Having established our office in Barcelona in 2018 we have helped numerous companies enter the Spanish market in the past 3 years. Since then we have learned a huge amount about employment obligations and we want to share what we have learned about hiring in Spain with other companies looking to follow suit.
Spain is an attractive destination for global business expansion and with good reason. It has the 4th largest economy in the EU. As a member of the EU, it benefits from free trade agreements and the single currency. It has a world-class infrastructure comprising two of Europe’s busiest airports, an extensive high-speed rail network, and the largest network of highways in the EU.
Madrid and Barcelona are already well-established, international business hubs. Both have seen significant investment in the tech sector in recent years. Barcelona has proved particularly alluring for tech companies in the last decade. Madrid boasts the 7th highest number of computer developers in Europe. Other locations such as Malaga, Valencia, and Bilbao are also making a name for themselves too.
70 of the top 100 companies in Forbes Global 2000 currently operate in Spain. Over the last decade, multiple new technology firms have successfully established themselves in the country. Companies such as Red Points, a firm that produces enterprise software, ID Finance, a digital finance and lending enterprise, and Payflow, an innovative payment solution company.
In efforts to build on recent successes and to reinvigorate the economy in the post-pandemic slump, the Spanish government has taken further steps in 2021 to position itself as an ideal location for new and expanding businesses. Prime Minister Pedro Sanchez announced sweeping changes in early 2021 to improve key employment-related issues such as education, jobs, pensions, and taxes.
While these points answer some of the questions “why” businesses should consider Spain as the location for expansion, less obvious is the “how.” This article explains some of the employment obligations businesses will need to consider when recruiting or hiring in Spain.
All facts and figures are correct as of September 2021.
Employer payroll contributions
- 23.60% Social Security.
- 5.50% (General Type) Unemployment.
- 0.20% Salary Guarantee Fund.
- 0.60% Professional Training.
- 29.90% Total Employment Cost.
In Spain, both employees and employers must pay social security contributions. Employers must pay a tax rate of 29.9% based on an employee’s gross salary.
Employers should always take social security contributions into account when considering remuneration packages for potential employees.
The social security system offers public medical care to all affiliated workers. Enrolment with the General Social Security Fund (Tesoreria General de la Seguridad Social or ‘TGSS’) is compulsory in Spain. TGSS is the government agency that regulates social security benefits.
You can use this calculator to view and calculate social security tax contributions for employers.
Employee payroll contributions
- 4.70% Social Security.
- 1.55% (General Type) Unemployment.
- 0.10% Professional Training.
- 6.40% Total Employee Cost.
4.7% is the standard employee contribution amount. In actual terms, the minimum amount of contribution can vary depending on the type of work that an employee carries out and their qualifications. For example, Senior management employees are expected to contribute a minimum of €1,547 per month. Technical engineers will need to contribute at least €1,282.80 and administrative assistants €1,108.33.
Employee income tax
Employers withhold a percentage of an employee’s gross salary as a contribution towards the income tax payment of the employee. This amount can vary depending on the salary and the personal circumstances of the employee. An employer should endeavour to withhold an amount as close as possible to the employee’s actual tax liability. Doing so will help to avoid additional administrative and financial costs incurred when an employee files a tax return.
You can find more information relating to employee income tax rates here.
The tax year for Spanish employees aligns with the calendar year.
In Spain, the employer can expect an employee to work a maximum of 40 hours per week (calculated annually) and 9 hours per day.
The employee is permitted to work an additional 80 hours of overtime per year. Any exclusions to these limitations are ordinarily detailed in collective bargaining agreements or where they can demonstrate that urgent or extraordinary circumstances apply.
The exact number of holiday days is established in an agreement between the employer and employee. However, according to the Worker’s Statute (article 38), no employee may have less than 30 calendar days of leave per annum. 30 calendar days (or 22 working days) is, therefore, the norm for a full-time employee.
In addition, Spain has nine national public holidays in 2021 and additional regional public holidays too. The exact amount of paid leave will therefore vary depending on the location. You can find a list of Spanish public holidays here.
- Some additional points for consideration:
- Spain’s Labour Law requires that at least one period of that holiday leave must be a minimum of two weeks long.
- Any public holidays that fall on a Sunday will transfer to the following Monday.
- As per employees in many countries, some parents prefer to take most of their leave while their children are on school holidays. These dates also vary according to the autonomous region in which they live.
Employers in Spain cannot provide financial compensation as a substitute for an employee’s holiday entitlement. When employees with casual or temporary contracts cannot take holidays because their typical days of employment fall on public holidays, they receive their wages pro-rata.
