When you decide to get hired within a certain field of activity you need to be aware of certain risks that may arise. In case you are not properly informed…
HR and Payroll in Spain: Your guide to running business.
Spain is considered an extremely attractive business destination for multinationals, offering the opportunity to hire highly qualified professionals at competitive labor costs. If you are considering expanding your business in Spain, here are some key points to consider about Spanish Payroll and HR.
Spanish authorities are flexible and offer multiple registration options and incentives for foreign companies expanding into Spain.
Non-resident VAT registration
Companies which plan to enter the Spanish market to sell their goods and services can do so by obtaining a non-resident VAT number. It usually takes around 1 week to obtain the number and a minimum set of documents is required.
Non-resident entity registration (FNRE)
Foreign companies which want to access the Spanish labor force and hire top talent at competitive costs, but do not plan to sell their goods and services in Spain, can do so by registering as foreign non-resident entity.
FNRE companies are liable only for payroll taxes and contributions. There are no accounting obligations and FNRE companies do not have to pay corporate tax.
Company Incorporation in Spain
Spanish authorities provide several types of legal entities which can be set up by both local and foreign investors. The most popular business form in Spain is the Sociedad Limitada (SL) – the equivalent of a limited liability company. Other options such as sole proprietorship, joint ventures, corporations are available.
Want to register business in Spain? To learn more about company formation in Spain and talk to an expert Contact Us.
HR Administration and Payroll in Spain
Employment in Spain is highly regulated, and employees enjoy extensive rights under the Spanish labor law. Before you put someone on payroll in Spain, you need to consider the following:
Employment contracts are ruled by general bargain agreements – Convenios Colectivos. These agreements have a big impact not only on labor standards but also on the structure of the Spanish payroll. Each job category is regulated by specific Collective Agreements, with a specific salary range per industry, monthly/weekly working hours, vacation days per year, etc.
In Spain, laid off employees are entitled to receive 45 days of indemnity per each year worked in the company up until the 12/02/2012 and 33 days of indemnity for each year worked in the company after 12/02/2012. Spain is not a litigious country except when it comes to employees who have been laid off, therefore when facing such a scenario it is important to have the best advice on how to handle the terminations. Our Spanish HR Administration experts have a rich experience in handling terminations and will be able to guide you through the whole process
Social Security Contributions
The social security contributions are divided between the employer and employee. The employee contribution rate is 6,35 – 6,40% based on gross salary, whereas the employer contribution is around 31,0 – 33,0% of this gross salary. These contributions represent the public insurance system for employees in various contingencies such as illness, accident, maternity, retirement, and unemployment.
Income Tax (IRPF1)
Income tax in Spain consists of a system of progressive fees based on the annual remuneration. Companies are required to withhold and pay the tax office on behalf of their employees. These deductions are established on the same rates applicable to the annual tax settlement that the employee must perform. Spanish payroll requires to deduct these withholding and to ensure the necessary adjustments (regularization of withholding rate) for the tax payable to fit the amount withheld.
1 IRPF – Impuesto sobre la renta de las personas físicas; a personal income tax in Spain
Spanish business made simple
Adm In ME is your trusted business partner in Spain. We can handle all initial registrations on your behalf, prepare employment contracts compliant with the Spanish labor law, act as your labor advisor and help you comply with labor, taxes and Social Security regulations. Contact us today to talk to an expert and receive your customized offer for HR & payroll services in Spain.
Contact us to get a free evaluation of your HR and payroll requirements in Spain or to request the price for our services
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