How to Hire Employees in Spain: A Comprehensive Guide

Spain has a developed economy, with a dominating service sector. Even though the country experienced a financial crisis and recession over the last decade, it is now the world’s 14th largest economy. Tourism, manufacturing, agriculture, energy and power, and the external commerce industry are the primary industries in Spain.

In Spain, 65.62% of the population is within the 15-64 age group. The local youth excel in skill-based job profiles, thanks to the country’s progressive education system. Furthermore, its strong diplomatic ties result in the influx of numerous international students who want to graduate from a Spanish university. Therefore, Spain has a big pool of talented professionals across various fields.

Hiring in Spain follows an extensive procedure. Read on to know what you must consider before looking for candidates in the country.

Before you hire staff in Spain, there are a few things related to the hiring and management of employees that you should know. You must consider the following:

Contract employment

An important part of recruitment and selection in Spain is presenting a formal contract to the employee. The contract can be formal or written. However, if the employment duration is more than 4 weeks, you must present a written contract within 2 months of the employee’s starting date. The contract must include the following information:

The employment laws and regulations demand the employer to detail the following information in the contract:

• Identification of the parties involved
• Date of commencement
• Employment duration, if the contract is temporary
• Place of work
• Professional category or group
• Detailed salary structure, including benefits and other forms of compensation
• Total working hours
• Total number of holidays
• Notice period
• Collective bargaining agreement (CBA)

The probationary period is usually two months for most professionals and six months for technicians. Employers retain the right to terminate employment during the probationary period if the relationship does not work out. 

Termination

A contract is terminated under the following conditions:

• The employee resigns voluntarily
• Both parties agree to terminate the contract
• The reason for termination is listed in the contract as a legitimate condition
• Dismissal due to disciplinary or legal reasons

According to Spanish law, you are entitled to give the employee severance pay if the contract is terminated unfairly. Generally, companies pay a severance penalty of 20 to 33 days of daily compensation, in addition to bonuses and commissions. If employers wish to terminate the contract immediately, the employee is entitled to a month’s salary due to termination of the contract without notice.

Severance pay

Severance compensation is only paid when an employer abruptly terminates an employment relationship. In such a case, the severance pay is equal to the employee’s salary in the notice period.

You can either terminate an employment contract with a notice period or terminate the employment contract immediately by paying an indemnity in place of notice. An alternative is to combine the two by including a notice period and paying indemnification for the balance of the notice period.

The indemnification in place of notice is computed using the employee’s annual salary, including statutory and contractual fringe benefits, at the time of termination. Furthermore, you must fulfill the following conditions before terminating the contract:

1. Provide written notice to the employee mentioning the reason for termination
2. Provide a compensation of 20 days’ salary per year of service, up to a maximum of 12 months. The amount is payable after delivering the written notice.
3. Provide the employee 30 days’ notice before the official termination, beginning from the time of notifying the employee
4. Provide 45 days’ pay per year of service (33 days if employed after 12th February 2012) in case of unfair dismissal, maximum to up to 42 months

Payroll and taxes

The Spanish law mandates the following contributions from both the parties in a paycheck:

Employer contribution

Employee contribution

The Employee income tax in Spain is levied as follows:

For non-resident employee income tax rates:

General rate is 24% but only 19% for residents of EU member states or the European Economic Area.

Furthermore, businesses have to pay the following additional taxes:

• Branch profit tax
• Capital tax
• Corporate income tax
• Real property tax
• Transfer tax
• Value-added tax (VAT)
• Progressive income tax (which increases with an employee’s salary)
• Miscellaneous local taxes

Wages and working hours

In Spain, a standard workweek is 40 hours. You can distribute the work hours throughout the years, with some weeks having more than 40 working hours while some have less. To validate this distribution, there has to be a relevant Collective Bargaining Agreement (CBA) sanction in the employee contract.

Overtime is legal in Spain and employees receive their overtime pay in compensation or additional time off within four months. However, paid overtime must not exceed more than 80 hours in a year unless there are special circumstances.

The minimum wage in Spain is 1,125.9 euros per month. However, that amount is expected to grow as the government plans to increase the minimum wage to 60 percent of the nation’s average salary.  

Time offs

There are 10 national holidays in Spain and 2 to 3 times local and regional holidays. In addition, businesses in Spain have to provide 22 working days or 30 calendar days as annual paid leaves. It is important to note that these days cannot be reimbursed as extra compensation.

The Spanish law grants employees sick leaves and relevant benefits (loss of daily income and healthcare). However, if an employee has contracted a non-work-related disease, they cannot reimburse the medical bills for the first three days. The benefits are given from the 4th day to the 20th day of the leave, with 60% salary compensation. From the 21st day, the compensation increases to 75%. Employees can obtain 100% of their salary during sick leave if allowed in the CBA.

Depending on the profession, you can allow one day of sick leave without any loss of salary.