Maternity and paternity pay
Spain has a modern attitude to maternity and paternity leave, pioneering an approach that other countries in the EU have since copied. As of January 2021, both maternity and paternity leave entitlement is 16 weeks for both sets of parents.
These changes make Spain one of the most progressive countries in Europe where paternity leave is concerned. The total leave period is longer in other countries but is usually offered on a transferrable basis, intended to be used by either the mother or the father and not necessarily both. Spain recognises the needs of both sets of parents in its more modern approach.
Employees must take the first six weeks immediately after the child is born. Parents can take the remaining 10 weeks as desired, non-consecutively within the first 12 months of the baby’s life. This can be extended by one week per child in the case of multiple births.
If the child is born with health problems or a disability, an extra week of leave is granted. If the child is born prematurely or requires hospitalization for more than seven days, parents can extend their leave by as many as 13 weeks.
During parental leave, parents earn 100% of their normal salary. To be eligible for the benefit, they need to have contributed to Spanish social security for at least 180 days in the last seven years or 360 days in their entire working life. However, Spain also has a maternity benefit for women who haven’t met the social security requirement. It amounts to approximately €530 per month.
Adoptive or foster parents are eligible for the same benefits if the child is under 6 years of age. If the child is over 6 years, the parents are eligible only for 10 weeks of paternity and maternity leave.
Same-sex couples are also entitled to the same benefits. One parent must apply for paternity benefits, and the other parent must apply for maternity benefits. To qualify for these benefits, each parent must have a legal connection with the child. For example, a biological link or legal adoption.
The Spanish Labour Law dictates that when an employee cannot work due to sickness or injury, they can claim an allowance for temporary incapacity. The amount an employee can claim varies depending on how many days have passed since the first day of absence:
- 1-3 days: Unpaid.
- 4-15 days: The employee is entitled to 60% of their salary. The employer pays this.
- 16-20 days: The employee is entitled to 60% of their salary. This is paid by the employer, who can then deduct the amount from the social security payment.
- Day 21 onwards: The employee is entitled to 75% of their salary. This is paid by the employer, who can then deduct the amount from the social security payment.
Employers have the option to supplement these mandatory payments with further, optional payments if they wish.
To receive the mandatory benefits, the employee will need a medical examination by a doctor from the Servicio Público de Salud (State Health Services). All employees must have an annual medical check-up.
Employees can take sick leave up to a maximum of 1 year. In certain circumstances, this can be extended by an additional 180 days.
You can find more information and links to useful forms here.
Other forms of paid leave of absence
Employees are entitled to other forms of leave, such as:
- Marriage: 15 calendar days (includes weekends and holidays)
- Family death, accident, serious illness, or hospitalization of a family member: 2 days (4 days if the employee needs to travel to visit the relative)
- Temporary Relocation: If the employer requires that the employee relocates to a new city, the employee is entitled to 4 days for every 3 months spent away from home.
- Moving house from the main residence: 1 day
- Public and personal obligations (e.g., jury duty, appearance in court): As long as is necessary
- Professional training: The employee can adapt the working day to attend professional training courses, classes, or exams to obtain an academic or professional qualification.
- Prenatal exams, preparation for childbirth: As long as is necessary.
- Included in this is the breastfeeding permit, which provides an allowance for women employees who care for children under nine months of age: One hour of absence from work per day or half an hour if taken at the beginning or end of the working day.
- Legal guardianship of a child under 12 or a person or persons with a disability: reduction of the working day by between one-eighth and one-half
- Perform trade union representation duties: The amount of time established by law or collective agreement
- After being given notice: If an employer has given an employee notice that they are being laid off, they are entitled to 6 hours per week to find new employment.
In each case, the employee must inform the employer in advance.
Any employee that has been employed for a minimum of 12 months can request a voluntary extended leave of absence. During this period, their employment is essentially suspended. A professional contract is maintained between employer and employee, but the employee is not required to work, and the employer is not liable for the employee’s salary.
This arrangement can extend for anywhere between 2 to 5 years. In some cases, the employer can initiate a compulsory period of unpaid leave.
Once the absence period has been concluded, employees will ordinarily return to their previous job. There are circumstances where this may not be appropriate. For example, if the employee has taken extended leave due to seemingly temporary health reasons, which are later deemed to have permanent implications.
Employees can also claim a leave of absence of up to one year to care for a family member who cannot work and look after themselves because of their age, accident, disability, or illness. This period of time can be extended by mutual agreement between employer and employee.
Terminating the employment relationship
If either an employer or an employee wishes to terminate an employment agreement, the initiating party must provide at least 15 days’ notice in writing unless the contract agreement specifies a longer period. This rule does not apply to interim contracts or probation periods.
