What global businesses need to know about payroll in Spain
Tourism is a vital part of Spain’s economy, and the country is closing in on France as the most visited tourist destination in the world. However, the protests in areas of Spain in 2024 about over-tourism demonstrated that its employment and business landscape is about much more than sun, sea, sand and sangria.
Spain has the 15th-largest economy in the world by GDP, and the fourth-largest in the European Union, after Germany, France and Italy. It seems remarkable to think that Spain only transitioned to democracy as recently as the late 1970s, as it has transformed into a successful, service-driven economy that has modernized rapidly.
The Spanish workforce is well-educated and skilled, and with youth unemployment running at around 25%, there are many good employees that are keen to work. This factor (among others) means that labor costs are relatively low by European standards. Meanwhile, Spain’s historical links with Latin America – dating back to its discovery and conquest of much of the Americas in the 1500s – gives it a powerful position on the world economic stage, backed up by a reliable currency in the euro.
Spain’s payroll and employment laws can be complicated, and collective bargaining has a very heavy influence on pay and conditions. Read on to discover all the key facts around running payroll in Spain.
Getting Started
There are two types of company that can be set up: a Sociedad Anónima (S.A.), meaning a corporation, or a Sociedad Limitada (S.L.), meaning a limited liability company.
The first steps to ensuring payroll success in Spain are to become familiar with the country’s labor laws, and how to register a company with the national trade registry, the Registro Mercantil Central (RMC). The requirement to register applies to all businesses operating in Spain, including branch offices of foreign companies.
The key steps to business set-up in Spain include:
- All the partners/directors involved in setting up the company obtaining tax identification numbers (NIEs)
- Submitting five choices of company name to the RMC, in order of preference; they will grant you the highest-ranked name that isn’t already taken and doesn’t conflict with other businesses
- Opening a Spanish bank account and deposit the initial capital, which is normally €3,000 (approx. £2,500; $3,150)
- Visiting a notary to confirm the deed of constitution (this will need to be done in Spanish, so a translator may be required)
- Submitting the deed to the RMC
- Registering with the tax and social security office
- Obtaining a contribution account code (CCC) in order to hire workers and process their payroll
Employment Considerations
Many regulations around pay and working conditions in Spain are defined by collective bargaining agreements. These are not only agreed between worker unions and individual businesses but are often also applied to specific sectors in certain geographical areas. For example, a sectoral collective bargaining agreement exists in the Malaga area for the hospitality industry, principally to cover workers in the hotels, bars and restaurants on the Costa del Sol.
Companies must register each employee’s contract with social security authorities and the national employment service. New contracts must be registered with social security any time before the start of employment, and with the Public Employment Service within ten days following the employee’s start of employment.
In line with many other European countries, Spain has a standard working week of 40 hours, made up of five eight-hour shifts. The traditional ‘siesta’ break, where businesses close from around 2pm to 5pm, and then reopen for the early evening, is still commonplace (especially outside the bigger cities). Overtime is paid at 175% of normal salary, and is limited to 80 hours per year; both of these parameters can be adjusted through collective bargaining.
A gap of at least 12 hours must separate the end of one working day and the start of the next, and this is now being rigorously enforced. In May 2019, a new law came into force in Spain obliging businesses to record the daily working hours of all their employees, and to retain these records for four years.
Probationary periods are normally two or three months, rising to six months for highly specialized work; again, this can be revised through collective bargaining negotiations. Notice periods are a minimum of 15 days, and employers can offer payment in lieu of notice; there is no notice period during probation.
Compensation, Bonuses and Severance
There have been regular increases in Spain’s national minimum wage rate in recent years, and more are likely in the years to come. As of 2025, the rate is €1,184 per month (approx. £985; $1,250) – however, employees normally get 14 monthly payments per year to include the annual bonuses. This means the annual minimum wage is €16,576 per year (approx. £13,700; $17,300). Discretionary bonuses and pre-agreed bonus structures are commonplace.
Employers in Spain must pay their employees on a monthly basis, or more frequently depending on the employment contract or collective bargaining agreements. All payments must be made by check or direct bank deposit, and the employer must provide a payslip with the amount of payment and withholdings to be signed by the employee.
Employees who work from home at least 30% of the time are now entitled to a Remote Working Allowance, so that the cost of the equipment they need to do their jobs from home is covered by employers. The exact amounts are to be negotiated, often by collective bargaining.
Severance pay is 20 days’ pay per year of service, up to a maximum of a year’s salary. This rises to 33 days’ pay per year of service in the case of an unfair dismissal. In the event of large-scale redundancies, employers normally negotiate a severance agreement through collective bargaining.
Tax and Social Security
Employers in Spain must deduct income tax from their employees’ paychecks. The tax is divided into two equal halves – state tax and regional tax – but rates can vary slightly between Spain’s different states and autonomous regions.
The first €12,450 earned per year (approx. £10,300; $13,000) is taxed at 19%, after which the next band of 24% kicks in. Further bands of 30%, 37% and 45% are then applied, before the highest rate of 47% for all earnings over €300,000 per year (approx. £249,000; $314,000). Non-residents are generally taxed at 24%, but a lower rate of 19% applies to non-residents from a number of countries in the EU and the European Economic Area (EEA).
While most employers in the country will have to submit these payments to Spain’s Tax Authority, employers in the Basque and Navarra regions will submit income taxes to local authorities. In addition, there are rules establishing when the company must submit its tax payments; those with more than €6,010,121 to pay in tax revenue are required to pay taxes on a monthly basis, while all other employers must do so on a quarterly basis.
Spain has a variety of social security contributions, most of which have to be covered by employers and which should be remitted to the authorities monthly:
- Social security: 24.27% employer, 4.83% employee
- Unemployment: 5.5% employer, 1.55% employee
- Professional training: 0.6% employer, 0.1% employee
- Salary Guarantee Fund: 0.2% employer
- Work accident insurance: 2.05% employer
- Solidarity contribution: 0.76-0.97% employer, 0.16-0.2% employee (only on earnings over €4909.50 per month)
Holidays and Leave
Spain has nine days of national public holidays each year, plus a substantial selection of regional holidays that are served in different places. Employees should receive a total of 14 paid days off for public holidays annually. National holidays that fall on weekends don’t normally generate a day off in lieu, but this does happen with some regional holidays.
Paid leave entitlement is 22 days per year, which can be increased through collective bargaining, although unused leave can only be carried over to the following year in exceptional circumstances.
Sick leave is unpaid for the first three days, then paid by employers at 60% of normal salary for the following 17 days, and at 75% thereafter. However, employers can claim back all payments made from the 16th day onwards from social security.
Maternity leave is compulsory for the first six weeks post-birth, and most mothers also take two weeks’ breastfeeding leave after this. Within the first year post-birth, mothers can also choose to take ten weeks of further maternity leave, or work 20 weeks at half their normal hours. Social security covers maternity pay at 100% of salary up to a maximum of €4,909.50 per month (approx. £4,070; $5,140). The arrangements for paternity leave are identical to maternity, minus the breastfeeding leave.
Spain also allows paid leave for a variety of other major life events. These include 15 days for a marriage, one day for moving house, and unlimited time for civic or jury duties.
In Summary
There’s lots to love about doing international business in Spain, but as this guide demonstrates, there’s plenty to be wary of from payroll and employment perspectives. In particular, the heavy influence of collective bargaining, and the different rules and arrangements across regions can lead to added complexity for payroll teams. We recommend working with a global payroll partner that can help you access local expertise; that way, your organization can fully understand all the ins and outs when it comes to running payroll in Spain.
This guide is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional. Click here to see more country payroll guides from CloudPay.