Introduction
Ranked as the second-largest country in Western Europe and an integral member of the European Union, Spain grants access to a single market of over 500 million consumers.
It also allows businesses to benefit from EU trade agreements and the free movement of goods, services, capital, and labor.
Moreover, Spain's strong infrastructure isn't just beneficial for industries—it also makes it easier for businesses to grow and hire people locally.
This means it's crucial to understand Spain's job market and rules if you're looking to tap into its economic opportunities.
When you decide to hire employees in Spain, many factors come into play.
This includes a comprehensive understanding of the labor market, the rules and regulations, challenges, and more. For example,
- Spanish is the official language of Spain, spoken by a vast majority of the population. It is closely followed by English, which is slowly gaining momentum, although it is not as popular as Spanish.
- The official currency of Spain is the Euro (EUR).
- As of 2024, the current minimum wage in this country is set at €1,134.00 per month.
- The standard working time in Spain consists of 40 hours per week.
However, this is not all. To hire in Spain efficiently and cost-effectively, you must have a proper human resource management team to understand the various hiring challenges and associated costs.
On that note, here is a detailed breakdown.
Challenges of Hiring in Spain
Spain is undoubtedly one of the most attractive countries for global hiring. However, when you look closer, everything might not be as easy as it seems.
It comes alongside its own set of international expansion challenges and burdens, which, if not handled properly, can be a nightmare for enterprises.
Let’s explore a few examples of such challenges in hiring employees in Spain.
1) Employment Laws
Spain has some comprehensive labor laws that stem from various sources. It includes the Spanish Constitution, collective dismissal agreements, and the Worker’s Statute.
Some of the key provisions of the employment laws in Spain include,
- Employees in Spain are entitled to 23 working days of annual paid leave, nine national public holidays, and 16-18 weeks of maternity leave.
- Overtime is allowed but cannot exceed 80 hours per year.
- The notice period in Spain consists of 15 working days.
As quite visible, the labor laws of Spain cover every crucial aspect of the employee-employer relationship. More often than not, this can be a challenge for you when hiring in Spain.
This is especially true if you do not have the proper legal guidance to ensure compliance, which can lead to serious legal pitfalls.
2) Payroll
In addition to the employment laws, Spain also has an intricate payroll system, compliance with which is of utmost necessity for all employers.
It includes provisions such as the following:
- Employees in Spain are entitled to 13th and 14th pay, usually disbursed during the Summer and Christmas holidays.
- The amount equates to 1/14th of the total annual salary of the employee.
- Additionally, employers and employees must contribute to the social security system in Spain.
- The amount usually falls within the range of 1,260 euros to 4,495.50 euros per month, depending on the employee's earnings.
Compliance with the payroll system in Spain requires a solid understanding of tax laws. Additionally, setting up a powerful payroll solution can prove advantageous.
However, it usually requires a substantial upfront investment in capital and other resources, which can be especially difficult for small companies with budget constraints.
3) Competitive Talent Landscape
Moving on, another potential challenge of remote work in Spain is the unavailability of skilled professionals.
Despite being a popular hotspot for international hiring, Spain continues to struggle with the availability of skilled labor.
According to a report by the Bank of Spain, as many as 39% of companies struggle to find the right people to hire.
4) Increased Unemployment Rate
By the first quarter of 2024, Spain's unemployment rate had reached 12.29%, much higher than experts initially anticipated (11.08%).
Additionally, there are 2.978 million unemployed people in Spain, while employed individuals decreased by 139,700.
One of the main reasons for this increase in unemployment in Spain is the country's stringent labor regulations.
As a result, employers might find it challenging to manage their workforce according to their needs. This has led to the creation of what we refer to as the ‘dual labor market’ in Spain.
How to Hire in Spain
There are three main ways in which you can hire people in Spain. They include,
- Setting up a local entity
- Hiring employees via EOR
- Hiring employees via AOR
Setting up a local entity
- Setting up a local entity is one of the most traditional methods of hiring employees in a foreign country.
- It involves establishing a formal business presence in Spain and complying with local labor laws.
- However, the process usually demands proper management resources and can be extremely expensive and time-consuming.
