Employer of Record in Spain

Hiring employees in Spain involves navigating a distinct set of labor laws, social security contributions, and payroll regulations that can be complex for foreign companies. Understanding these requirements is crucial for compliant and effective talent acquisition. Whether you're looking to expand your team with local experts or establish a regional presence, ensuring legal adherence from the outset is paramount.

When considering hiring in Spain, companies typically have several options:

• Establishing a local entity: This involves setting up a subsidiary or branch, which requires significant time, investment, and ongoing administrative burden for company registration, legal compliance, and local accounting.
• Utilizing an Employer of Record (EOR): Partnering with an EOR like Rivermate allows you to hire employees in Spain quickly and compliantly without needing to establish your own legal entity.
• Hiring independent contractors: While flexible, this option carries risks if the working relationship is later deemed to be employment, potentially leading to significant penalties and back payments.

How an EOR Works in Spain

An Employer of Record (EOR) acts as the legal employer for your workforce in Spain, handling all local employment responsibilities while you retain full control over day-to-day management. Specifically, an EOR in Spain takes care of:

• Payroll processing and tax withholding: Ensuring accurate and timely payment of salaries, social security contributions, and income tax in compliance with Spanish regulations.
• Benefits administration: Providing and managing mandatory benefits such as healthcare, pension contributions, and leave entitlements.
• Labor law compliance: Navigating complex Spanish labor laws, including contracts, working hours, termination procedures, and severance pay.
• HR administration: Managing onboarding, offboarding, leave requests, and other employment-related documentation.
• Visa and work permit sponsorship: If applicable, assisting with the necessary documentation for foreign employees to work legally in Spain.

Benefits of Using an EOR in Spain

For companies looking to hire in Spain without establishing a local entity, an EOR offers several compelling advantages:

• Speed to market: Hire employees in Spain within days or weeks, rather than months it takes to set up a legal entity.
• Reduced costs and administrative burden: Avoid the expenses and complexities associated with entity setup, legal registration, and ongoing compliance.
• Guaranteed compliance: Minimize legal and financial risks by ensuring adherence to all Spanish employment laws and tax regulations.
• Access to top talent: Recruit and hire the best professionals in Spain regardless of your company's physical presence.
• Flexibility and scalability: Easily expand or reduce your workforce in Spain as business needs evolve, without the constraints of a local entity.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Spain includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Spain.

In Spain, employers must fulfill several tax obligations, including social security contributions and income tax withholding. Employers are responsible for contributing to social security based on employee gross salaries, with key rates for 2025 as follows:

Additionally, employers must withhold income tax (IRPF) from employees' salaries, with progressive rates depending on income levels and regional adjustments:

Employees can claim deductions such as personal allowances, pension contributions, housing expenses, and regional incentives, which reduce taxable income.

Employers must adhere to strict reporting deadlines: social security contributions are paid monthly, quarterly income tax withholding returns (Modelo 111) are due in April, July, October, and January, and an annual summary (Modelo 190) is due by January 31. Companies also file an annual corporate tax return by July 25. For foreign entities, additional considerations include non-resident income tax at 24%, special regimes like the Beckham Law, transfer pricing rules, and VAT registration requirements. Ensuring compliance often requires professional advice, especially for foreign workers and companies operating in Spain.

Spain's salary landscape varies significantly by industry, role, and location, with major cities like Madrid and Barcelona offering higher compensation. For example, annual salaries for key roles range from €20,000 for customer service reps to €75,000 for data scientists, with technology and finance sectors experiencing the highest pay. Employers should consider regional differences and industry standards to remain competitive.

The statutory minimum wage in Spain, known as Salario Mínimo Interprofesional (SMI), was €1,134 gross per month in 2024, paid over 14 installments (€1,323 in 12). Employers must ensure wages meet or exceed this minimum, with collective agreements potentially setting higher standards. Bonuses such as Christmas and summer payments, productivity incentives, and allowances for transportation, meals, and housing are common components of compensation packages.

Salary trends for 2025 suggest continued growth, especially in high-demand sectors like technology, driven by inflation, cost of living increases, and evolving work arrangements. Employers should adapt compensation strategies to attract and retain talent effectively.

Spain's labor law guarantees employees a minimum of 30 calendar days (approximately 22 working days) of paid annual vacation, with the timing typically agreed upon between employer and employee, and notice given at least two months in advance. Collective bargaining agreements often enhance these entitlements. Employees also benefit from 14 national public holidays annually, with regional and local holidays varying by location.

Sick leave requires a medical certificate within three days, with social security providing between 60-75% of salary depending on the duration. Parental leave includes 16 weeks paid maternity and paternity leave, both at 100% salary, with flexibility for additional time within the first year. Other leave types include bereavement, marriage, study, sabbaticals, legal obligations, and union activities, often governed by collective agreements.

Spain's employee benefits are governed by statutory requirements, collective agreements, and evolving expectations. Employers must provide mandatory benefits such as social security contributions covering healthcare, unemployment, and pensions; at least 30 days of paid vacation plus public holidays; paid sick leave; and 16 weeks each of paid maternity and paternity leave. Additionally, employees typically receive two extra salary payments annually—Christmas and summer bonuses, each roughly equivalent to one month’s salary. Severance pay is also mandated upon termination, depending on circumstances and tenure.

