Hire employees in Spain using an Employer of Record

You need someone in Spain by next quarter. Your lawyer just said entity setup takes 6 months minimum. The math doesn't work.

Meanwhile, your perfect candidate is fielding other offers, and you're stuck explaining why you can't move forward yet. Setting up a Spanish entity means working through the Mercantile Registry, getting a tax ID, opening corporate bank accounts, and registering with Social Security. All before you can legally employ anyone.

Here's the reality: you've got three ways to hire in Spain, each with different costs, timelines, and headaches.

Option 1: Set up your own entity

• Cost: €15,000-40,000 upfront, €8,000-15,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: Full tax registration, payroll system, legal compliance, HR infrastructure
• Makes sense when: Hiring 20+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines (€7,500-187,500), back taxes, legal disputes
• Makes sense when: Short projects (< 6 months), specialized skills
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee
• Timeline: 2-3 days to hire
• Complexity: None – we handle everything
• Makes sense when: 1-50 employees, testing markets, multi-country teams

If you're hiring 1-10 people, entity setup costs more than 2-3 years of EOR fees. $179/month equals $2,148/year per employee versus €15,000+ upfront. An EOR like Hire with Columbus handles employment contracts, payroll, taxes, benefits, and compliance updates while you focus on managing your team.

Ready to hire in Spain without the headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in Spain. Here's how the costs and risks compare.

Most companies jump straight to thinking about contract types – permanent, fixed-term, part-time. But the bigger decision is how you'll legally employ someone in Spain at all. That choice affects everything from your timeline to your budget to your legal exposure.

How can you hire in Spain?

Set up your own entity

You're looking at €18,000-€25,000 just to get the doors open. That covers incorporation fees, legal setup, tax registration, and getting your payroll system running. The timeline? Four to six months if everything goes smoothly.

Then there's the ongoing stuff. Annual accounting fees run €8,000-€15,000. Legal compliance and HR infrastructure add another €7,000-€15,000 yearly. You'll need local expertise for employment law, tax filings, and regulatory changes.

This makes sense if you're planning to hire 20+ people long-term and want full control over your Spanish operations. But for smaller teams or market testing, the math doesn't work.

Hire contractors/freelancers

The appeal is obvious – you can start tomorrow. No entity setup, no payroll headaches, just a contract and you're rolling.

Here's the problem: Spain's labor authorities don't mess around with misclassification. If your "contractor" works set hours, uses your equipment, or follows your processes like an employee, you're looking at fines up to €187,515. Plus back taxes, social security contributions, and potential legal disputes.

Real contractors in Spain must work independently, use their own tools, and control how they complete projects. If you need someone integrated into your team for daily collaboration, contractor status won't hold up under scrutiny.

Use an employer of record (recommended)

This is where Hire with Columbus comes in. We become the legal employer in Spain while you manage the day-to-day work and performance. Your new hire gets a proper Spanish employment contract with full legal protections.

Cost: $179/month per employee. Timeline: 2-3 days from decision to signed contract. We handle employment contracts, monthly payroll, tax compliance, benefits administration, and all the legal requirements that would normally require your own entity.

The ROI is clear. Five employees through an EOR costs $895/month ($10,740/year) versus €25,000+ just to set up an entity, plus ongoing compliance costs. You're saving money and months of setup time.

Employment contract types in Spain

Once you've decided how to hire (and hopefully chosen the EOR route), you need to pick the right contract type. Spain recognizes several employment contracts, but most international companies use these four:

Permanent contracts (indefinite duration)

This is your go-to for full-time core roles. No end date, full job security protections, and what most Spanish professionals expect for career positions.

Termination requires "just cause" or follows specific procedures with notice periods and severance. But you get stability – employees are more likely to invest in your company long-term when they have job security.

Hire with Columbus handles all the contract language and ensures compliance with Spanish employment law. We also manage the termination process if needed, including calculating proper severance and notice periods.

Fixed-term contracts

These work for specific projects, seasonal work, or temporary replacements. Maximum duration is typically 24 months, though some exceptions allow up to 36 months.

Here's the catch: if you exceed the time limit or the work becomes permanent in nature, the contract automatically converts to permanent. Spanish courts favor employee protection, so they'll scrutinize whether your "temporary" need was really temporary.

