PEO Spain

World Bank Ease of Doing Business Ranking

• DB Rank – 30
• DB Score – 77.9

Rankings on Doing Business topics – Spain

Topic Scores

Global PEO in Spain

Spain is a highly attractive destination for businesses seeking to utilize the services of a Professional Employer Organization (PEO). With its strategic location in Europe, well-developed infrastructure, and strong economic ties, Spain offers an ideal environment for international companies looking to expand their operations. As a PEO country, Spain provides a streamlined and efficient process for businesses to establish a presence and hire employees without the need for setting up a legal entity. PEOs in Spain offer comprehensive HR and employer services, including payroll processing, benefits administration, tax compliance, and handling employment contracts. By partnering with a PEO in Spain, businesses can access local expertise, navigate complex labor regulations, and ensure compliance with Spanish employment laws. This arrangement allows companies to focus on their core business activities while leaving the administrative and HR responsibilities to the experienced hands of the PEO. Spain’s PEO services play a vital role in enabling international companies to enter the Spanish market seamlessly and tap into the country’s diverse talent pool and vibrant business opportunities.

What Is a PEO?

A PEO, or Professional Employer Organization, is a company that provides a range of HR and payroll services to small and medium-sized businesses. These services can include employee benefits, payroll, compliance with labor laws, and recruiting and training.

PEOs work by entering into a co-employment agreement with the businesses they serve. In this arrangement, the PEO becomes the employer of record for the business’s employees, taking on responsibilities such as payroll, tax withholding, and employee benefits. The business, however, retains control over its day-to-day operations and the supervision of its employees.

PEOs can help businesses streamline their HR and payroll processes, reduce costs, and free up time and resources to focus on their core business activities. They can also provide access to a range of benefits and resources that small businesses may not be able to afford or manage on their own.

PEOs are also understood as employer of record / EOR at times.

Spain – Country Overview

Spain is the second-largest country in the European Union and also one of the largest economies in the world. Structural reforms, transparent judicial/regulatory systems, and sound economic institutions facilitate Spain’s economy. The country’s GDP (PPP) is $38,286 per capita. Steady modernization has helped the Spanish economy grow continually, with the industry sector contributing nearly 27% to the country’s GDP. The total value of imports and exports is equal to 65.5% of GDP.

Capital City

Madrid

Currency

Euro (€)

Principal Language

Spanish

Government

Parliamentary Monarchy

Employment Contracts in Spain

In Spain, an employment contract can be either in writing or verbal. However, during the period of a verbal agreement, either party may necessitate that it be replaced with a written contract.

Some of the details typically mentioned in the written employment  contract in Spain include:

• Shift work schedule
• Remuneration structure
• Work and performance system
• and more

The different types of employment relationships are:

• Permanent Employment: In the absence of a formal contract, indefinite employment is the default option. However, those employed under more than two temporary contracts for more than 24 months in 30 months are deemed permanent employees in Spain.
• Fixed-Term Contracts: There are three types of usual fixed-term employment agreements in Spain:
  • Contracts for a specific, limited service or job
  • Contracts for very high output demands
  • Temporary agreements
• Temporary Employment: Per Spanish legislation, employees hired by temporary agencies to third-party user companies are entitled to the same basic employment standards as if they were directly employed by the company for which they work.

Probationary Period

A probationary period typically lasts up to 6 months for skilled technicians and 2 months for other workers. Additionally, the period may not exceed 3 months for workers who are not qualified technicians.

Working Hours in Spain

Spain’s work regulations state that employees are not allowed to work more than 9 hours a day and an average of 40 hours a week, averaged over a reference period of 12 months.

Employee Leave in Spain

Employees in Spain are entitled to the following leaves:

• Annual leave in Spain: Per the labor law, employees receive paid annual leave for up to 30 calendar days, which is equivalent to 22 business days of leave.
• Sick leave in Spain: Employees in Spain typically receive sick leave for a maximum period of 12 months (365 days). It can, however, be prolonged for another six months (180 days) if a cure is expected within such time.
• Maternity leave in Spain: Female employees are eligible for 16 weeks of maternity leave (plus two additional weeks for each additional child in the case of multiple births).
• Paternity leave in Spain: Male employees receive 16 weeks of paid paternity leave, up from 12 weeks previously.

