Your guide to Spain payroll

Spain is a great location to recruit remote employees in Europe. But to attract and retain top talent, you need to pay employees in Spain in a timely and reliable manner. And to do that, you also need to understand and comply with Spain’s payroll laws.

Payoneer Workforce Management can help companies foreign to Spain, like U.S. businesses, streamline payroll, including navigating contributions and deductions without setting up a local entity. 

Payroll in Spain: Wages and other payments

To set up a payroll in Spain, you need to understand local labor legislation and exactly what your employees are entitled to. This involves a working knowledge of payroll cycles, minimum wage laws, leave entitlements, and severance packages.

Spain’s payroll cycle

Spanish employers normally operate on a monthly payroll cycle and pay their employees on the last working day of each month.

Employees in Spain are typically paid in 14 installments across the year. This means that they receive 2 payments per month, twice a year. These are known as the 13th- and 14th-month bonuses. For most employees, these additional salary payments are mandatory under Spanish labor law and are typically paid in July and December.

Minimum wage

The minimum wage in Spain is EUR 1,381.33 per month. 

If your employee works more than their normal working hours, this is classed as overtime. Any overtime must be compensated either through rest periods over the next 4 months or additional pay. 

If you choose to pay your employee for their overtime hours, the rate should be specified in either Collective Bargaining Agreements (CBAs) or their employment contract. 

Typically, overtime pay is 1.75 times the normal wage.

Moreover, overtime has an annual cap of 80 hours.

Sick pay

Employees in Spain are entitled to paid sick leave when they are unwell for more than 3 days.

The first 3 days are unpaid. If the employee is unable to work for more than 3 days, their employer is responsible for paying them from the 4th to the 15th day. If they are still unwell after 15 days, the Spanish social security system will begin to pay them from the 16th day at 75% of their normal wage.

In Spain, the standard period of paid sick leave can last for up to 365 days, but in some cases, this may be extended by an additional 180 days. This means the maximum period of paid sick leave in Spain is 18 months.

Maternity and paternity pay

In Spain, new parents are entitled to 19 weeks of paid leave at 100% of their normal wage to care for their baby. This is paid by the Spanish social security system and not by the employer’s Spain payroll budget.

Severance packages

Spanish employees are entitled to severance pay if they are dismissed from their role for economic, technical, organizational, or production-related reasons.

Employers must pay employees in Spain 20 days of pay for every year they have worked for their company. The maximum severance pay in Spain is 12 months’ salary.

13th- and 14th-month salary

13th- and 14th-month salary payments are mandatory for most employees in Spain’s payroll system.

This means that their salary must be paid in 14 installments across the year. The additional 13th and 14th payments are typically paid in July and December each year.

Spain payroll: Taxes, contributions, and deductions

In Spain’s payroll system, you need to account for several mandatory contributions and deductions.

Income tax

In Spain, the employer must withhold income tax from their employees’ salaries. Spain’s payroll taxes are calculated based on applicable tax brackets.

Employee’s annual salary	Income tax rate
EUR 0 to 12,450	19%
EUR 12,450 to 20,200	24%
EUR 20,201 to 35,200	30%
EUR 35,200 to 60,000	37%
EUR 60,000 to 300,000	45%
EUR 300,000+	47%

Solidarity contributions

There is a new solidarity contribution for employees with yearly earnings over EUR 4,909.50 per month in Spain. This starts from 0.77% borne by the employer and 0.15% by the employee.

Social security and other contributions

On top of the solidarity contributions, employee and employer payroll taxes in Spain include social security contributions. 

Spain payroll compliance best practices

There are several best practices to help you stay compliant when setting up your payroll. 

Spain employers should always:

• Monitor tax law changes, labor laws, and statutory requirements
• Perform occasional payroll audits to identify any errors
• Provide ongoing payroll training to staff

You must also comply with all mandatory tax deadlines in Spain. 

If you’re finding it difficult to manage your Spain payroll and are worried about staying compliant, Payoneer Workforce Management can help your business to simplify and streamline the process.

How to pay employees in Spain

There are three ways to pay employees in Spain:

1. Set up a local entity: This allows you to establish a legal business presence in Spain, but it can be a complicated and time-consuming process.
2. Hire contractors: Instead of hiring employees, you may choose to work with self-employed contractors. They must not act like employees, or you could risk misclassification fines.
3. Use Payoneer Workforce Management: Payoneer Workforce Management can help facilitate the payroll cycle and assist with navigating local requirements. You can pay employees in Spain accurately and on time with compliance support.

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FAQs

1) How does payroll in Spain work?

Employers typically pay employees in Spain on the last working day of each month. When you set up a Spain payroll, you need to account for several mandatory contributions and deductions. These include income tax and social security contributions.

2) Does Spain have 14 salaries?

It is mandatory to pay most Spanish employees in 14 salary installments across the year. The additional 13th and 14th payments are typically paid in July and December.

3) How to calculate payroll in Spain?

To calculate your Spain payroll, begin with the employee’s gross salary. You must then deduct any mandatory employee contributions before subtracting income tax based on progressive rates. The final total is the employee’s net salary. Try out our employee cost calculator for a detailed breakdown of employment costs.