Article cover the EOR in Spain, country that boasts one of the largest economies in the EU, ranking fourth as of 2021 (figure one). The country enjoyed a significant economic resurgence in 2021, expanding by over 6% in a post-Covid bounce-back. Growth in the second half of 2022 is expected to slow down to 4.1% in 2022 and 3.3% in 2023, due to inflation concerns and other repercussions of the Russian invasion of Ukraine. This projected growth is faster than the overall Eurozone.
Spain’s better-than-average growth for the EU presents businesses with an enormous opportunity if they want to set up a local base in the country. Ensuring compliance with local labour laws is an important part of this process; here are some of the key points of EOR Spanish employment law:
Figure One. Latest economies in the EU (plus Switzerland and the UK)
The standard working week in Spain is forty hours on average and no more than nine hours per day. Union membership in Spain is quite high, and collective agreements might limit contractual hours further.
Terminating permanent employment contracts requires no less than fifteen days’ notice on the part of either the employee or the employer. Dismissal without notice is illegal and the employee can be reinstated if this occurs. Severance payments can begin at thirty-three days of salary for each consecutive year of employment.
Salaries in Spain are heavily influenced by collective agreements established through negotiations with unions. The minimum wage, as of July 2022, is 1,125.80 euro monthly. There is a ‘fourteen month’ annual payroll calendar, meaning that Spanish employees receive two bonus payments each year. These are typically prorated and paid halfway through the year, as well as at wintertime.
Employees in Spain pay social security, called Tesoreria General de la Seguridad Social (TGSS). Rates are currently 6% for employees (in addition to income tax) and 30.4% for employers.
Employees in Spain receive thirty calendar days of paid leave each year, with one holiday period mandated at two weeks long. There are eight further public holidays in EOR Spain. Annual paid leave can be negotiated like other parts of the contract.Â
Pregnant employees are entitled to sixteen weeks of paid maternity leave, with the same amount being given to the second parent too. Mothers must take six weeks of this leave when the baby is born, and the remaining ten weeks within a year of the birth.
Parental leave is granted to parents, usually after maternity and paternity leave, allowing mothers and fathers to take care of their young children without losing their jobs. Such a policy exists in all EU Member States and in Spain it is called Excedencia por cuidado de hijos. The policy design and eligibility rules vary across the EU and not all women and men in the EU are eligible for parental leave.
For sick leave, the amount of payment you receive depends on the type of illness or accident. For work-related illnesses or accidents, TGSS pays 75% of base salary from day two of the absence. For non-work-related illnesses, employers pay 60% of base salary starting from day four until day fifteen, then TGSS pays 60% from day sixteen until day twenty. From day twenty-one wards, the employee receives 75% of base salary, paid for by TGSS.
Private health insurance can be negotiated as part of a job offer, especially by more senior employees. Generally, health coverage in Spain is funded by TGSS.
Spanish contracts also offer other benefits such as pension schemes with employer contributions, unemployment insurance, and time off for volunteering.
Conclusion on EOR in Spain
Navigating the intricacies of Spanish employment law is a challenging but necessary part of setting up a business in Spain. Using a partner PEO Company, otherwise known as an employer of record, is a great way to allow you time to focus on getting your company up and running while leaving labour compliance to people with specialist knowledge and systems.
Acvian provides business owners with a one-stop-shop of tools and resources to ensure your business is compliant with Spanish labour law. Acvian’s tools include hiring and relocation support, as well as a payroll cost calculator to ensure your employees are paid correctly. With Acvian’s guidance and expertise, you are in no better place to take your business to the next level in Spain.