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Employer Of Record In Spain

Employer Of Record In Spain

Skuad offers Employer Of Record solutions that accelerate and digitize the expansion of your company in Spain without any need to create a subsidiary in the country. Spain’s growing GDP puts it among the top 15 economies globally, and its talented professionals are looking to collaborate with companies in the international arena. With experience and expertise in the Spanish mainland, Skuad makes the perfect partner for developing your business south of the Mediterranean Sea.
Utilizing the Skuad platform gives you an immediate edge over your competitors. By leveraging Skuad’s high-tech infrastructure and network from across the world, you can get easy access to the best talent in Spain. While Skuad busies itself hiring, contracting, paying, and complying with the complex set of Spanish labor laws, you can channel all your energies to set up and scale your business. Learn about our offerings here.

Spain At A Glance

Population: 47.43 million (2020)

Currency: Euro (EUR, €)

Capital city: Madrid

Languages spoken: Spanish

GDP: $1.45 trillion

Employment In Spain

As with most nations in the EU, finding jobs in Spain is notoriously tricky as Spain’s labor laws heavily protect the country’s labor market and give major preference to native employees. Traditionally, the compliance burden has always been heavy and time-consuming for employers in Spain as there are several legislative requirements in the country. However, the recent economic strife has forced Spain’s judiciary to increase reforms in their labor laws and embrace flexibility in the job market. 

Skuad is a Global HR platform that builds remote teams for SMEs and MSMEs around the globe. As your local payroll partner in Spain, Skuad can utilize its extensive knowledge of Spanish labor laws to safeguard your interests and ensure a smooth, uncomplicated recruitment experience for your company. 

By partnering with Skuad, firms can recruit, onboard, and manage remote teams in over 150 countries. While you focus on boosting your growth, Skuad looks after employment contracts, payroll, compliances, benefits, and a whole host of HR responsibilities for your company. With a tech-first approach, Skuad is a self-serve, centralized, and truly automated HR platform.

Title Explanation
Statutory Working Hours 40 hours per week
Mid-Day Break (Siesta) A traditional 1-2 hours of a break around lunchtime. These days, several firms allow 1-1.5 hours to enjoy meals in their office building, restaurants, or lunchrooms.
Overtime Eligibility Workers can work overtime for a maximum of 80 hours every year. This is not inclusive of
  • Overtime to compensate for rest
  • Work to mitigate/fix urgent damage
Paid Public Holidays 14 public holidays annually, out of which 2 are local. National holidays include
  • Christmas
  • New Year’s Day
  • Labor Day
  • Spanish National Day

Any public holiday due on a Sunday is transferred to the coming Monday.

Holiday Pay Apart from 14 public holidays, employees get a minimum of 30 days of paid vacation.
Medical Leave The government sets the minimum guaranteed percentage of salary in case of absence due to an illness or accident. The Collective Agreements may direct a firm to pay the extra dues.
Maternity Leave and Paternity Leave

Mothers get 16 weeks of leave, of which the first 6 are mandatory to be taken after birth. The salary for this period is directly given to the mother’s social security, albeit only to a specific limit. Firms can make additional payments if necessary.

Beginning in 2021, fathers are entitled to 16 weeks of paid paternity leave. Similar to maternity leave, the first six weeks of paternity leave must be taken immediately after birth.

Disclosure And Confidentiality Of Personal Information Spanish labor relations are governed by the Organic Law 15/1999 of December 13 on Protection of Personal Data.
Anti-Discrimination Law Employers cannot discriminate against employees on the grounds of gender, race, ethnicity, religious belief, marital status, sexual orientation, political belief, union affiliations, social status, or language.


Contractors Vs. Full-Time Employees

Spain’s labor laws compel employers to commit to their employees. Employers usually have to sign a contract with their employees, spelling out the terms and conditions of employment. The employees usually have two choices — fixed-term contracts or indefinite contracts (permanent). 

Fixed-term contracts are valid for a set time, like 6 months or a year, and are helpful for firms that want to test the performance of new employees before hiring them permanently. Moreover, employers do not have to offer a notice period before terminating a fixed-term contract. 

However, the rules dictate that employers cannot offer a person more than two successive fixed-term contracts for the same job position, each lasting a maximum of 12 months within a 30 months period. Once this time is exceeded, the employee becomes full-time and is automatically offered an indefinite contract.

Hiring In Spain

The hiring system in Spain is regulated and controlled by the government to guarantee the protection of the employees’ rights. The regulations are complicated: jobs are categorized based on a variety of regulations known as Collective Agreements. Simply put, a Collective Agreement is a tool through which employers and employees negotiate the terms and conditions of the employment. They legalize work, working conditions, repayment of obligations, etc., and are renewed annually. 

