budget

Define a clear objective to draft a sustainable employee benefits plan. Consider resources, goals and a prudent budget. Discuss the plan with stakeholders and identify the targets to achieve with the benefits program. For instance, if your priority is employee retention, you may consider offering some lucrative additions to the benefits plan. 

2.  Conduct needs assessment

A thorough needs assessment will help employers understand the employees’ requirements. Employers can interview the workforce or distribute questionnaires to get the best idea. Furthermore, you can also assess the benefits plan of other regional companies to develop a more competitive  benefits program

3. Draft employee benefits plan

Prepare a plan that benefits the employees and stays within the budget using the information collected. You must calculate factors such as employee contributions, cost containment features, administration expenses and much more to create a perfect benefit program. 

Revaluate the benefits and compensation package periodically to make suitable changes as per the company and employees’ updated needs. 

Spanish employees are entitled to the following benefits:

Annual leaves

Employees are guaranteed 22 working days (30 Calendar Days) of paid leave that can be distributed across the year according to mutual understanding between employees and employer. 

In addition to this quota, Spain observes 10 national and almost two to three times local and regional holidays. You cannot transform these leaves into monetary compensation. 

Employees are entitled to their standard salary during paid leaves, including benefits such as health and life insurance, company-sponsored vehicles and others. 

Sick Leaves

Under Spanish labor regulations, employees are guaranteed sickness benefits, albeit not entitled to any payments after the first three days of being diagnosed with a common disease. You must provide sickness benefits starting from the 4th day till the 15th day when you can charge the bills to the social security office.

Social security benefits are determined by an employee’s salary and position within the company. Employers frequently match an employee’s sickness benefits to their basic compensation.

Maternity leaves

Pregnant mothers are entitled to 16 weeks of maternity leave and the mother must take six weeks immediately after childbirth. The employee can distribute the remaining 10 weeks as per her comfort in the next 12 months.

The paid leave begins right after the delivery date. In case of medical complications or multiple births, mothers can extend the leaves by one week for every additional child.  

Employees also have the right to avail social security benefits during maternity leave. However, to qualify for the maternity benefits in Spain the employee must complete a minimum duration in the company.

Paternity leaves

Spain has been attempting to balance parental leave allowances in recent years. As a result, both parents are now entitled to 16 weeks of maternity and paternity leave in Spain as of January 2021. Adoptive and foster parents also qualify for this paid leave. In the event of a birth, the parents are required to take six weeks off right away. The parents can take the remaining 10 weeks off in the next 12 months at their convenience.

Insurance

The Spanish law mandates medical insurance for local employees. You must enrol your staff with the General Social Security Fund (Tesorería General de la Seguridad Social – TGSS). The social security deduction is 28.3%, of which employers pay 23.6% and the employees pay 4.7%.

Pensions

Spain is popular as one of the highest pension-paying countries in the world. The Spanish government pays nearly 80% of the employee’s final gross annual salary before they retire.

Although you are not mandated to offer pensions to your employees, many employers choose to do so to attract the best talent.

Supplementary pension plans offer a total retirement income of 60% to 80% of the final salary, including the Social Security payments. Pensions are frequently calculated as a proportion of wages, regardless of the length of service.

Considering the length of the service, the maximum pension an employee can receive after 20 or more years of employment and the annual percentage of pension credited for each year is 1.5% to 2% of earnings.

Following are the common full-time employee benefits in Spain:

• Minimum wage
• Social security
• Health insurance
• Annual, sick and parental leaves

To convince an employee to work from their Spain office, companies usually offer the following benefits, in addition to the ones offered to the locals:

Relocation: Covers the expenses of moving into Spain. It also includes the fees of the relocation agent to ease the transition.

Accommodation: Covers subsidized housing and the fees of the rental agent who helps find accommodation.

Language Training: Covers the cost of courses the employee studies to integrate within the team. The courses are also available for the employee’s family.

Family Benefits: Covers the tuition fees of the employee’s children, visa costs and potential loss of a spouse’s income.

The following parts of the payroll are exempted from taxation:

• Reimbursement related to employee relocation
• Cost of moving personal goods
• Company shares amounting to a maximum of 12,000 EUR, except in major Spanish-listed companies
• Personal use of company-provided car
• Daily meal vouchers up to a daily price of 11 EUR, nursery vouchers and public transport in certain conditions
• Medical insurance premium up to a yearly amount of 500 EUR per family member
• Company car restricted to use only for professional activities is exempted from income tax

Amount paid for termination and dismissal are exempted from income tax with maximum limit upto  €180,000. 

Taxes on investment income and capital gains

Investment income are your gains via share dividends, interest on bank accounts, deposits or fixed-rate securities. The capital gains refer to your stock redemption earnings from investment funds and rewards from competitions.

You do not have to submit a tax declaration in 2021 if your investment income or capital gains earnings are below 1,600 EUR annually.

One of the main restrictions an employer faces to offer benefits and compensation to employees is the lack of a local entity. However, establishing an entity in Spain can be a hectic and time consuming task.

The simplest way to sort this issue can be collaborating with PEO like Multiplier and allow them to work as co-employer to handle your payroll processing and benefits administration. 

If you already have an entity, before offering a set of benefits and compensation to your employees, you need to check for any conditions or terms outlined in the Collective Bargaining Agreement (CBA). A CBA typically details the minimum wage, paid vacation time and other rights of the employee. Your benefits plans must remain within the CBA’s restrictions.

A CBA is typically used to regulate the following:

• Number of days to work in a year
• Annual leaves
• Paid and unpaid leaves
• Probationary period
• Notice period
• Job category
• Minimum salary

Private Health Insurance

Private medical insurance is an employee benefit in Spain that supplements the public medical system. It is one of the employees’ most highly valued perks due to the favorable tax treatment. 

Employees may experience delays in testing and non-urgent surgical dates if they use the public system. Therefore, private insurance will help in skipping the queue during emergencies.

The Basic Private Health Policy gives you access to medical care from a network of doctors and hospitals. Richer benefits include dental coverage that pays 80% to 90% of medical expenses.

Life and Personal Accident Insurance

In most cases, group life insurance covers all employees, and the company pays the entire premium. The following are typical coverage profiles:

• Death coverage is frequently twice the annual salary (double if by accident), while a fixed amount is granted in other circumstances.
• In some circumstances, a predetermined amount is granted for absolute or whole and permanent disability.

Curating benefits and compensation plans that cover all the requirements can be challenging. The amount of time, effort and analysis required is overwhelming. A smarter way is to partner with Multiplier and offer the desired benefits package to your global team.

Multiplier is a global employment platform that helps in onboarding and managing employees globally. We assist you in preparing the perfect benefits and compensation package which caters to the needs of your preferred country and team. Furthermore, we help you offer employment contracts within minutes, manage payroll of various teams, release payments in local currencies, comply with local and global labor laws, and much more.

To draft and offer profitable benefits and compensation plan, connect with us.