Spanish Employee Benefits

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What are the Employee Benefits in Spain? 

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Spain might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Spain including local benefits.

When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Spain, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils.

Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into Spain.

It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect contract negotiations.

What Compensation Laws exist in Spain?

In Spain, a comprehensive framework of employment laws and regulations guarantees employees enjoy protection in various areas. Legislation covers such as minimum wages, social insurance, redundancy, termination, and severance, working hours, vacation leave, maternity, and paternity issues and more.

Statutory and mandatory minimums cannot be undercut by collective or trade union agreements that are concluded with employer organizations, although they can improve entitlements for employees.

Drawing up contracts is tricky enough, but in Spain it is vital to fulfil responsibilities to your employees over benefits, compensation, and minimum requirements. Do not take the risk of ignoring them. Compensation and benefits include:

  • Social Insurance: Anyone working in Spain must register with the Social Security Institute (Instituto Nacional de Seguridad Social, INSS) and pay contributions to the system via their taxes, either as remitted by their employer or directly if they are self-employed (autónomo).

    Spain’s social security program reaches around 90% of the population, covering such as sickness, maternity, industrial injuries, pension, invalid and death benefits. Spain has among the highest benefits in the European Union (EU) but also among the highest contributions, the bulk of which is carried by employers.

    In 2021 employers pay 29.9% of employees’ salaries, plus a further average 1.5% to cover accidents and illness. Employees contribute 6.35%.

  • National Minimum Wage: The national minimum as set by the Ministry of Employment and Social Security for 2021 in Spain remained at €1,108.30 (US$1,308) per month equating to €13,300 (US$ 15,709) per year, considering 12 equal monthly payments.

  • Working Hours: Full-timers over 18 must not work more than nine hours each day up to a maximum of 40 hours a week, averaged over a year. One-and-a-half days’ consecutive rest per week is statutory with a 12-hour break between daily shifts. Working more than six hours requires a break of 15 mins.

  • Overtime: Overtime applies if stipulated in a collective bargaining agreement or contract and is any work over the maximum permitted normal working hours.

    Overtime cannot exceed 80 hours annually. Compensation for extra hours can be paid at a premium or time off given in lieu. Since May 2019 employers must keep records for four years of employees’ daily working hours.

  • Paid Vacation: Employees are entitled to a minimum of 30 calendar days (22 working days) annual paid leave with one holiday period comprising a minimum of two weeks. Employers cannot replace holidays with paid compensation.

    The holiday calendar is set by each company and agreed by workers and employers. Additionally, there are public, regional, and local paid holidays.

  • Sick Pay: 60% of salary applies for days four to 20. For longer absences, or injuries suffered at work, employers must pay 75% of salary which is reimbursed by the Institute of Social Security.

  • Maternity/Paternity Allowance and Entitlements: Maternity allowance is a minimum 16 weeks, taken consecutively including weekends and holidays with a minimum six weeks taken after birth. The mother is entitled to full pay from the Spanish Social Security Institute.

    Additionally, all pregnant women are entitled to healthcare before, during and following the birth at hospitals belonging to the National Health Service (Sistema Nacional de Salud).

    Paternity leave increased to 16 weeks from 2021, the same as for the mother, but the allowance is not transferrable between partners.

  • Discrimination: Gender, marital status, age within limits established by law, racial or ethnic origin, social status, religious beliefs, political ideas, sexual orientation, affiliation or non-affiliation to a union or reasons of language inside the Spanish state are all areas where discrimination is prohibited.

    Employees cannot be discriminated against for reasons of disability, provided they are able to perform the role in question.

  • Termination and Severance: Grounds for individual termination include end of contract for a specific job, resignation, and retirement through permanent illness. Objective dismissals can be based on workers’ incompetence, inability to adapt to technical change, poor attendance and redundancies based on economic, technical, or organizational grounds.

    In the event of fair dismissal, legislation requires employees receive a minimum legal compensation of 20 days’ pay for each year of service, up to a maximum of 12 months’ pay.

    In unfair dismissals, an employee on an open-ended contract is paid a minimum legal compensation of 45 days’ pay for each year of service, up to a maximum of 43 months’ equivalent pay.

    In enterprises of fewer than 25 employees, the Public Fund of Wage Warranty (Fondo de Garantía Salarial) pays 40% of the remuneration of employees in collective redundancies.

Social Security in Spain

In 2021 employers must pay 29.9% of employees’ salaries, plus a further average 1.5% to cover accidents and illness. Employees contribute 6.35%. 

Everyone working in Spain must register with the Social Security Institute (Instituto Nacional de Seguridad Social, INSS) and pay contributions to the system via their taxes, either as remitted by their employer or directly if they are self-employed (autónomo).