Use these sparingly and only when you have a genuine fixed-term business need. Most ongoing roles should start as permanent contracts.

Part-time contracts

Part-time employees in Spain get the same protections as full-timers, just prorated. Same vacation days, same benefits, same job security – just based on their reduced hours.

You can't treat part-time work as a way to avoid employment protections. These employees still get permanent contracts if the role is ongoing, and they can request increases to full-time if business needs change.

Training and apprenticeship contracts

These are for employees under 30 (or under 35 if they're long-term unemployed) who need specific job training. Duration ranges from 6 months to 2 years depending on the qualification level.

The employee must receive formal training related to their role. It's not just a regular job with a different contract label – Spanish authorities expect genuine skills development and certification.

Which contract type should you use?

For most international hires, permanent contracts make the most sense. You want these people integrated into your team, working on core business functions, and staying long-term. The job security actually works in your favor – it attracts better candidates and reduces turnover.

Fixed-term contracts are tempting because they feel safer, but they often backfire. If the work continues beyond the contract period or becomes clearly permanent, you'll end up with a permanent employee anyway – plus potential legal complications.

Hire with Columbus helps you choose the right contract type based on your specific situation. We've seen companies get burned by using fixed-term contracts for permanent roles, and we'll steer you toward the approach that actually protects your interests while keeping you compliant.

The bottom line: don't overthink the contract type. Focus on getting the hiring approach right first – EOR versus entity versus contractor. Once that's settled, the contract details fall into place pretty naturally.

How does payroll and taxation work?

Your €60,000 employee actually costs €81,600 per year in Spain. That 36% markup comes from employer social security contributions that many companies forget to budget for.

Spain's payroll system runs on monthly cycles with some quirks you need to know. Employees expect their salary split into 14 payments (not 12) - two extra payments in summer and December. Miss a payroll deadline and you're looking at fines starting at €626 per violation.

Tax brackets and income tax

Spanish income tax follows a progressive system with rates that vary slightly by region. Here are the national rates for 2025:

Autonomous communities can add up to 3% on top of these rates. Madrid keeps it at national rates, but Catalonia adds the full 3% for higher earners.

The good news? Employees handle their own income tax through monthly withholdings. You just need to calculate and remit the right amount.

Social security contributions breakdown

Here's where it gets expensive. Spain's social security system requires contributions from both employer and employee, but you're paying the bigger share:

These rates apply to salaries up to €4,495.50 per month (the social security ceiling). Anything above that amount is exempt from contributions.

Payment schedule and 14-month salaries

Spanish employees receive 14 monthly payments per year, not 12. The extra payments (called "pagas extraordinarias") typically come in June/July and December.

You can structure this two ways:

• 14 separate payments: Pay regular monthly salary plus two bonus months
• Prorated into 12: Divide the total annual salary (including extra payments) across 12 months

Most employees prefer the 14-payment structure because those summer and Christmas bonuses feel significant. It's also the traditional approach that matches local expectations.

Payroll runs monthly with salaries typically paid on the last working day of each month. Some companies pay on the 25th to give HR teams buffer time.

Total employment cost example

Let's break down the real cost of hiring someone at €60,000 annually:

Employee at €60,000 gross salary:

• Base salary: €60,000
• Employer social security (29.90%): €17,940
• Other employer costs (estimates): €3,660
• Total annual cost: €81,600

Employee receives:

• Gross salary: €60,000
• Less employee social security (6.35%): €3,810
• Less income tax withholding (~22%): €13,200
• Net take-home: ~€43,000

The math stings, but it's standard across Europe. Budget 35-40% above gross salary for total employment costs.

Payroll cycle and deadlines

Spain's tax authority (Hacienda) doesn't mess around with deadlines. Here's your monthly schedule:

Monthly obligations:

• Employee salary: Last working day of month
• Tax withholdings: By 20th of following month
• Social security: By 30th of following month
• Payroll reports: By 10th of following month

Quarterly filings:

• VAT returns: By 20th of month following quarter
• Quarterly tax summaries: By 30th of month following quarter

Annual requirements:

• Annual tax certificates: By January 31st
• Employee tax summaries (Certificado de Retenciones): By February 28th

Miss any of these and penalties start at €626 per violation. Repeat offenses can hit €6,250 or more.