Beyond mandatory benefits, many employers enhance packages with optional perks like supplemental private health insurance, life insurance, occupational pension plans, meal vouchers, transportation allowances, childcare support, training programs, and Employee Assistance Programs (EAPs). Spain’s healthcare system combines universal public coverage with private options; employers often sponsor private health insurance to improve access and reduce wait times. Retirement benefits include the state pension, based on contribution history, and occupational pension schemes, which vary by employer.

Benefit offerings differ by company size and industry. Large firms tend to provide comprehensive packages, including health and pension plans, while SMEs may focus on core statutory benefits. Technology companies often offer stock options and flexible work, whereas manufacturing firms may tailor benefits to occupational health risks. This landscape underscores the importance for employers to design competitive, compliant benefits packages aligned with industry standards and regional practices.

Employment agreements in Spain are legally binding contracts governed by the Workers' Statute, establishing minimum employee rights and employer obligations. Employers must comply with specific legal requirements, including mandatory clauses, probation periods, confidentiality, non-compete clauses, and regulations on contract modifications and terminations to avoid penalties and legal disputes.

Spanish labor law recognizes mainly two contract types: indefinite and fixed-term. Indefinite contracts are open-ended, providing full employee rights and severance pay if terminated without just cause. Fixed-term contracts are for specific durations or projects, with stricter regulations and limitations on renewals. Employers should understand these categories and their legal implications to ensure compliance and proper workforce management.

Remote work in Spain has expanded significantly, driven by technological advances and a focus on work-life balance. The legal framework, notably Law 10/2021, defines remote work as regular work outside the employer’s premises using technology, with employers responsible for providing equipment, ensuring safety, and covering related expenses. Employees have the right to request remote work, which employers must consider in good faith, and a written agreement outlining terms is typically required.

Flexible arrangements such as flextime, compressed workweeks, job sharing, telecommuting, and part-time work are increasingly adopted to enhance work-life balance. Companies must also comply with GDPR for data security, implementing secure access, data processing agreements, and employee training. Clear policies on equipment provision and expense reimbursement are vital, with employers often supplying necessary tools or stipends. A strong technology infrastructure—including high-speed internet, collaboration tools, cloud solutions, and IT support—is essential for effective remote work.

In Spain, employee termination is highly regulated, with strict procedural and substantive requirements favoring employee protections. Employers must adhere to specific notice periods based on contract type and reason for dismissal, with some cases requiring no notice (e.g., disciplinary dismissals), while objective dismissals mandate a 15-day notice. Employers can opt to pay in lieu of notice, which includes salary and benefits for the notice period.

Severance pay varies by dismissal reason: objective dismissals entitle employees to 20 days' salary per year (capped at 12 months), while unfair dismissals require 33 days' salary per year (capped at 24 months). No severance is owed for justified disciplinary dismissals or dismissals due to employee incapacity or death. Proper documentation, adherence to procedural steps, and valid grounds are essential; failure to comply can lead to unfair dismissal claims, with remedies including reinstatement or severance payments.

Employers must provide detailed written notices, maintain documentation, and follow specific procedures for each dismissal type. Employees have 20 working days to challenge dismissals in court, with potential remedies including reinstatement or severance, depending on the case. Common pitfalls include inadequate notice, vague reasons, procedural errors, discrimination, or retaliation, which can result in null or unfair dismissal declarations and significant penalties.

Spain's freelance landscape, known locally as "autónomos," offers flexibility for businesses to access specialized skills without traditional employment complexities. However, companies must understand the legal framework to avoid misclassification risks. The distinction between employees and independent contractors is crucial, based on factors like dependence, subordination, alienation of results, and provision of means. Misclassifying can lead to penalties, including back payment of social security and taxes.

Engaging independent contractors requires a formal agreement outlining the scope of work, payment terms, autonomy, and IP rights. Contractors typically retain IP rights unless explicitly assigned to the company. Tax obligations for autónomos include income tax (IRPF), VAT (IVA), and social security contributions, with specific filing requirements. Common industries utilizing freelancers include technology, creative industries, consulting, professional services, education, and healthcare, where project-based work and specialized skills are in demand.

Non-EU/EEA citizens require both a visa and work permit to work legally in Spain. The process involves obtaining a job offer, employer application for the permit, employee visa application, and registration upon arrival, including social security and TIE registration within one month. Typical processing times range from 2 to 6 months, with costs varying depending on the permit type and legal and translation fees.

Key visa options include Highly Qualified Professional, Skilled Worker, Intra-Company Transfer, Self-Employed, and Non-Lucrative visas. Employers must ensure all foreign employees have valid permits, maintain records, and report employment changes. Employees must adhere to visa conditions, register with social security, and renew permits timely. After five years of legal residence, individuals may apply for permanent residency, which grants indefinite work and residence rights.

Employers and employees must comply with legal obligations, including permit validity, social security registration, and timely renewal to avoid penalties. Permanent residency is available after five years of continuous legal residence, provided criteria like financial stability and social integration are met.