Spain’s social security program reaches around 90% of the population, covering such as sickness, maternity, industrial injuries, pension, disability, and death benefits. Spain has among the highest benefits in the European Union (EU) but also among the highest contributions, the bulk of which is carried by employers.

Some foreigners can be exempt from social security payments for up to five years in the event of a qualifying agreement between Spain and their home country.

Employer Statutory Costs in Spain

Corporate taxes and social security contributions are among the statutory costs facing employers in Spain.

  • Social Security: In 2021 employers must pay 29.9% of employees’ salaries, plus a further average 1.5% to cover accidents and illness. These are remitted to the Social Security Institute (Instituto Nacional de Seguridad Social, INSS). Employees contribute 6.35%.

  • Value Added Tax: Employers also pay and add consumption tax on all goods and services. Standard rate 21%; reduced tax 10% and 4%; some goods are VAT-exempt.

  • Corporate Income Tax (CIT): On worldwide income for companies is 25% with a lower rate for new companies in the first two years of 15%.

  • Withholding Tax: Spanish companies deduct payments to individuals or companies regarding interest payments, rents, dividends, Capital Gains etc. which are liable for tax. As a rule:

    - EU/EEA residents 19%
    - Non-EU/EEA 24%

  • Capital Gains Tax: Up to €6,000 (US$ 7,096) 19%; 21% up to €50,000 (US$ 59,138) and 23% above €50,000. This is a tax paid on profits.

  • Capital Duty: This is paid by shareholders at a rate of 1% on capital reduction or company dissolution.

  • Customs and Excise Duty: Customs is paid on goods entering Spain from outside of the EU and Excise is collected on certain goods both imported and produced in Spain e.g., tobacco and alcohol and vary widely.

What Benefits are Guaranteed in Spain?

Guaranteed benefits in Spain are generally laid down by a combination of the Labor Law, the Workers’ Statute (Estatuto de los Trabajadores) and accompanying mandates, decrees, and collective agreements. These include:

  • Maternity Leave: This benefit is for a minimum 16 weeks, with at least six weeks taken after birth. The mother receives full pay from the Spanish Social Security Institute (Instituto Nacional de Seguridad Social INSS).

  • Paid Vacations: Employers are guaranteed 30 calendar days (22 working days) paid leave per year, plus paid public holidays.

  • Minimum Wages: In 2021, the national minimum wage in Spain remained fixed at €1,108.30 (US$1,308) per month equating to €13,300 (US$ 15,709) per year.

  • Sick Benefit: From the fourth day till the 20th of incapacity through illness or injury employees receive 60% of salary, and 75% thereafter. Employers are reimbursed by the Social Security Institute from day 21.

  • Discrimination: Employees benefit from legal protection against discrimination on the grounds of gender, marital status, age within limits established by law, racial or ethnic origin, social status, religious beliefs, political ideas, sexual orientation, affiliation, or non-affiliation to a union or for reasons of language inside the Spanish state.

    Employees cannot be discriminated against for reasons of disability, provided they are able to perform the role in question.

What Restrictions apply to Benefits and Compensation in Spain?

Unemployment Benefit: Individuals must be certified as legally unemployed by the Spanish Unemployment Office (Servicio Publico de Empleo Estatal) and have paid into the social security system. Those employed for less than a year with insufficient social security contributions can apply for an unemployment subsidy, but must meet the following requirements:

  • Be legally unemployed
  • Register as a job seeker and sign an ‘activity agreement’
  • Have made at least three months contributions if they have family commitments, or six months if not
  • They do not have an income exceeding 75% of the National Minimum Wage

Maternity Benefit: The mother must have paid sufficient social security payments to qualify for the full 16 weeks’ benefit of 100% salary.

Health Insurance and other Benefits in Spain

Those living and working in Spain will likely have access to state healthcare, which is partly funded by social security contributions. Full-time and self-employed are covered along with spouses and children. To receive free healthcare, individuals must register with the General Social Security Fund (TGSS), which has offices throughout the country, to obtain a social security number. Registration requires:

  • Valid passport or ID card
  • Residency certificate
  • Proof that address is registered with local town hall

Once registered with the TGSS, a social security number will be issued with a certificate confirming eligibility for state health care. This enables registering for a health card (tarjeta sanitaria individual, TSI).

Other benefits covered by social insurance cover maternity leave, sick leave, and unemployment benefit.

Cut through the red tape!

Guaranteeing legally protected compensation and benefits for your employees is an essential element of complying with Spain’s Labor Law. Social insurance, maternity benefits, holidays, working hours and termination agreements are among the benefits guaranteed for Spanish employees and cannot be ignored. Bradford Jacobs' Employer of Record (EOR) services will ensure compliance with these crucial requirements to avoid fines and sanctions.

Contact us today to learn more!