Common payroll mistakes in Spain

Most companies trip up on these issues when running Spanish payroll themselves:

Miscalculating social security ceilings: The €4,495.50 monthly ceiling catches people off guard. You still pay employer contributions above this amount, but employee contributions stop.

Forgetting regional tax variations: Each autonomous community sets slightly different income tax rates. Barcelona employees pay more than Madrid employees at the same salary level.

Missing the 14-month structure: Some companies try to pay 12 months only and face employee complaints. It's not illegal, but it's culturally tone-deaf and makes recruiting harder.

Late filings with Hacienda: The tax authority sends automated fines for late submissions. There's no grace period or friendly reminder - just penalties.

Incorrect holiday pay calculations: Spain requires specific calculations for vacation pay that don't match other European countries. Get it wrong and you'll hear about it during labor inspections.

Setting up compliant Spanish payroll yourself means hiring local accounting firms (€800-1,200 monthly), buying payroll software (€200-400 monthly), and hoping you don't miss any deadlines or calculation changes.

With Hire with Columbus, you pay $179/month per employee and we handle all payroll calculations, tax filings, and compliance deadlines. Your employees get paid correctly and on time, while you focus on actually running your business instead of deciphering Spanish tax codes.

What benefits and leave are required?

Spain employees get 22 working days minimum vacation, and it's use-it-or-lose-it unless you pay it out. Beyond vacation, you'll handle 14 salary payments per year (not 12), plus mandatory social security contributions that add about 30% to your payroll costs.

Here's what you're legally required to provide and what competitive companies actually offer.

Annual vacation leave

Spanish employees earn 22 working days of vacation per year, which works out to about 4.4 weeks. They accrue these days monthly - roughly 1.83 days per month of service.

The tricky part? Vacation days don't automatically roll over. Employees must use them within 18 months of earning them, or you have to pay them out at their current salary rate. No "use it or lose it" without compensation.

If someone leaves mid-year, you'll calculate their unused vacation pay based on days accrued. Someone who worked 6 months earned about 11 vacation days - pay them for any unused portion in their final paycheck.

Sick leave and medical coverage

Employees can take up to 3 consecutive sick days without a doctor's note. After that, they need medical certification from Spain's public health system.

Here's how sick pay works:

• Days 1-3: You pay 100% of salary (no doctor's note needed)
• Days 4-15: You pay 60% of salary (requires medical certificate)
• Day 16+: Social Security pays 60% of salary (you're off the hook)

For work-related injuries, you pay 100% from day one, and Social Security reimburses you. Keep detailed records - labor inspectors will check your sick leave documentation during audits.

Parental leave breakdown

Spain offers generous parental leave that's mostly government-funded, which is great news for your budget.

Maternity leave: 16 weeks at 100% salary paid by Social Security. Mothers must take 6 weeks immediately after birth, but can share the remaining 10 weeks with their partner.

Paternity leave: 16 weeks at 100% salary, also paid by Social Security. Fathers must take 6 weeks within the first 6 months, and can take the remaining 10 weeks anytime before the child turns one.

You'll handle the paperwork and advance the payments, then get reimbursed by Social Security. Most companies use payroll software to manage this automatically, but the administrative burden is real if you're doing it manually.

Public holidays for 2025

Spain has 14 official public holidays in 2025, split between national holidays and regional/local ones. You're required to give employees at least 14 paid holidays per year.

*Regional holidays vary by autonomous community. Madrid, Barcelona, and other regions add their own local holidays to reach the 14-day minimum.

If employees work on public holidays, you'll pay double their normal daily rate. Most companies simply close on these days to avoid the extra cost.

Mandatory social security contributions

You'll pay about 30% of each employee's gross salary in social security contributions. Here's the exact breakdown for 2025:

*Work accident rates depend on industry risk level. Office jobs pay 0.50%, construction pays 1.50%.

These contributions cover healthcare, pensions, unemployment benefits, and disability insurance. Employees get access to Spain's excellent public healthcare system and build pension credits.

Extra salary payments (pagas extras)

Here's something that catches most international companies off-guard: you'll pay salary 14 times per year, not 12. Spain requires two extra salary payments called "pagas extras."

You can either:

• Pay two full monthly salaries (typically in June and December)
• Divide the extra payments across 12 months (prorate into regular salary)

Most companies choose the second option for easier cash flow management. Just make sure your employment contracts clearly state which method you're using.