Under Spanish Labour Law, any employer wishing to dismiss an employee legally must do so for disciplinary or objective reasons.
Disciplinary (despido disciplinario) reasons can include:
- Repeated or unjustified absences from work, including being repeatedly late for work.
- Breach of contractual good faith and abuse of trust.
- Lack of discipline and disobedience.
- Verbal or physical abuse.
- Voluntary and continued failure to meet the agreed levels of work performance.
- Substance abuse, regular intoxication, or drunkenness.
- Harassment due to ethnic or racial origins, religious beliefs or ideology, disability, age or sexual orientation, and sexual harassment against either the employer or other employees.
When dismissing an employee for disciplinary reasons, the employer must inform them in writing of the reasons for the decision and the date of termination. If the employee is a trade union member, the employer must consult union delegates.
Objective (extinción del contrato por causas objetivas) reasons can include:
- The employee is unable to adapt to changes made to their job. Before dismissing the employee, the employer must have offered training to facilitate adaptation to the changes.
- Ineptitude. The employee is unable to perform their work for reasons that were unforeseen during the employee’s probationary period (does not include pregnancy, illness, or injury)
In certain objective circumstances, the employee is entitled to compensation of 20 days’ pay per year of service, up to a maximum of 12 months’ pay.
There may also be additional lawful reasons for disciplinary dismissal under the applicable Collective Bargaining Agreement.
Collective (despido Colectivo) reasons can include:
- Production reasons within the company.
An employer contemplating a collective dismissal must consult statutory employee representatives over a period of up to 30 calendar days (15 days for companies with fewer than 50 employees).
You can view more information on Spanish employment termination law here.
Leaving a job voluntarily
Employees must provide a minimum of 15 days’ notice when resigning from employment in Spain. The notice period can be longer depending on the terms of an employee’s contract or union agreement.
Employees could be eligible for up to 20 days compensation for each year of employment in the following circumstances:
- The employer has not adhered to the terms of the employment contract. For example, not paying the employee on time or not paying the agreed amount.
- The employer substantially changes the employees working conditions and has not followed Spain’s Labour Law regulations in making those changes.
- The employer doesn’t consent to transfer the employee to a different work location that involves a change of residence.
The Labour Laws in Spain make specific provisions for cases where an employee is being made redundant. These are called objective cases and ordinarily occur during periods of economic difficulty. The employee is entitled to compensation if the employer wishes to terminate an employee’s contract for objective reasons.
The compensation owed to the employee amounts to 20 days’ salary for each year they have been in employment, up to a maximum of 12 months’ salary. Where there is no justified reason for redundancy, this can rise to 45 days salary.
The employer must provide 30 days’ notice to the employee. Employees are entitled to spend 6 hours of leave per week finding new employment.
Follow this link for more information regarding redundancy in Spain.
Currently, the minimum age of retirement in Spain is 65 years old. However, this will increase to 67 years old by 2027. To qualify for the minimum state pension, an employee must have remained employed and paid Spanish social security contributions for at least 15 years. Two of these years must be within the 15 year period immediately preceding the pension claim. Full pension requires 35 years of social security contributions in Spain, and that will be increasing to 38 and a half years by 2027.
Trade unions in Spain are not dissimilar to those in other Western European countries in many ways. The Spanish constitution grants trade unions the right to represent employee’s professional, economic, political, and social interests. Unions can manage collective bargaining agreements and manage disputes on behalf of employees. Employees have the right to associate with any union and establish union affiliation without consent from the employer.
Where Spain differs is in the level of employee affiliation. Trade union membership in Spain increased steadily from the 1990s until 2009 but has been decreasing at a steady rate ever since. Spain’s level of union affiliation is at a much lower level than most of its Western European counterparts. “While in Sweden affiliation is 70%, in Italy and the UK 25%- an anti-trade union country if ever there was one – and in Germany 20%, in Spain, it’s now no more than 15%, according to the most optimistic estimations, and 8% or 10% in line with the most realistic”.
The two main trade union confederations in Spain are CCOO (Confederacion Sindical De Comisiones Obreras) and UGT (Unión General de Trabajadores), each of which has between 900,000 and 950,000 members. Other unions may be popular in particular sectors and at the company or the regional level.
Employees within companies comprising of more than 50 workers will typically appoint a works council. A works council is an employee-elected body that is ultimately representative of the interests of all union-affiliated employees.
Was this article helpful? Do you have any other questions about hiring in Spain? If so, or if you need any assistance with your potential move to Spain (or any other region in Europe), please get in touch at email@example.com.
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