Expand your organization into Spain — without a Spanish entity
As a developed Western European country, Spain is a common destination for many organizations looking to expand their operations. Large cities such as Madrid and Barcelona have significant economies, and the country is renowned for a highly educated professional workforce.
In addition, Spain is well-integrated into EU supply chains, constituting a significant source of goods traded throughout the EU.
For these reasons, many foreign businesses look to build a presence in Spain.
While Spain is an excellent place to expand, the relaxed business culture can be a shock to many organizations, and delays are commonplace. The language barrier is a common hurdle, but administrative procedures, regional variations, cultural differences, and long waiting times can also hold businesses up and cause costs to spiral unexpectedly.
We specialize in expansion solutions to support foreign organizations setting up in Spain. Our Spain PEO & Employer of Record, or payroll outsourcing services, give you everything you need to expand your business, without the need for a formal entity in Spain.
Our in-house talent acquisition team can even recruit your local workforce for you, as well as handling any ongoing HR, payroll and compliance management. Our team will provide everything you need to expand into Spain rapidly, while potentially saving you thousands in setup costs.
Our Spain PEO simplifies your expansion
Our Spain Employer of Record solution supports businesses expanding into Spain, removing the need to set up a local legal subsidiary.
Employment & Labor Laws in Spain
Employment contracts in Spain
Spain’s employment laws are unique, and industries/job types can have their own sets of regulations. It is therefore important that you always completely understand the legal requirements relevant to your industry, before expansion and hire in Spain.
You should always provide new employees in Spain with a formal contract of employment with all relevant details of the employment agreement. This should be written in Spanish, with any references to compensation using the local currency of the Euro.
Note, it is a legal requirement to have a written employment contract for temporary employment contracts of more than four weeks.
Employees will usually expect a non-fixed-term contract, as these carry more legal protections than a fixed-term contract.
Note, if employees are to be engaged as remote workers, a remote working agreement is also required. This sets out how the employee will be reimbursed for remote work expenses, health & safety, and general remote working conditions. It is a requirement of Spain’s remote working law, passed into law in late 2020.
By partnering with our Spain Employer of Record & PEO, a team of local experts can provide assistance for drafting strong employment contracts that are compliant with local regulations.
Working hours in Spain
The normal working week in Spain is 40 hours, and most office employees work Monday to Friday. Some businesses may offer an extended lunch break, but this is based on individual preference.
Throughout the work day, a 15-minute break is required after six continuous hours of work.
Employers in Spain are required to provide workers with a minimum of one and a half days uninterrupted rest per week.
Public holidays in Spain
Spain has nine national public holidays that are recognized across the country.
There are also region-specific holidays in areas such as Catalonia, which is an autonomous region with many of its own administrative procedures and regulations.
Spain vacation leave
Employees in Spain usually receive 22 days of paid vacation leave per year, in addition to the public holidays.
While this 22 days can generally be broken up as the employer and employee would like, the employee is entitled to at least two consecutive weeks of vacation.
Spain sick leave
Employees in Spain can receive 60% or more of wages when they are unable to work through sickness or injury. This is covered by the government (although employers may need to pay and then receive a refund), and must be reviewed every 18 months.
Some employers may choose to contribute more to sick employees, but this depends on individual employment contracts and agreements.
Parental leave in Spain
Mothers in Spain can take up to 16 weeks of paid maternity leave, at least six of which need to be taken after birth. To receive this benefit, the mother has to have paid social security benefits for at least 180 days in the last seven years (or 360 days across their lives). Standard paternity leave is 30 paid days.
Mothers can also take up to one year of unpaid maternity leave and are legally entitled to resume the same role. They can take another two years, but will not have a guarantee of returning to their role afterward.
There is also a tax deduction for working mothers of 1200 euros per year for each child under three years of age.
Terminations and severance in Spain
When employees on indefinite-term contracts are terminated in Spain, a severance payment of around one month’s wages per year of employment is usually due. Also, an additional month of pay is usually paid upon termination.
Note, hiring and termination in Spain is not ‘at will’ as it is in the United States. It is only permissible to terminate employment ‘with cause’, where possible grounds are prescribed by law. Those possible grounds are:
- Consensual Dismissal. This applies in the case of employee resignation or the expiration of a definite term contract
- Objective Dismissal This occurs, for example, where the dismissal is a result of restructuring and that position being made redundant
- Disciplinary Dismissal. Under this ground, a fair process must be followed before an individual is terminated, which includes notice and mediation/conciliation.
Where an individual is terminated for disciplinary reasons, there is no requirement for severance payments.
These rules do not usually apply for employees in a probation period, which is generally two months, but can be more for certain roles.
Workers who feel they have been unjustly terminated can take legal action, which may complicate matters.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. A Spain PEO can mitigate risk for foreign companies and provide guidance through this process.
Taxation in Spain
Spanish workers are taxed progressively, so higher earners pay more in taxes than those at lower incomes. The tax rate is between 19% and 45%.
Corporate tax is set at 25%, although other taxes may apply depending on the specific circumstances.
Employers need to contribute to a social security fund which comes to around 30% of each employee’s salary, with an upper limit of just over €3,500.
Health coverage in Spain
Spain has a social healthcare system that is funded by the government, so employers do not need to offer private health insurance. However, some companies do choose to, particularly for senior-level positions, and it can be a desirable feature for many potential employees.
Spain compensations & benefits
Compensation Laws in Spain
As of June 2020, the minimum wage in Spain is €1,108.30 per month. Some roles and industries may have a higher minimum if this has been negotiated and agreed upon.
Benefit management in Spain
Establishing a Spanish benefits system for your workforce can be difficult as a foreign organization. With the language and cultural differences, and a complicated, unique collection of employment laws, running a comprehensive and compliant benefits system can be very time-consuming
A Spain Employer of Record, specializes in administering Spanish employee benefits systems. We’ll handle everything, using our experience to ensure you are ready to commence operations in Spain quickly and efficiently.