Competitive benefits beyond legal minimums

Legal minimums won't help you attract top talent in Madrid or Barcelona. Here's what competitive companies offer:

Health insurance: Private health coverage (€100-200/month per employee) for faster medical appointments and English-speaking doctors.

Flexible benefits: Meal vouchers (€9/day tax-free), transport allowances, and gym memberships through flexible compensation platforms.

Additional vacation: 25-30 days total vacation instead of the legal minimum 22 days.

Professional development: €1,500-3,000 annual training budgets and conference attendance.

Remote work stipends: €500-1,000 annually for home office equipment, especially post-COVID.

Common benefit administration mistakes

Missing social security deadlines costs €626-6,250 per violation. The most expensive mistakes we see:

Late social security filings: Monthly contributions are due by the 30th of the following month. Miss this deadline and penalties start at €626 per employee.

Incorrect vacation calculations: Forgetting to pay out unused vacation during termination can trigger labor court claims. Average settlement: €3,000-8,000 per case.

Sick leave documentation gaps: Labor inspectors fine companies €3,126-25,000 for inadequate sick leave records during audits.

Holiday pay errors: Paying single rate instead of double rate for public holiday work leads to back-pay claims plus penalties.

Administering these benefits correctly requires local HR expertise that costs €50,000+ annually, plus benefits software (€200-500/month), legal review (€5,000/year), and the constant risk of costly errors.

Hire with Columbus handles all benefit administration, social security filings, and compliance monitoring for $179/month per employee. We calculate vacation accruals, manage sick leave documentation, process extra salary payments, and ensure you never miss a social security deadline.

What are the compliance requirements?

Written contracts aren't optional in Spain. They're mandatory. Verbal agreements will leave you exposed to claims, fines, and employee lawsuits that can stretch on for months.

Employment contract requirements

Every employment contract in Spain must be written within 10 days of your employee's start date. No exceptions, no verbal agreements that "we'll formalize later."

The contract must be in Spanish (or include an official Spanish translation) and contain these mandatory clauses:

• Employee and employer identification details
• Job title, duties, and workplace location
• Start date and contract duration (if temporary)
• Salary amount and payment frequency
• Working hours and schedule
• Vacation entitlement (minimum 30 calendar days)
• Notice periods for termination
• Applicable collective bargaining agreement reference

Missing any of these clauses can void the entire contract. You'll also need to register the contract with Spain's Social Security system within 60 days of hire.

Probation periods

Probation periods in Spain max out at 6 months for most employees. For senior management roles or highly skilled positions, you can extend to 12 months, but only if it's specified in the applicable collective bargaining agreement.

During probation, either party can terminate with 15 days' written notice (no cause required). After probation ends, full employment protections kick in and termination becomes much more complex and expensive.

You can't extend probation periods once they're set. If you try to fire someone after probation without proper cause, expect reinstatement orders plus back pay.

Working time regulations

Spain caps regular working hours at 40 hours per week and 9 hours per day. Employees must get at least 12 consecutive hours of rest between workdays and 36 consecutive hours per week.

Overtime is limited to 80 hours annually and must be compensated at 175% of regular hourly rate (or given as time off). You're required to maintain detailed records of all working hours. The labor inspectorate will ask for these during audits.

Employees get mandatory 15-minute breaks for every 6 hours worked. Lunch breaks aren't legally required but are standard practice (usually 1-2 hours).

Notice periods

Notice periods in Spain depend on length of service and who's initiating the termination:

These are minimum requirements. Collective bargaining agreements or individual contracts often require longer notice periods, especially for senior roles.

Termination process

You can't fire someone in Spain without documented cause, proper notice, and often consultation with employee representatives. Valid grounds include serious misconduct, poor performance (with documented improvement attempts), or economic reasons.

For economic dismissals affecting 10+ employees within 90 days, you'll need government approval after a consultation period with works councils. This process typically takes 30-45 days minimum.

Disciplinary dismissals require a formal written notice detailing the specific misconduct and giving the employee a chance to respond. Skip this step and the termination becomes invalid.

Severance pay

Severance requirements depend on the type of termination:

Maximum severance caps at 42 months' salary for unjustified dismissals and 12 months for economic reasons. These amounts are in addition to notice pay and any accrued vacation.