Commonly, employers log on to jobseekers portals like LinkedIn and InfoJobs to search for new employees. Although LinkedIn is popular globally, InfoJobs is specifically targeted to the EU region. Recruiting new employees through such portals or social media adverts has its benefits. For one, they may find information on various probable applicants. Multiple sources also mean a reduced risk of not finding a talented person for the job. 

However, human resourcing is a complex and cumbersome process, and in a heavily regulated job market like Spain, it is easy for an organization to misstep compliance. Therefore, in Spain, the hiring process is best serviced under the guidance of professionals. 
That’s where Skuad steps in. As your Employer Of Record, Skuad can virtually manage your entire HR process in compliance with the local Spanish law. While an experienced team at Skuad hires and manages the top talent in the country for you, you can focus on more important work like expansion, operational management, and marketing. Learn more now.

Probation And Termination

In Spain, the time of probation is defined by the Collective Agreement of the said job profile. But, in the absence of a Collective Agreement, the trial time cannot exceed 

  • 6 months for undergraduates / junior college specialists
  • 2 months for all others

Permanent contracts, training contracts, and special employment contracts have their own stipulated probation period.

Title Explanation
Resignation Employees need to provide a minimum of 2-3 weeks of notice, depending on the Collective Agreement.
Termination of Employment

If it is a dismissal due to budgetary, structural, or operational issues, the organization must give a 15 days notice. Indemnity in such a case will be equal to 20 days of gross salary for every year served.

In case of dismissal due to a disciplinary reason, no notice or indemnity is due.

For all other reasons, firms traditionally owe 33 days of gross salary for every year served with a cap of 24 months and no prior notice.


EOR Solution

Working with an Employer Of Record is the best way to enter a complex labor market like Spain. An EOR like Skuad decentralizes the entire HR process and is cost-saving in the long run. With Skuad’s remote and virtual HR platform, you do not need to set up a subsidiary on the Spanish mainland anymore. 

Moreover, outsourcing employment through Skuad’s EOR solutions in Spain means that you do not have to worry about compliance or legal hurdles. The seasoned professionals at Skuad ensure that all local Spanish laws are complied with and your company’s function in Spain remains smooth and hassle-free. 
Custom-made employment contracts as per specific requirements, quick amendments to the existing agreements, and the convenience of e-signing documents are just some of the many additional advantages of working with experienced EORs like Skuad

Types Of Visas In Spain

It’s important to note that the family members of foreigners have to apply jointly or individually for their work and resident visas if they wish to accompany the said foreigners to Spain. Spouses do not get work permits without job offers.

Title Explanation
Golden Visa (or Investor Visa) Non-resident foreigners, who have made a significant capital investment in Spain, can apply for this visa. The said investment can be:
  • €2 million in Spain’s public debt securities.
  • €1 million in shares of Spanish companies doing real business activity.
  • €1 million in Spain’s investment funds, venture capital funds, closed-end investment funds, etc.
  • €1 million in bank deposits.
  • Purchase of Spanish real estate worth a minimum of €500,000.
Entrepreneur Visa

This visa is for entrepreneurs whose innovations are considered to be of special economic interest to Spain.

The government reviews the business plan, the profile of the applicant, and the potential economic benefit that may arise from such an innovation.

Highly Qualified Visa This visa is for highly skilled workers that have been hired in top positions as managers or other technical professionals in Spanish companies. As a general rule, their yearly salary should be more than €50,000.
Visa For Temporary Residency and Research Work This visa is designed specifically for foreigners coming to Spain for research and development purposes or those who are looking to innovate in public or private organizations.
Intra-Company Transfer Visa This visa is for foreign employees within a multinational entity based in Spain, who have been transferred to Spanish territory under a professional relationship or for training.
Self-Employed Work Visa This type of visa is for foreigners who are either freelancers, independent contractors or wish to open or purchase a new business in Spain. Such foreigners have to apply for a residence permit within a month of their arrival in Spain. After 5 consecutive years of holding the residence permit, they can apply for permanent residency.
Frontier Worker’s Permit This is a special permit card issued to employees or self-employed people who are residents of the frontier in a neighboring state, to which they return daily. The duration of this visa is 3 months to a year, with options for extensions.
Seasonal Work Permit This is a non-renewable, non-transferable visa given for temporary or seasonal activities in Spain. It is valid for a duration of 9 months within a year.
Cross-Border Work Permit This permit allows non-EU foreigners to work for a client of their Spanish employer or for a subsidiary of a foreign firm located in Spain. It is valid for 1 year and can be renewed for an additional year.
Blue Card Work Permit This is an exclusive permit for EU blue card holders who have lived for a minimum of 18 months in another EU country. These permits are usually given to highly qualified employees with proven higher education or those with a minimum of 5 years of work experience. Blue card work permits are valid for 1 year and can be renewed for 2 extra years, post which the foreigner can apply for permanent residency. A Blue Cardholder can:
  • Live and work in Spain
  • Freely move for business for up to 90 days in the entire EU

Work Permit

Getting Spain’s work permit is a lengthy, scrutiny-heavy procedure. As such, the country prefers hiring native citizens over foreigners. This is mainly due to the restrictive policies of the Spanish government, which were adopted as a cure for the rampant unemployment in the country. However, with their recent economic downturn and a global pandemic, the authorities have gradually relaxed their immigration policies.

