How to hire and pay employees in Spain
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Before hiring
Before Hiring
Before employing workers in Spain, you need to understand that collective bargaining agreements often matter more than national law. Most industries have agreements that set minimum salaries, working conditions, and termination procedures—and they override standard employment rules.
Your employment contract must specify which agreement applies, and courts will hold you to those standards even if you didn't realize they existed.
Another critical consideration: Spanish employees strongly prefer indefinite contracts over fixed-term arrangements, even when fixed-term contracts offer higher pay. The psychological security of permanent employment carries significant cultural weight.
Fixed-term contracts require clear legal justification, and converting temporary workers to indefinite status after certain thresholds isn't optional—it's automatic. Even small companies with just five employees must establish worker representation, so don't assume you can scale gradually into compliance.
A solution like Oyster eliminates these barriers for you, automatically managing collective agreement requirements and contract compliance across Spain's complex regulatory landscape.
Recent News
When you hire employees in Spain, "set it and forget it" isn't a strategy—it's a risk. Pay floors move, Social Security rules get updated, and policy shifts can change your cost model mid-year. Staying current helps you make offers you can stand behind, run payroll correctly, and avoid last-minute fixes that burn your team (and your credibility with Finance).
Minimum wage (SMI) increased for 2025—retroactive to January 1
Spain increased the 2025 Salario Mínimo Interprofesional (SMI) to €1,184/month gross in 14 payments (i.e., €16,576/year), approved in February 2025 and retroactive to 1 January 2025. If you implemented the change after January payrolls ran, you may have needed back-pay true-ups.
For HR teams, this is more than a wage floor. SMI changes often create salary-band compression and can trigger knock-on adjustments where collective bargaining agreements (convenios) or internal pay structures reference minimum thresholds.
Working-time reform to 37.5 hours is moving through Parliament (watch item)
On 6 May 2025, the government approved and sent to Parliament a bill to reduce the standard full-time workweek from 40 to 37.5 hours without salary reduction. It wasn't final at the time of reporting, but it's significant enough to plan for now.
If it passes, employers should expect changes to scheduling, overtime thresholds, and part-time contract design (hours, pay, and documentation). This is also the kind of reform that tends to bring tighter expectations around timekeeping—so your working-time controls should be audit-ready, not "good enough."
Social Security costs updated for 2025—plus a new surcharge for high earners
Spain's 2025 Social Security "contribution order" (Order PJC/178/2025) updated contribution bases and rules effective 1 January 2025, including a reported maximum contribution base of €4,909.50/month. If you run payroll locally (or manage a provider), your system needed these changes applied from January to avoid under/over-contributions.
Also effective 1 January 2025, Spain began applying an additional "solidarity" Social Security contribution on earnings above the contribution ceiling. It doesn't increase employee benefits, but it does increase total employment cost—especially for executives, specialized tech roles, and variable pay (bonuses/commissions) that push earnings above the cap.
The MEI (Intergenerational Equity Mechanism) contribution continues in 2025 (commonly cited at 0.80%), and it's the kind of "small rate" that becomes very real money as headcount grows. Practical takeaway: model fully loaded cost (not just gross salary) before you lock comp bands or headcount plans.
IRPF withholding updates can change net pay expectations for lower wages
From 1 January 2025, Spain introduced a new employment-income deduction aimed at limiting the tax impact for workers earning around the updated SMI and up to certain thresholds. IRPF is the employee's tax, but employers still carry the operational burden: your payroll withholding calculations have to reflect the change.
If your hires are near the lower end of pay bands, expect more questions about "why net pay looks different" and be ready with clear employee comms. This is where a reliable payroll process matters—because fixing withholding errors after the fact is painful for everyone.
Budget pressure is likely to continue into 2026
Late-2025 public negotiations signaled sharply different proposals for the 2026 SMI increase (figures discussed ranged from roughly 1.5% to 7.5%), though nothing is final yet. Even without a published number, the message is clear: annual wage-floor adjustments are becoming a recurring planning assumption.
Actionable step: build a simple scenario model now (e.g., low/medium/high SMI increase) and pressure-test your offer strategy, pay bands, and Spain hiring plan before Finance asks you to "do more with less."
If you're hiring in Spain, the goal isn't to chase the cheapest route—it's to employ people fairly, stay compliant, and keep your payroll predictable. Want a partner who combines software with real human support when things get complicated? Start hiring globally with Oyster HR.
At a glance
CURRENCY
EUR
OFFICIAL LANGUAGE
SPANISH
PAYROLL FREQUENCY
MONTHLY
EMPLOYER TAXES
~30%
13th / 14th SALARY
13th (June) & 14th (December) but can be prorated to 12 monthly salaries per year (More information on vacation bonuses and 13th/14th month salaries here)
Good to know
Good to know
Top countries hiring in
Spain
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Labor laws in
Spain
Working hours and overtime
The standard workweek in Spain is 40 hours, calculated annually rather than weekly—this matters for flexible scheduling. Daily work must not exceed nine hours unless collective agreements specify otherwise. Employees can work a maximum of 80 hours of overtime per year, though many agreements restrict or prohibit overtime entirely.