Hiring employees via EOR
- An EOR, or Employer of Record, acts as a legal employer on your behalf and provides the local knowledge and expertise to navigate the local employment regulations in Spain.
- A good EOR like Skuad primarily focuses on employment-related responsibilities, such as managing onboarding, employment contracts, payroll, benefits, tax withholdings, HR compliance, and offboarding. All this without setting up a local entity.
Hiring employees via AOR
- An AOR or agency of record is usually one of the most sought-after options when hiring and managing international contractors.
- They deal with all legal and compliance matters, including payouts, classifications, and compliance with local labor laws.
Cost of Hiring in Spain
When you decide to hire employees in Spain, carefully evaluating the various costs involved is crucial. Let’s examine the same.
| Parameters |
Setting up a local entity |
Partnering with Skuad (EOR/AOR) |
| Setup costs |
Extremely high since it requires upfront investment in terms of money and other resources |
Low, since Skuad already has an established presence in Spain |
| Compliance costs |
High, since you will need to hire a legal team to guide you through the complex labor landscape of Spain |
Low, Skuad brings along built-in compliance management and in-house expertise |
| Administrative costs |
The cost is high, as you will have to handle overhead costs related to payroll processing, HR administration, and more. |
It is significantly low because Skuad takes care of all administrative burdens so that you can better focus on scaling your business. |
| Parameters |
Partnering with Skuad (EOR/AOR) |
Setting up a local entity |
| Setup costs |
Low, since Skuad already has an established presence in Spain |
Extremely high since it requires upfront investment in terms of money and other resources |
| Compliance costs |
Low, Skuad brings along built-in compliance management and in-house expertise |
High, since you will need to hire a legal team to guide you through the complex labor landscape of Spain |
| Administrative costs |
It is significantly low because Skuad takes care of all administrative burdens so that you can better focus on scaling your business. |
The cost is high, as you will have to handle overhead costs related to payroll processing, HR administration, and more. |
In addition, quite a few other types of costs are included when hiring in Spain. They can primarily be categorized into the following types.
| Direct costs |
- Salary and wages
- Employee benefits
- Onboarding and training
|
| Indirect costs |
- Legal and Compliance
- Workplace safety
- Administrative costs
|
Skuad’s hiring costs calculator provides a detailed breakdown of all these expenses.
A Brief About Employment Laws in Spain
The primary employment law in Spain is the Worker’s Statute. It covers various aspects of the employment relationship, such as
- The Spanish Workers' Statute (Estatuto de los Trabajadores) Article 15 stipulates the standard full-time work week and hours of Spanish employees.
- As an employer, you must practice Article 49 of employment law while terminating the employment.
- The government fixes the minimum wage annually through a royal decree in Spain.
Additionally, several other provisions are in place to guide the labor landscape in Spain.
They include the Spanish Constitution, which lays down the fundamental rights of workers, and collective bargaining agreements.
Hire in Spain with Skuad
With expertise in over 160 countries, Skuad is a one-stop solution for all your international hiring challenges.
Be it signing contracts, onboarding employees based on country-specific law, or ensuring seamless workforce management, Skuad has got you covered.
It is a unified platform that boasts robust features that facilitate every aspect of global hiring. For example, its automated payroll capabilities allow you to consolidate payments through a single dashboard.
This way, you can pay your global employees with just a click!
Join us today and ensure a fully secure and compliant employment lifecycle only with Skuad!
FAQs
Q1: How do I hire an employee in Spain?
Ans: There are two main ways to hire employees in Spain. You can set up a local entity or leverage the service of an EOR. You can also opt to partner with an AOR to hire in the country.
Q2: What is the payroll system in Spain?
Ans: Under the payroll system in Spain, employers are required to pay their full-time employees in the country’s official currency, the Euro (EUR). Additionally, the current minimum wage as of 2024 has been set at €1,134.00 per month.
Q3: What is the notice period for employees in Spain?
Ans: The notice period for employees in Spain consists of 15 working days.
Q4: What are the work regulations in Spain?
Ans: The standard working time in Spain is 40 hours per week. Overtime is allowed. However, it is limited to 80 hours per year.
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