The following are the statutory national holidays in Spain:

• January 1 – New Year’s Day
• January 6 – Epiphany
• April 15 – Good Friday
• August 15 – Assumption of Mary
• October 12 – Hispanic Day
• November 1 – All Saint’s Day Holiday
• December 6 – Constitution Day Holiday
• December 8 – Immaculate Conception

Spanish labor laws also allow workers to take paid time off for:

• Getting married – 15 calendar days
• Serious illness, accident or death of a family member – two calendar days (four days if travel is needed)
• Moving home – one day

The rules also cover:

• Breastfeeding a child under the age of nine months with a mother or father taking a one-hour paid break from work every day
• Reducing the working day between one-half or one-eighth when taking legal guardianship of a child aged under 12 or a disabled person.

Taxation

Spain’s corporate tax rate

In Spain, the corporate tax rate is 25%. Though, depending on circumstances, other taxes may also be applied.

Employers will need to pay into a social security fund, and this can account for up to 30% of an employee’s salary, with an upper limit of €3,500.

An employee will need to pay 6.35% of their pay into the Social Security fund.

Spain’s income tax

Workers in Spain are taxed progressively with income tax levied at between 19% and 45%.

The country’s minimum wage is €1,108.30 per month, and some industries and jobs have a higher minimum wage.

Employee Termination in Spain

Individual dismissals on an objective basis are subject to a 15-day notice period, whereas disciplinary dismissals do not require notice. The notice period in Spain typically runs from 15 days to one month, while some collective bargaining agreements require a three-month notice period.

Global Mobility in Spain

There are typically the following categories of visas in Spain:

• Schengen visa for Spanish tourists (valid only up to 90 days)
• Spain visa for business needs (may necessitate an employer to provide an agreement)
• Visa for medical requirements
• Visa for religious purposes, sports, cultural, or film crew
• Visa for associates of official delegations
• Visa for study, research, training, or other types of internships
• Visa for the spouse of a Spanish citizen
• Spanish airport transit visa
• Visa for underage children

For work permits in Spain the Labor Authorities issue Work and Residence Permits to employers who wish to recruit outside the European Union (EU). The employee can apply for a Work Visa in person after receiving the Work and Residence Permit from their employer. 

Employee Benefits in Spain

The legal retirement age is 65 for 36 years and 3 months of employment and 65 years and 5 months for those with lesser tenure. Service requirements and age will gradually increase to 65 years for those with 38 years and 6 months of service and 67 for those with lesser service duration by 2027. The social security system provides benefits including medical care, workers’ compensation, retirement pensions, hospitalization, unemployment compensation, and disability payments. The Spanish social security system generally covers the following:

• Loss of ability to work due to an employment-related accident, an occupational disease, or maternity
• Old age
• Loss of job
• Family requirements (assistance for children aged less than 18 or disabled)

All employees including non-Spanish nationals who work in the Spanish territory are required by law to register with the social security system.

Pension Fund

The Social Security system in Spain includes the state pension scheme. The pension scheme is financed by a payroll tax on salaries where employees pay 4.7% of their salaries while employers pay amounts equal to 23.6% of employees’ salaries.

Healthcare Benefits

Employees registered to work in Spain who makes social security contributions are covered by the state healthcare. Those who are not registered to work in Spain but have been in Spain before April 2012 and earn less than EUR 100,000 can register for the healthcare as a Spanish resident via the local Instituto Nacional de la Seguridad Social (INSS). Individuals can also access state healthcare by contributing each month to ‘pay-in’ public health insurance schemes which are run by autonomous regions. The monthly fee is EUR 60 for those aged less than 65 and EUR 157 for those above 65.

Unemployment benefit

There are 2 types of unemployment benefits in Spain: contributory and non-contributory.

• Contributory Unemployment Benefit
  Both employers and employees are required to make contributions to a contingency fund. The benefit is based on the number of contributions and previous average wages. To qualify, individuals are required to register with the employment office as available to work and they must make contributions for a minimum of 360 days over the last 6 years.
• Noncontributory Unemployment Benefit
  This benefit is conditional and applies to individuals who are not entitled to contributory benefits whether due to a lack of contributions or an extended period without work.