Night work (10 PM to 6 AM) comes with restrictions: night workers cannot average more than eight hours per day, in a period of 15 days. Work on a public holiday must be compensated, in addition to the salaries corresponding to the week, with the amount of hours worked increased by at least 75%, or with equivalent time off.
Minimum wage
Employment contracts
While employment contracts can be made orally or in writing, certain types must be written and include a Spanish version. Furthermore, after signing, companies must tell the Public Employment Service the contract's conditions and submit a copy within 10 days.
The contract must clearly state which collective bargaining agreement applies—this isn't optional detail, it's a fundamental compliance requirement. Indefinite contracts are the default; fixed-term contracts require objective legal justification like occasional and unpredictable oscillations in labor needs, occasional and foreseeable oscillations (for no longer than 90 discontinuous days total in a calendar year), or temporary replacement of an employee whose job is protected, among other limited circumstances.
Your contract must specify salary, benefits, working hours, location, and job duties with enough detail to withstand legal scrutiny. Vague contracts create risk—courts interpret ambiguity in the employee's favor.
Probationary period
Probation periods in Spain depend on employee classification. In the absence of a collective agreement, the maximum duration for a trial period is six months for qualified technicians and two months for other employees (or three months for employees who aren't qualified technicians in companies with less than 25 employees).
The classification isn't about seniority—it's about role complexity and required expertise. During probation, either party can terminate at any time without cause, unless otherwise agreed. Once probation ends, full worker protections apply immediately.
Pensions
Spanish state pension calls for significant contributions from the employer (23.6% of an employee’s salary) while a Spanish employee contributes 4.7% of their salary. Occupational and private pension arrangements exist, but aren’t seen as necessary because of Spain’s generous state pension.
Estimate your savings when using Oyster
Use this calculator to get an estimate of employment costs using Oyster.
(Spoiler alert: It’s much cheaper than setting up entities around the world!)
- Taxes, and social security20,602
- Net annual salary29,389
- Taxes & contributions12,885
- Social Tax11,875
- Occupational Health fee35
- Labor Accident Insurance375
- Fct (Wage Guarantee Fund)0
- Allowances600
- Fct (Wage Guarantee Fund)600
Benefits and leave in
Spain
Vacation time
Employees receive a minimum of 30 calendar days of annual leave—that's working days plus weekends, not 30 working days. This translates to roughly 22 working days for a standard Monday-Friday schedule.
Collective agreements may establish a higher minimum number of PTO days, and you cannot pay employees in lieu of unused vacation except at contract termination.
Sick leave
To be eligible for sick leave for a common illness, an employee must have made social security contributions for 180 days in the prior five years and obtain a medical certificate (parte de baja) from their doctor when the illness prevents them from working.
For sick leave due to common illnesses (not work-related), neither the employer nor Social Security provides sick pay for the first three (3) days; from the 4th until the 20th day, the employee is entitled to 60% of the employee's social security basis of contribution, and 75% from the 21st day onward. Between the 4th and the 15th day, the employer is required to bear these costs, and from the 16th day onward Social Security pays the cost.
Starting April 1, 2023, instead of the employee submitting the medical report directly to the employer, the medical doctor sends the information directly to the INSS. Extended sick leave suspends the employment contract but doesn't terminate it. Job protection continues throughout the illness—you cannot dismiss someone for being sick.
Maternity and paternity leave
Parental leave
Both parents receive seventeen (17) weeks of paid leave per child. Social Security funds 100% of salary during this period (up to the maximum threshold). The first six weeks must be taken immediately after birth and are non-transferable between parents—both parents get this time individually.
The remaining weeks can be taken flexibly until the child turns 12 months old, either full-time or part-time. Job protection applies throughout the entire leave period. Additional breastfeeding leave allows one hour per day (divisible into two 30-minute periods) until the child reaches nine months, and this time is fully paid.
Holidays
View a list of recognized public holidays in Spain here.
Employer tax
Employers contribute to Social Security, including 23.6% for common contingencies, 0.60% for occupational training, and 0.20% for the Wage Guarantee Fund (FOGASA). This Fund of Wage Warranty can assist small businesses by paying 40% of legal indemnification for collective redundancies in companies with fewer than 25 employees.
Contribution rates and applicable items vary depending on factors including contract type. Additional contributions may apply based on industry and collective agreements.
For a €50,000 annual salary, expect total employment costs around €61,800. This doesn't include mandatory annual bonuses (13th/14th salary), which effectively increase the base salary by 8-16% depending on the agreement.
