30/06/2019.- Payroll in Spain: Hiring and compensating employees is one of the most complicated parts in the process of establishing operations in a new country. Although companies have much to gain when establishing operations in Spain, Payroll in Spain is not easy. With complicated and often-changing regulations, it can be particularly difficult for employers in our country to understand such policies and accurately reflect them on employee paychecks.
Main features of Payroll in Spain
The aim of this article is to provide an overview of the most important aspects of Spain’s labor legislation. Our goal is that employers become more familiar with the main features of Payroll in Spain.
Number of Payments
Employers in Spain are required to pay their workers in 12 monthly payments. In most collective agreements, there are also two extra paychecks, typically in July and December. Extra paychecks are prorated and included in monthly payrolls through social security contributions.
When an employee is sick for one to three days, they receive no compensation for those missed days. However, when an employee is out for 4 to 15 days, the employer must pay 60 percent of the salary for each day. For sick leaving longer than that, Spain’s National Institute of Social Security takes over the payments, paying 60 percent for up to 20 days, and 75 percent for 21 days up until the maximum leave period (18 months). Employers may have to complete up to 100 percent (depending on the relevant collective agreement).
For injuries that occur on the job, Social Security pays 75 percent from the first day going forward.
Social Security Contributions
Social Security payments are certainly the most controversial issue when talking about payroll in Spain. It becomes a crucial issue to determine the total cost of your employees. The precise contributions are determined by the sum of the amounts of monthly payments that are taxable.
In Spain, both employees and employers are liable to pay social security contributions. Employers are required to pay a tax rate of 29.9 percent (to be increased slightly in some cases where the activity carried out by the employees is believed to be more “risky” than the average- e.g. construction, mining, etc.), based on employee’s gross salary up to a maximum of 4,070.10 € per month (being 4,070.10 € the maximum amount to be considered for social security purposes for 2019) for each employee. As for employees, social security tax rates fall between 4.8 percent and 6.4 percent of their (gross) salaries (such amount to be withold by the employer).
Employers must take social security contributions into consideration, before making an offer to a potential employee. Otherwise, employers may find that the salary they have offered becomes unaffordable once social security has been added.
Personal Income Tax Deductions
In Spain, employers withhold a percentage of the employee’s gross salary as a payment on account of the employee’s income tax. There are slightly different rules for permanent and temporary contracts. Generally, for permanent contracts the amount withheld will depend on the size of the salary and the employee’s personal circumstances. If possible, the amounts withheld should be very close to the actual tax liability of the employee. By doing so, you will minimize any additional payments or refunds should the employee file a tax return following the year end.
The table below shows the 2018 withholding tax rates for a single employee with no children.
|Witholding Tax for Employees 2018|
|Annual Gross Salary – Taxable wages||Amount||Withholding tax rate|
|9.000 €||0,00 €||0,00%|
|12.000 €||0,00 €||0,00%|
|15.000 €||1.146,00 €||7,64%|
|18.000 €||1.888,20 €||10,49%|
|20.000 €||2.338,00 €||11,69%|
|22.000 €||2.787,40 €||12,67%|
|25.000 €||3.532,50 €||14,13%|
|27.000 €||4.095,90 €||15,17%|
|30.000 €||4.938,00 €||16,46%|
|32.000 €||5.500,80 €||17,19%|
|35.000 €||6.342,00 €||18,12%|
|37.000 €||6.904,20 €||18,66%|
|40.000 €||7.764,00 €||19,41%|
|45.000 €||9.495,00 €||21,10%|
|50.000 €||11.345,00 €||22,69%|
|55.000 €||13.194,50 €||23,99%|
|60.000 €||15.048,00 €||25,08%|
|65.000 €||16.906,50 €||26,01%|
|70.000 €||19.159,00 €||27,37%|
|75.000 €||21.405,00 €||28,54%|
|80.000 €||23.656,00 €||29,57%|
|85.000 €||25.908,00 €||30,48%|
|90.000 €||28.152,00 €||31,28%|
|95.000 €||30.409,50 €||32,01%|
|100.000 €||32.660,00 €||32,66%|
In conclusion, taking into account the above, we strongly recommend that salaries are always agreed on a gross pay basis.
In connection with the above, you may find here an easy-to-use salary calculator for computing your net income in Spain, after Income Tax and Social Security contributions have been deducted.
Taxes must be filed by the 20th of each month or by the 20th of each month following the end of a quarter. This means April 20th, July 20th, October 20th and January 20th. Finally, the annual filing deadline is January 31st of the following year.
- Vacation: 30 days per year. Some collective agreements change 30 days per 22 or 23 working days (in some particular cases, even more).
- Pubic holidays: 14 days in total (including National, regional and local festivities).
- Marriage: 15 days
- Maternity leave: 16 weeks for the mother / 4 weeks for the father.
The table below shows the National Publich Holidays in Spain for 2019. Local bank holidays for Madrid and Barcelona also included.
|January 1st||New Year’s Eve|
|April 18th||Holy Thursday (Madrid)|
|April 19th||Good Friday|
|April 22nd||Easter Monday (Barcelona)|
|May 1st||Labour Day|
|May 2nd||Community Festival of Madrid (Madrid)|
|May 15th||Patron Saint of Madrid (Madrid)|
|June 10th||Whit Monday (Barcelona)|
|June 24th||Saint Jhon’s Day (Barcelona)|
|August 15th||Assumption Day|
|September 11th||National Day of Catalonia (Barcelona)|
|September 24th||Patron Saint of Barcelona (Barcelona)|
|October 12th||Hispanic Day|
|November 1st||All Saints Day|
|November 9th||Our Lady of the Almudena (Madrid)|
|December 6th||Constitution Day|
|December 9th||Immaculate Conception Day (Madrid)|
|December 25th||Christmas Day|
|December 26th||Saint Stephen Day (Barcelona)|
Overtime to be consiered when processing payroll in Spain
Workers in Spain are permitted to work a maximum of 80 hours of overtime per year. That said, some exceptions may be allowed subject to urgent or/and extraordinary situations.
We hope employers will find the above information useful. Furthermore, do not miss the opportunity to benefit from working with a company experienced in the nuances of Spanish payroll. In this regard, Avantges team of committed professionals can help any organization handle the complexities of payroll in Spain. As a result, we allow them to focus on what they do best.