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PEO & Employer of Record in Spain: A Comprehensive Guide

Spain’s strong culture and pro-employee laws are common reasons for seeking out a Professional Employer Organization (PEO). Despite numerous economic hurdles over the past decade, Spain has shown impressive growth. Currently, they’re ranked highly in infrastructure and continue to lead the EU in worldwide exports. A PEO can be invaluable if you’re considering the country for a test market.

Why Use a Spain PEO

A Spain PEO assists businesses in hiring staff without the need to form a formal organization. While new hires and headquarters teams focus on the business goals, the PEO manages all human resource activities, benefits, payroll, and taxes. Establishing a subsidiary or branch office in Spain is not always ideal for hiring staff because it is time-consuming and costly. Hiring viaa Professional Employer Organization (PEO) or Employer of Record (EOR) is a more efficient and effective choice, especially when launching a business in a new nation. Working with a PEO/EOR in Spain provides numerous benefits beyond accelerating your company’s growth. Their ability to generate legal contracts, manage recruits and handle a host of HR-related tasks ease the pressure of your internal team.

Spain PEO Costs

Typically, PEOs follow either a fixed or variable pricing model. A professional PEO based on the fixed pricing model will cost you anywhere between $500 – $1,500 per employee per year. However, several factors determine the final amount. A PEO may charge a flat fee per employee or a percentage of your company’s annual payroll. Multiplier’s PEO solution has an employee-based pricing model. Our PEO pricing covers international payroll, multilingual contracts, benefits administration, expenses, and leave management. The final cost may change according to the complexity of the employee’s jurisdiction and employment laws. Our straightforward and convenient Spain EOR services ensure you can run payroll and benefits for your international employees with zero hassle. Multiplier is a comprehensive and flexible PEO platform offering an effortless experience in global HR management.

How to hire in Spain

Spain’s employment laws are unique, and the various industries/job types have specific regulations you must know. Therefore, you must always completely understand the legal requirements relevant to your industry before expanding and hiring in Spain.

Employment Contract

You must follow certain laws regarding notice periods and termination obligations while hiring in Spain. Furthermore, you must also write and execute a formal contract for each employee that includes the following:
  • Your (employer) name and address
  • Job role
  • Place of work
  • Professional group or category
  • Total working hours
  • Work schedule and work hours
  • Date of commencement of employment (and termination, if necessary)
  • Duration of the notice period
  • Salary (Gross, Net and Base)
  • Holiday and sick leaves
  • Collective bargaining agreements
Most new employees in Spain are given a two or six-month probationary period. If the relationship does not work out during probation, you have the right to fire the employee. Certain restrictions limit the termination of employees on an indefinite contract without a probationary period. The Spanish law imposes severe fines if you fire an employee unfairly. The severance pay in such cases typically ranges from 20 to 33 days of pay, including average bonuses and commissions, for each year of employment. If the business wants to fire the employee immediately, it must pay an extra month’s salary as a penalty for failing to give notice.

Payroll and Taxes

You must pay a social security tax for each of their employees. This tax usually amounts to 29.9% of an employee’s pay up to 4,070.10 euros. Moreover, you must pay local and national taxes in Spain, which include the following:
  • Branch profit tax
  • Capital tax
  • Corporate income tax
  • Real property tax
  • Value-Added Tax (VAT)
  • Miscellaneous local tax
New employees are also liable to Spain’s progressive income tax, which rises in tandem with the worker’s wage. Non-residents must additionally pay withholding taxes on profits, interest, and royalties, ranging from 19 percent to 24 percent. However, they can benefit from the Beckham Law, which permits non-resident employees to pay a fixed income tax rate of 24% for up to six years. The following people qualify for the Beckham law:
  • Foreign employees and administrators who have moved to Spain for work
  • Expats with a high income and management position in a company

Wages and working hours

In Spain, the typical workweek is 40 hours; however, you can choose to reduce this to 37 or 38 hours. You may distribute that time as per the employees’ convenience, with some weeks including more than 40 hours and others containing fewer, if permissible by the Collective Bargaining Agreement (CBA). Overtime is legal, and employees may earn overtime compensation in the form of additional pay or time off within four months. On the other hand, paid overtime may not exceed 80 hours per year unless there are exceptional circumstances.

Time off

Spain recognizes 10 national holidays and 4 regional or local public holidays. You must also provide 22 working days or 30 calendar days of paid time off every year, as specified by the CBA. The employees cannot transform the time off into additional compensation; hence, they are motivated to take all their paid vacation days.

Sick Leaves

Spanish employees are entitled to 60% of their regular pay in case of sickness or accident. If the employee contracts a common disease or a non-work-related injury, they are provided leaves and pay according to the given table:
Leave Pay
1 – 3 days (3 days) 0% (The employer has no obligation to pay unless they agree to reimburse or the pay is stated in the CBA)
4 – 15 days (12 days) 60% paid by the employer(60% of the employee contributions base paid by the employer)
16 – 20 days (5 days) 60% paid by Social Security (Even if the employer makes the payment on behalf of the social security)
21 days and more 75% paid by Social Security (Even if the employer makes the payment on behalf of the social security)
Additionally, employees in Spain are entitled to 16 weeks of paid maternity and paternity leave. The mother must take 6 weeks of leave immediately after childbirth. The mother can distribute the remaining 10 weeks within 12 months of childbirth as per her comfort. When the employee’s paid leave is finished, she can take another year of unpaid child care leave with the assurance that her former job will be available when she returns. She may also take a second unpaid child-care leave, but it will not secure her job.

Why Multiplier?

Managing HR operations in a workplace can be demanding, especially if your business is overseas. Apart from payroll processing and tax filing, having an international workforce means remaining compliant with foreign laws. To make matters more complex, governments and local authorities keep updating legislation from time to time. This is where you need a reliable PEO to navigate the intricacy of international employee management. Multiplier’s professional PEO in Spain serves as the co-employer of your workforce, providing risk-free and dependable support in onboarding, payroll management, benefits, compliance, and other HR-related activities.

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