Skuad has a rich network of local partners in Spain that can assist in processing work and residence permits for foreigners in the country. As a reputed EOR in Spain, Skuad looks after all the essential rules and obligations related to local employment. On Skuad’s virtual and fully automated HR platform, you can review your remote employees’ performance and operations from anywhere in the world. Book a demo now.

Work Permits Explanation
Can Skuad Sponsor Work Permit In Spain? Yes
Processing Time Usually 4-6 months, but it can take up to 8 months as well
Work Permit Process

Step 1: Spanish employer applies for a suitable work permit of the foreign employee at the Immigration Office with relevant documents.

Step 2: Once successful, the foreign employee has 1 month to apply for an appropriate Spanish work visa with relevant documents.

Step 3: Once successful, the employee must collect it within 30 days.

Step 4: The employee is registered with the social security office in Spain.

Learn more here.

Passport Submission Copy of the passport is presented to the Immigration Office at the time of application.
Work Permit Validity Generally, for 1 year with a maximum extension of up to 2 years.
Work Permit Process For Different Countries For most countries, the process is similar. EU citizens do not need a work permit.
Change Of Sponsor Within Spain The visa can be renewed if the holder has a new contract.
Where Is The Application Processed? At the Spanish Consulate of the country where the applicant resides.
Work Permit Restrictions To successfully get a work permit, the foreigner must fulfill the following conditions:
  • The applicant must be highly qualified - meaning either a highly qualified professional, top-level executive, researcher, innovator, or global artist.
  • Their salary must be at least 1.5x the average annual salary of the Industry standard.
  • A person in the local job market cannot take the same position.

Apart from these, unemployment rates in Spain also play a huge role in the decision-making process.

When Can Employee Travel To Spain After receiving their permit, the applicant must move to Spain within 3 months.
What is The Cost of a Work Permit? The average cost of a work permit for foreign nationals employed in Spain is anywhere between €62-176.
Duration Of Work Permit Processing 1 week - 4 months
Can Spouses Work On Dependent Visa? Spouses have to apply jointly or individually for work permits.

Payroll And Taxes In Spain

Firms entering Spain can find it incredibly challenging to navigate the complexities of the Spanish taxation system. The major challenges include diligently complying with various income taxes, social security, compensation, VAT, and several such businesses and permanent establishment concerns. 

There are two ways to manage your payroll and taxation in Spain. You can either set up your team or take assistance from seasoned professionals like Skuad, who have a dense network of partners on-field and can systematize your entire payroll management. 
Book a demo now to learn more.

To avoid expenses related to additional staff, legal counsel, and accounting firms, subsidiary companies in Spain need the assistance of local HR professionals, such as Skuad’s online HR platform, who have the requisite knowledge and experience to manage the complex taxation, compliance, and payroll procedures in Spain.

Title Explanation
Remote Payroll This payroll applies to non-resident firms, with local or foreign employees, that have been using the assistance of an Employee Of Record or a Professional Employer Organization like Skuad.
Local Payroll Administration This payroll is for firms that have been registered in Spain but prefer having their payroll administration outsourced to a payroll provider. In such a scenario, the firm is still the Employer Of Record and is duty-bound for compliance, immigration, health benefits, taxes, and other regulations.
Internal Payroll The internal payroll applies to large entities that wish to manage payroll for all local and foreign employees. However, such entities have to incorporate their business in Spain before hiring any employees.

Employer Taxation

Title Explanation
Corporate Income Tax The current corporate income tax rate is 25%.
Payroll Tax Currently, there is no payroll tax applicable in Spain.
Employers Social Security And Statutory Contributions

In Spain, the employer's social security contribution rate is 31.4%. In addition, a variable rate for accidents at work premises also applies to them.

There are also special provisions in the state’s social security system for self-employed people under the age of 50 who have been contributing to other social security systems for over 5 years.

Withholding Tax (WHT) Currently, the WHT stands at 24% for non-EU residents and 19% for residents from EU/EEA regions. This tax is applicable on incomes like dividends, interest, management fees, and royalties.
Reimbursements To claim expense reimbursement in Spain, the employees must submit receipts and expense reports to their employers.