Data protection

Spain follows GDPR strictly. You'll need explicit employee consent for data processing beyond basic employment requirements, written data processing agreements with any HR vendors, and documented procedures for handling employee data requests.

Employee monitoring (emails, computer usage, location tracking) requires prior notification and works council consultation. Covert monitoring can result in evidence being inadmissible in disciplinary proceedings.

Data breach notifications must be filed within 72 hours with Spain's data protection authority (AEPD). Employee notification is required within 30 days if the breach poses high risk to their rights.

Common compliance mistakes

Invalid employment contracts are the biggest trap. Companies often use generic templates that miss mandatory clauses or fail to reference applicable collective bargaining agreements.

Wrong termination processes cost even more. Many employers skip the formal disciplinary procedure or fail to consult with employee representatives, making dismissals automatically unfair.

Missing social security registrations within 60 days can trigger automatic fines, even if you eventually comply. The labor inspectorate doesn't accept "we forgot" as an excuse.

Improper overtime calculations are another frequent violation. Spain requires detailed time tracking, and underpaying overtime results in back pay plus penalties.

Penalties for violations

Compliance failures in Spain carry steep penalties:

• Invalid employment contract: €626-€6,250 fine per employee plus contract deemed indefinite
• Wrong termination process: Full severance plus legal fees plus potential reinstatement order
• Missing mandatory clauses: Contract voided, back payments owed, potential indefinite status
• Improper dismissal: €7,500-€225,000 fine plus 45 days severance per year worked
• Social security registration delays: €626-€6,250 per employee
• Working time violations: €751-€7,500 plus overtime back pay
• GDPR violations: Up to €20 million or 4% of annual revenue

Repeat violations can double these amounts. Labor inspectorates in Spain conducted over 180,000 workplace inspections in 2025, with 68% resulting in penalties.

Hire with Columbus ensures every contract includes all mandatory clauses, follows proper termination procedures, and maintains compliant records. Our local legal team handles the paperwork so you don't face these penalties.

What has changed recently?

Spain's job market got a major shake-up in 2025, especially around remote work rules and digital nomad policies. The government wrapped up new remote work laws in March 2025 that require employers to cover 100% of remote work expenses (internet, electricity, equipment). No more splitting costs with employees.

The digital nomad visa got a complete makeover too. The income requirement dropped from €2,334 to €2,160 monthly, and processing times shrunk from 3-4 months to just 6-8 weeks. Spain's clearly trying to compete with Portugal and Estonia for remote talent.

New collective bargaining agreements

Several major sectors renegotiated their collective agreements in 2025. The metal industry agreement now mandates 25 vacation days instead of 22. Meanwhile, the hospitality sector finally introduced flexible working arrangements for administrative roles.

IT services saw the biggest changes. The new agreement includes mandatory mental health days (2 per year) and requires companies to provide €500 annually for professional development. If you're hiring developers or IT professionals, these aren't optional perks anymore.

Social security contribution changes

Spain bumped up employer social security contributions by 0.3% across the board in January 2025. For a typical €50,000 salary, you're now looking at about €15,150 in annual employer contributions instead of €14,850.

The unemployment contribution rate also went up slightly. Employers now pay 5.8% instead of 5.5%. It's not massive, but it adds up when you're calculating total employment costs.

Termination and severance updates

The government tightened wrongful termination penalties in 2025. If a labor court rules against you, the penalty increased from 45 days' salary to 50 days' salary per year of service. For someone earning €60,000 with three years of service, that's €24,658 instead of €22,192.

They also extended the probation period for specialized roles. Senior positions (earning over €75,000) can now have up to 8 months of probation instead of 6 months. It gives you more flexibility, but the paperwork requirements are stricter.

Minimum wage adjustments

Spain's minimum wage hit €1,134 per month in 2025, up from €1,080 in 2024. The government also introduced regional variations. Madrid and Barcelona now have higher minimums at €1,200 monthly.

This affects more than just entry-level roles. Collective agreements often tie salary bands to minimum wage multiples, so expect some knock-on effects across your entire compensation structure.

When you're dealing with all these changes, an EOR like Hire with Columbus handles the compliance updates automatically. We track every regulatory change and adjust payroll, contributions, and contract terms without you having to monitor Spanish labor law developments. Starting from $179/month per employee, it's often cheaper than trying to keep up with these changes internally.