Individual tax
Income tax in Spain operates on a progressive scale, with rates varying by autonomous community. Employees contribute 4.7% of gross salary to Social Security for common contingencies, plus 1.55% for unemployment and 0.10% for occupational training.
Regional tax variations mean take-home pay differs across Spain for identical gross salaries. Your employees in Catalonia will have different tax obligations than those in Madrid, and you should factor this into compensation planning.
Termination in
Spain
Termination in Spain requires clear legal justification and meticulous documentation. Disciplinary dismissal (for employee misconduct) requires proving serious, culpable breach of duties—courts set a high bar and frequently rule dismissals "unfair" when documentation is insufficient.
Objective dismissal (for economic, technical, organizational, or production reasons) requires demonstrating business necessity and following formal procedures, which include notifying the workforce of planned redundancies 15 days in advance and consulting with worker representatives.
When employment ends, employees receive a "finiquito" payment covering earned salary, prorated vacation, and any contractual entitlements. Severance depends on dismissal type: Disciplinary dismissals carry no severance if ruled fair, but if ruled unfair for an employee on an open-ended contract, the minimum legal compensation is 33 days per year of service, capped at 24 months' pay. Objective dismissals require 20 days per year of service (capped at 12 months) paid upfront.
Here's the reality: most dismissals end up classified as unfair because Spanish courts heavily favor employee protection. Budget for the unfair dismissal amount unless your documentation is absolutely bulletproof. Collective agreements often increase statutory severance requirements, and those enhanced amounts are binding.
Statutory notice periods max out at 15 days regardless of tenure—surprisingly short compared to other European countries. However, collective agreements and individual contracts typically extend this to one to three months for professional roles.
You must specify notice requirements in the employment contract; if you don't, the 15-day minimum applies.
During notice, employees retain all rights and protections. Early termination of the notice period requires mutual agreement or payment in lieu of notice. Dismissals without proper notice or payment expose you to additional compensation claims.
Start hiring employees in
Spain
Should you set up a Spanish entity or use an Employer of Record? Here's the decision framework: entity setup takes 4-6 months, costs €10,000-€20,000 in legal fees, and requires ongoing accounting, tax filing, and employment law expertise. For your first few Spanish hires, that math doesn't work—you're paying overhead before you've validated the market fit.
An EOR like Oyster employs your Spanish team members through our local entity while you maintain day-to-day management. You avoid setup costs, ongoing compliance burden, and the risk of getting collective agreement requirements wrong.
We handle payroll, tax withholding, benefits administration, and ensure your contracts specify the correct collective bargaining agreement—because courts won't forgive that mistake even if you're new to Spain.
The tipping point for entity setup typically comes around 15-20 employees, when the annual EOR cost exceeds the amortized entity overhead. But even then, the compliance risk transfer matters.
With Oyster, you get employment law expertise, automatic updates when regulations change, and human support when complex situations arise—like navigating a dismissal under a specialized collective agreement. Talk to our team to understand which approach fits your hiring timeline and risk tolerance.
Disclaimer: The information provided in this resource is for general educational purposes only and shall not be construed as legal advice. While Oyster strives to provide current and accurate information, Oyster makes no warranties or representations as to the correctness of the content provided and accepts no liability or responsibility for any errors or omissions in the content provided. By using this resource you acknowledge and agree that you do so at your own risk. The content of this resource is subject to change without notice.
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FAQs
Can I hire contractors instead of employees in Spain?
Spanish authorities aggressively reclassify contractors as employees when the working relationship shows employment characteristics: fixed schedule, direct supervision, economic dependence, or integration into company operations.
Misclassification triggers back taxes, penalties, and immediate employee status with full retroactive benefits. Only use contractors for genuinely independent, project-based work with clear autonomy.
What happens if I don't comply with collective bargaining agreements?
Courts enforce collective agreements as strictly as statutory law—ignorance isn't a defense. Non-compliance can result in back pay for wage differences, penalties, and employee claims for contract breach.
Employees can report violations to labor authorities, triggering inspections and fines. Always identify the applicable agreement before finalizing contracts.
How do I calculate the 13th and 14th salary payments for Spain?
These payments are extraordinary bonuses. Employees in Spain are entitled to two extraordinary bonuses each year: a Christmas holiday bonus and an additional bonus as set by a collective bargaining agreement or by agreement between the employer and the employees' legal representatives.
A collective bargaining agreement can provide for these extraordinary bonuses to be prorated into 12 monthly payments.
Do I need to provide private health insurance to Spanish employees?
No—Spain's public healthcare system (Sistema Nacional de Salud) provides universal coverage. However, many employers offer private health insurance as a competitive benefit, providing faster access to specialists and expanded coverage. It's a strong retention tool but not legally required.
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