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Spain – Employer of Record

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Country Introduction – Spain

Capital – Madrid
Currency – Euro
GDP – 1.427 trillion USD (2021)
People/Nationality – Spanish
Language – Spanish
Major Religion – Christianity
Population – 47,507,330 (as of October 6, 2023)

Spain has a diverse and highly developed economy that is considered the 14th largest in the world by nominal GDP. It is a member of the European Union, the Eurozone, and the World Trade Organization, contributing significantly to global trade and commerce.

It is one of the world’s leading tourist destinations, renowned for its rich cultural heritage, beautiful beaches, and vibrant cities. Tourism plays a vital role in the Spanish economy, attracting millions of international visitors each year. Spain has a strong industrial base, including sectors like automotive, aerospace, pharmaceuticals, and renewable energy.

The country is a major automobile producer and exporter. It is a significant producer of agricultural products, including fruits, vegetables, olives, and wine. It is one of the largest wine producers in the world.

Living in Spain can be a vibrant and enriching experience. The country offers a high quality of life with a pleasant Mediterranean climate, a rich cultural heritage, and a relaxed lifestyle. Overall, Spain’s economy reflects a mix of traditional industries and modern sectors, making it a dynamic player in the global economic landscape.

Contract of Employment

In Spain, it is mandatory to provide a written employment contract to the employee, detailing the terms and conditions of employment. Types of Employment Contracts:

Temporary Contract: This type of contract is for a specific period or for a specific task. There are different subtypes of temporary contracts, each with its own regulations.

Permanent Contract: This is an open-ended contract without a specific termination date. Permanent contracts provide more job security to employees.

Training and Apprenticeship Contract: This type of contract is designed for employees between the ages of 16 and 25, providing training and work experience simultaneously.

Probation Period

The typical probation period for employees in Spain is three months. In the case of indefinite-term contracts, which are the most common type of employment contracts, the legal maximum probation period is six months. For non-qualified workers, the maximum probation period is two months.

Termination

In Spain, the termination period, also known as the notice period, can vary depending on the circumstances and the type of employment contract.

Indefinite-Term Contracts: For permanent contracts, the notice period typically ranges from 15 to 30 days. The specific duration often depends on what is stipulated in the employment contract or collective agreement. Employers are required to provide notice to terminate an indefinite-term contract unless there is a valid reason for immediate termination, such as serious misconduct by the employee.

Fixed-Term Contracts: The notice period for fixed-term contracts is usually equal to the remaining duration of the contract, with a minimum of 15 days. For example, if there are three months left on the fixed-term contract, the notice period would be three months.

Probationary Period: During the probation period, the notice period is typically shorter. It can range from 7 to 15 days, depending on the terms agreed upon in the employment contract.

Immediate Termination: In cases of serious misconduct by the employee, immediate termination without notice is possible. However, the employer must be able to prove the serious nature of the misconduct.

Working Hours

The standard working week in Spain is 40 hours.

Overtime

Overtime is usually calculated on a daily or weekly basis, depending on the specific situation. If an employee works beyond the standard 40 hours per week, those additional hours are considered overtime.

13^th Month Pay

In Spain, there is no legal requirement for employers to pay a 13th-month salary, commonly referred to as a “Christmas bonus” or “extra month’s pay.” However, some employers in Spain may choose to provide their employees with a bonus or additional payment at the end of the year, especially as a gesture of goodwill or as part of the company’s policies.

Annual Leave

In Spain, employees are entitled to a minimum of 30 calendar days of paid vacation leave per year. This vacation time is usually divided into 22 working days (Monday to Friday) and 8 public holidays.

Sick leave

During the first 365 days of sick leave, employees are generally entitled to receive sick pay from their employer. The duration of sick leave can be extended if the employee is not yet fit to work after the initial period. Employees are typically entitled to receive a percentage of their salary as sick pay.

The specific percentage and duration of sick pay can vary based on the employment contract, collective bargaining agreements, and the employee’s years of service with the company.

Maternity and Paternity Leave

Pregnant employees in Spain are entitled to 16 weeks of maternity leave. This period includes the time before and after childbirth. After childbirth, mothers are required to take a minimum of 6 weeks of maternity leave. The remaining weeks can be taken either before or after childbirth, as chosen by the mother.

Fathers in Spain are entitled to paternity leave of 16 consecutive weeks, which can be taken uninterruptedly or divided into different periods within the first six months after the birth or adoption of the child. In the case of multiple births (e.g., twins or triplets) or adoptions of more than one child, the paternity leave period is extended by two weeks for each additional child beyond the first one.

VAT / GST

Here’s a breakdown of the VAT rates in Spain:

Standard VAT Rate: The standard VAT rate in Spain is 21%. This rate applies to most goods and services, including electronics, clothing, and non-essential items.

Reduced VAT Rate (10%): A reduced VAT rate of 10% is applied to specific items such as food, water, books (including e-books), pharmaceutical products, hotel accommodation, and passenger transport services.

Super Reduced VAT Rate (4%): The super reduced VAT rate of 4% is applied to essential items such as basic foodstuffs, certain medical products, and cultural events.

Income Tax

Progressive Income Tax Rates for 2021:

Employer / Employee Contributions

Employer Contributions:

Social Security Contributions: Employers are responsible for paying social security contributions based on the gross salary of their employees. The social security contribution rate depends on the type of employment contract, with different rates for permanent contracts and temporary contracts. Employers also pay contributions for accidents at work and occupational diseases.

Unemployment Insurance: Employers contribute to the Unemployment Fund, which provides benefits to employees who lose their jobs. The contribution rates for unemployment insurance vary based on the type of contract and the duration of the contract.

Professional Training: Employers are required to contribute to the Professional Training Fund, which supports training and skill development for employees. The contribution rate varies based on the size of the company and the sector.

Employee Contributions:

Social Security Contributions: Employees also contribute to social security funds based on their gross salary. The employee’s social security contribution rate is deducted directly from their pay check.

Income Tax: In addition to social security contributions, employees are subject to income tax (IRPF) based on their taxable income. The income tax rates are progressive, with higher incomes taxed at higher rates.

Public Holidays

In Spain, public holidays, known as “fiestas” or “días festivos,” can vary by region because some regions have their own public holidays in addition to the national ones.

January 1 – New Year’s Day
January 6 – Epiphany
Good Friday – Date varies based on the Christian calendar.
May 1 – Labour Day
August 15 – Assumption of Mary
October 12 – Spanish National Day
November 1 – All Saints’ Day
December 6 – Constitution Day
December 8 – Immaculate Conception
December 25 – Christmas Day

Severance Pay

In Spain, severance pay varies based on the type of employment contract and the reason for termination:

Permanent Contracts:

Unjustified Dismissal: 33 days of salary per year of service (up to 24 months’ salary).

Justified Dismissal: 20 days of salary per year of service (up to 12 months’ salary).

Temporary Contracts:

Fixed-Term Contracts: 12 days of salary per year of service upon contract expiration.

Temporary Contracts Converted to Permanent: Severance pays follows permanent contract rules.

Collective Redundancies:

20 days of salary per year of service (up to 12 months’ salary) for affected employees in layoffs.

Severance pay regulations are subject to change, and specific circumstances may influence the calculation.

Work and Residence Permits (Expatriates)

For expatriates in Spain:

EU/EEA/Swiss Citizens:

No work permit needed. For stays over three months, registration is required.

Non-EU/EEA/Swiss Citizens:

– Work permit required for employment.
– Different residence permits available (work-related, entrepreneur, highly qualified professional).
– Complex application process involving document submission and approval.
– Temporary permits can be renewed and permanent residency may be possible after several years.