Employee Taxation

Title Explanation
Income Tax Rate
Average Income Tax Rate (%)
Up To €12450 19
€12450-20200 24
€202000-35200 30
€35200-60000 37
€ 60,000 to 300,000 45
€ 300,000 and above 47
Sales Tax The current Value Added Tax (VAT) rate in Spain is 21%. It applies to persons or firms supplying taxable goods and services in the country.
Employees Social Security And Statutory Contributions

The current employees' social security contribution rate is 6.35% on salaries and wages. However, certain persons can be exempted from this contribution, given the following requisites are met:

  • Their home country and Spain have a social security agreement that allows exemption.
  • The person has an employment relationship with their home country employer and the said person has been paying relevant social security contributions to the authorities in their home country.
  • The person is living in Spain for a limited period (usually, less than 5 years).
Public Pension Spain has a mandatory state pension scheme, as well as voluntary options for companies and individuals.
Medical Insurance Medical insurance in Spain is covered by the state’s social security system. All the people living and working in the country have access to its free state healthcare.
Other Taxes Spain also levies taxes on real estate, erection and installation of projects, and construction work. There is also a tax on the increasing urban land value.

Bonuses

Employees are entitled to two statutory extraordinary bonuses a year. One bonus is paid around the Christmas holidays and the other in a month fixed by a collective agreement or by the employer and the employee representative. 

The amount of the bonuses is generally fixed by collective agreement but not less than the employee’s basic monthly salary of a month. This can also be paid in 12 prorated payments.

Incorporation: Setting Up A Spanish Subsidiary 

Regardless of the type of business, there are 8 important steps to set up a business subsidiary in Spain. Briefly, they are: 

  1. Obtain tax identification number as a foreign investor
  2. Register with Spain’s Commercial Registry 
  3. Open a corporate bank account
  4. Notarize company documents from Spanish notary
  5. Complete Form D1-A
  6. Deposit form with Directorate-General for Trade and Investments
  7. Pay transfer tax and stamp duties
  8. Register a subsidiary with appropriate authorities like social security, tax departments, etc., and procure the deed of incorporation issued by the Commercial Registry.

However, before setting up your company in Spain, you must review these factors: 

  1. Business: The Directorate-General for Trade and Investments (DGCI) can ask local firms with foreign shareholders and Spanish subsidiaries of non-residents to submit an annual report, and any other additional information, as directed, on the status quo of their foreign shareholding.
  2. Location: Regulations, expenses, and Human Resource availability vary from one region of Spain to another.  
  3. Language: Although Spanish is spoken by 99% of Spaniards, some regions use native languages like Catalan more. 

Using Skuad as your EOR solution can largely simplify the process of setting up a subsidiary in Spain. As your local partner, Skuad understands the complex employment regulations in Spain and can ensure that your subsidiary entirely complies with the local labor laws. For instance, Skuad can draft your contracts with employees or help you register with the Commercial Registry.  
Read about our services here.

Professional Employer Organization (PEO)

A Professional Employment Organization (PEO) provides MSMEs with end-to-end HR services such as payroll management, compliance, health benefits, tax management, hiring, training, etc. A PEO can be seen as an affordable, outsourced HR wing of a firm. 

However, if a company wants to have its HR function in-house, it can employ a company that offers Employment Of Record (EOR) services. Unlike a PEO, an EOR is a legal employer of the firm. In every other way, an EOR is similar in services to a PEO. 

When expanding, it is important for your firm to choose between a PEO and an EOR. Eventually, it all comes down to the scope and scale of your project and your future business opportunities.

Organizations planning to expand into new territories are better suited with a global EOR which becomes the legal employer on behalf of the organization. Instead of associating with a PEO, a co-employment partner, organizations have more to gain by utilizing the services of a EOR solution. The EOR solution safeguards organizations from unexpected policy changes, loss of control, and potential risks as the EOR bears every legal liability for the organization. In addition to these, the EOR handles payroll, tax, and employment law compliances. To know more about Skuad's EOR solution, Contact Skuad today

Conclusion: Why Is Skuad Ahead Of The Curve In Spain?

Spain is a highly regulated market with a major thrust on protecting the constitutional rights of the employees. As a company looking to expand with a remote team in Spain, it is important to review the complexities of the country’s labor laws, especially provisions under its several collective agreements and intricacies of Spain’s complicated taxation system. You must also understand how the benefits and obligations of employees differ based on whether they are from EU/EEA regions or not. 

With rapid progress in virtual management and automation, global HR platforms like Skuad have democratized employment opportunities in Spain. With Skuad, companies need not go through the arduous journey of setting up subsidiaries — they can simply trust their local partners to hire exceptional talent. At the same time, they can focus on expanding their business operations.

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