Taxes and payrolls: the peculiarities of the Spanish labour market

Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This series starts analyzing the Spanish labour market.

General data about the Spanish labour market

One of the most peculiar facts of the Spanish compensation methods is that most jobs, even if they are paid monthly, have 14 pays. Although this is not mandatory, it is very common. The two extra pay are given one in July (double summer pay) and one in December (double Christmas pay).

Stablishing the minimum salary to be 1000€, takes into account 14 pays. If we divide the total amount for the 12 months of the year, the minimum monthly salary is 1166.7€.

The minimum salary is the same for all workers, no distinctions by sector, gender or age of employees can be made.

Social Security contributions in Spain

Both the employer and the employee make contributions to Spanish social security. Major part is contributed by employers and to general contingencies.

Generally, contingencies include health care through social security. Usually, also employers offer private health insurance.

Once contributions are paid, employees need to pay an income tax that varies depending on their gross salaries. 

Pension contributions are part of general contingencies. Pension starts at 65 if the employee has contributed 15 or more years to social security, 2 of which have to have been in the last 15 years before retirement.

Contingencies from self-employees

Self-employees in Spain are called “autónomos”. They contribute to social security once a month, with the fixed self-employed quota. As in 2022, this quota is fixed at a minimum of 294€, when the contribution is done on the minimum quantity of 960.6€ a month. The maximum quota is 1266.66€ for the maximum base which is 4139.4€.

Self employees pay the following contingencies:

• 28.3% for general contingencies (which is the same as the total contingencies paid by employers and employees in general contracts).
• 1.3% of professional contingencies (access to the health system due to work-related diseases or injuries).
• 0.9% for the cessation of activities.
• 0.1% for professional training.

It is a total of 30.6%. And 30.6% of 960.6 is 293.94 which rounds to 294€ of self-employed quota.

Contingencies from training employees

In Spain, training can be done and it can last from 6 months to a year. The minimum salary is 650€/month for the first year (65% of the Spanish minimum wage) and 850€/month for the second year (85% of the Spanish minimum wage).

Internships have the same contingencies as regular contracts.

Example of net salary in Spain

The most common IT position in Spain is a software engineer. The most common salary is 37500 annual EUR. Taking into account, a single professional 30 years old. No kids, no people in their charge, and no physical disability. It takes into account that it is not a fixed-term contract.

The employer contributes 12,018.75€ to social security and the employee 2,381.25€.

After paying the income tax, the employee has a net salary of 26,417.62€ coming from a gross salary of 37,500€.

Papaya Global has the possibility to calculate automatically the net salary from the gross salary for any country and currency.

Unemployment regulation in Spain

An employee must have at least 360 days of contributions in the last six years, in order to receive benefits for unemployment. 

Unemployment payroll:

• Unemployed people receive 70% of their daily average earnings, during the first 180 days.
• Unemployed people receive 50% of their daily average earnings, after day 180.

No notice of dismissal is needed if the termination is due to disciplinary actions.

Notice of dismissal should be provided in writing (the period is established in each contract) for economic, organizational, technical or productive reasons.

If there is no specific reason, the time period to provide notice is 15 days or monetary compensation should be given.

After the dismissal, employers have to pay 20 days of salary per year of service up to 12 months is the dismissal is not for disciplinary reasons.

Different kinds of leaves in Spain

Each year there have to be at least 30 days of holiday. The holidays cannot be compensated monetarily and they cannot be carried to next year.

Employees can receive sick pay only if they have paid contributions for at least 180 days in the last 5 years. Sick leave is paid after the 3rd day of absence:

• Employees receive 60% of their average daily earnings, from the 4th to the 20th day.
• Employees receive 75% of their average daily earnings, from the 21st day to the 1st year of absence.
• Employees on sick leave due to work-related injuries, employers contribute  0.90% to 7.15% (usually 1.98%) of covered payroll. It varies  What injured employees receive depends on the time of disability:
  • Employees receive 75% of their average daily earnings if the disability is temporal.
  • Employees receive 55% of their average daily earnings if the disability is permanent but 76% if they are over 55.
  • Employees receive 100% of their average daily earnings if the disability is permanent to perform any type of work.

Two days of leave are given to employees after the death of a close relative. This can be extended through collective agreements.

Some benefits offered by employers include payment of meals up to 111€/day, payment of transport up to 1500€/year or free access to training courses.

Paid parental leave

Apart from sick leave, there is also maternity leave. It applies to biological parents, adoptive parents, guardians, and foster parents. During maternity leave, the employees receive 100% of their average daily earnings and social security payments. The first 6 weeks after birth need to be taken, and it can continue up to 16 weeks for mothers and 12 for fathers.

After the maternity leave, women can take one hour (or two half-hours) to breastfeed until the baby is 9 months old.

There is also the possibility to take a non-paid leave of up to 3 years. This also applies to the pre-adoptive period for adoptive parents.

Even if often is stated that employees receive 100% of their pay during parental leave, this is not completely true. There is a maximum pay which is the base of common contingencies. This amount in 2022 is 4,139.4€ a month. In other words, employees with higher salaries will have their wages reduced.

This can be avoided only if the employer does pay for the difference between the average salary and the base of contingencies. This practice is popular in positions where one of the main benefits included is work-life balance. Some companies doing that in Spain are Calvary Health Care and Mcafee.

Moreover, in order to enjoy parental leave, a minimum time worked is required:

• When the employee is under 21, there is no minimum period.
• When the employee is older than 21 and younger than 26, it should have worked at least 90 days in the last 7 years, or 180 days in all the working life.
• When the employee is older than 26, it should have worked at least 180 days in the last 7 years, or 360 days in all the working life.

Common benefits offered in Spanish companies

How to employ a Spanish worker

For a foreign company, to be able to hire a worker in Spain they need a registration number (CIF, Código de Identificación Fiscal). Once the company owns the CIF, it is registered on the tax and social security system. Income tax will now depend on the double taxation treaty with Spain of each country. 

Another possibility to employ someone in Spain is to set up a new limited company (an “SL”) in Spain. To do that, the minimum share capital is 3000€ and the shares can be owned by the parent company.

The last possibility is, if companies do not wish to be registered in Spain, they can only use workers in Spain if they are self-employed (the so-called “autónomos”). These individuals would provide the company with a monthly invoice for their services.

Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.

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