Employees in Spain are allowed extra paid time off for the following personal circumstances:

• Marriage (up to 15 days)
• Death in the family (2 days)
• Relocation (1-2 days)
• Attending a sick family member (2 days, can be extended to 4 if the transit is long and 2 years if the family member is seriously ill)

Women are given 16 weeks of paid maternity leave, allocated as 6 weeks immediately after childbirth and 10 weeks distributed as per their convenience (till the child is one year old). 

The employee can take an additional year for child care and still secure their position in the organization. The parent can take a breastfeeding leave of one hour of absence per work day or half an hour taken at the beginning or end of the working day. The child must be under nine months of age. 

This leave can be taken in either of these three ways:

• Absent for an hour a day
• Reduction in working schedule
• 15 consecutive days off

Women employees are also allowed second leave for child care, but the time off is unpaid in this situation and the position is not guaranteed.

Paternity leave is compensated for 16 weeks for the father (extended to 18 weeks for multiple births). Both parents of same-sex couples are eligible for paid leave. To be eligible for paid benefits, each parent must have the correct legal relationship with the child. 

The Spanish government will pay 100% of paternity pay if the father has contributed to the social security for a minimum of 180 working days in the previous 7 years or 360 total days in his professional life. Certain taxes on salary payments are still the responsibility of the employer.

13th-month salary

It is common in Spain for employees to receive 13th and 14th-month salaries. Therefore, the compensation is split into 14 installments and the additional pay is given in July and December, as stipulated in the employment contract and collective agreement.

Numerous upfront and hidden costs are involved in recruitment and selection in Spain. You have to consider the following factors to shape your hiring budget:

• Job advertisements
• Hours spent on reviewing applications and interviews
• Payroll
• Taxes
• Salaries
• Employee benefits
• Incentives
• Insurance

While most Spanish employees avail health insurance from government programs, the employers often provide additional insurance. Professionals in executive positions are provided supplementary life and health insurance from their employers.

The CBA requirements are an important deciding factor in recruitment and selection costs in Spain. These agreements vary within industries, resulting in varied costs for businesses.

Hiring employees in Spain can be complicated and time-consuming. Before beginning the hiring process, a business must establish its subsidiary or partner with an Employer of Record (EOR), like Multiplier.

To set up a Spanish subsidiary, you have to follow the given steps:

• Decide your entity type (joint venture, branch office, representative office, or corporation)
• Choose your incorporation method (private limited liability company, public limited liability company, or a simplified regime)
• Pay the minimum investment amount of 3,000 euros, if you choose a private limited liability structure
• Receive certification from the Mercantile Register
• Generate a provisional tax ID number (NIF)
• Open a bank account in Spain
• Submit a declaration against terrorist financing and money laundering
• Sign and public deed and notarize it
• Register with the Commercial Registry
• Name 3-12 directors who must file financial statements with the Mercantile Register annually

This entire process takes 6-8 weeks and demands a lot of expertise. A better alternative is to partner with an EOR and let them handle the administrative tasks while you set up your global team.

You have two distinct options when you are looking to hire employees in Spain: 

Via local entity

The traditional hiring process in Spain is establishing a local entity according to the country’s laws and regulations. However, you must invest significant time and resources in this initiative. When you establish a local branch or subsidiary in Spain, you will avail tax benefits. Although, this is not the best option if you only want to hire and not operate in the country.

Via a PEO

A Professional Employer Organization (PEO), like Multiplier, will assist you in onboarding and managing your Spanish employees via an online platform. A PEO offers a wide range of services, like payroll management, benefits administration, allocation of ESOPs, leaves management and much more, so you can manage your international team seamlessly.

Follow is the legal recruitment process in Spain companies:

1. Find out the regulations: The Spanish law has numerous regulations for hiring employees and a slight mistake can be costly for you. Contact experts to learn about the rules and regulations surrounding employment in the country. Adhere to the laws and maintain total compliance with the authorities.
2. Spread the word about the job opening: Reach out to the relevant agencies or post job advertisements online. This will help in receiving the highest possible applications.
3. Conduct interviews: Add a layer to the application review process and conduct both HR and technical rounds of interviews. This will help judge the candidate’s suitability for the open position.
4. Offer a formal contract: This is essential in finalizing the candidate. The employment contract must contain all information relevant to the job position, compensation and benefits to the employee.

Hiring in a European country demands a lot of expert help, patience, time and effort. The varying laws and regulations within Spain add another layer of challenges. If you are thinking about how to hire people in Spain, it is wiser to partner with an EOR.

Multiplier’s EOR services oversee your administrative and legal matters while you can hire from Spain and build a global team. Our global employment platform allows you to onboard and manage the employees, offer contracts within minutes, add relevant benefits, offer ESOPs and much more. To suffice, we help you save time and energy while growing globally. For more information, visit our website.