Employment law in Spain differs in several key aspects from the regulations in other European countries. Employers from outside of Spain should be familiar with these differences in detail.
This article provides a comprehensive overview of the fundamentals of Spanish employment law, covering everything from hiring and posting employees abroad to tax considerations and dismissal protection regulations. Global Tax Saving is here to support you as an expert in legal and tax matters in Spain.
Content
- The basics of employment law in Spain
- Protection in case of illness: Continued pay and social security
- Differences between fixed-term and permanent contracts
- What should be considered when posting employees abroad?
- What should be considered when hiring EU Nationals?
- Which tax aspects should be considered?
- Employment law in Spain: opportunities and challenges for employers
The basics of employment law in Spain
Employment law in Spain is regulated by the Workers’ Statute (Estatuto de los Trabajadores), which forms the core framework for employment relationships. This is further complemented by industry-specific collective agreements. Employers need to be aware of both the legal requirements and the terms set out in these collective agreements.
Employment Contracts in Spain
In Spain, employment contracts can generally be concluded without a formal written agreement. However, written contracts are mandatory for certain types of agreements, such as fixed-term contracts, internships, and part-time work.
Probation periods are also regulated: they may not exceed six months for employees with a university degree and two months for other workers, unless otherwise specified in collective agreements. Employers are required to report the signing and any extensions of employment contracts to the Spanish Employment Office (SEPE) within ten days.
In addition to the general categories of fixed-term and indefinite contracts, there are special employment relationships classified as “contracts of a special nature.” These include agreements for artists, commercial agents, and domestic workers.
Working hours in Spain
The standard working week in Spain is 40 hours on average over the course of a year. A maximum daily working time of nine hours is legally mandated, unless otherwise specified in a collective agreement. Overtime is also strictly regulated, with employees permitted to work up to 80 hours of overtime per year. Violations of working hour regulations can result in fines.
Holiday entitlement in Spain
Spanish employment law guarantees a minimum holiday entitlement of 30 calendar days per year, regardless of the number of weekly working days. This statutory minimum leave cannot be paid out or carried over, meaning it must be taken within the year. Additional holiday entitlements may be specified in collective agreements.
Collective agreements and their role in Spanish employment law
In Spain, collective agreements play a crucial role, granting employees important additional rights that often go beyond the statutory minimum requirements. These agreements typically apply to specific industries and regions, setting further regulations on working hours, pay structures, holiday entitlements, and even notice periods.
Employers must be familiar with the applicable collective agreements, as these – unlike in Dutch or other European employment law – must uniformly apply to all employees within a company in Spain. It is not possible to exclude individual employees from a collective agreement if it applies to the rest of the workforce.
However, exceptions can be made in certain cases to enhance a company’s competitiveness, such as for economic or organisational reasons. Employers must ensure that such deviations are temporary and comply with the minimum conditions set by law.
Dismissal and legal action against termination in Spain
The termination of an employment contract in Spain requires a proper procedure and a clear justification, which must be disclosed to the employee in writing. While dismissals in other countries are often justified by operational needs, Spanish law places greater emphasis on proving the necessity of the termination.
Employees can file a legal challenge against dismissal within 20 working days of receiving the notice. This deadline is only extended for official public holidays, which can vary by region in Spain, requiring particular attention. Unlike in other European countries, dismissal reasons cannot be amended during the legal process in Spain. Employers must present all necessary evidence from the outset.
If a labour court declares the dismissal invalid, the employer can choose between reinstating the employee or paying compensation. For unfair dismissals, the court may order compensation of 20 days’ wages per year of service, capped at 12 months’ salary. In cases of redundancy, this compensation may be lower, depending on the court’s decision.
Remote work and mobile working
In recent years, remote work and mobile working have become increasingly common in Spain. With the introduction of Law 10/2021, which regulates the conditions for remote and mobile working, a clear framework has been established.
An agreement for remote work must be formalised in writing and include provisions on working hours, availability, and cost reimbursement for work equipment. The law stipulates that regular remote work must constitute at least 30% of the weekly working hours to be classified as “telework.”
Employers are required to provide the necessary tools and equipment and ensure the safety of the remote workplace. Spanish law also emphasises the employee’s right to disconnect, ensuring a clear separation between work and personal time.
Protection in case of illness: Continued pay and social security
The entitlement to continued pay during illness in Spain differs significantly from the Dutch system. In the Netherlands, employers are obligated to pay at least 70% of an employee’s salary for up to two years of illness, with the first year often amounting to full pay depending on the employment contract. In Spain, however, the rules are notably less generous.
Under Spanish law, no salary is paid for the first three days of illness. From the fourth day onwards, the employer is required to pay 60% of the salary. From the 16th day, the Spanish social security system steps in, covering up to 75% of the salary. This limits the financial responsibility of employers in Spain for extended absences due to illness.
For workplace accidents, Spain has specific regulations: employers must pay 75% of the salary from the first day of absence. These costs, however, are typically reimbursed by social security, provided the incident is officially recognised as a workplace accident. This contrasts with Dutch laws, where workplace injuries fall under the broader framework of illness pay but often involve additional coverage under occupational accident insurance.
Differences between fixed-term and permanent contracts
The use of fixed-term employment contracts is strictly regulated under Spanish employment law. Fixed-term contracts are only allowed in cases specified by law, and employees who have worked for more than 24 months on fixed-term contracts within a 30-month period are automatically considered permanent employees. This rule was introduced to prevent the misuse of consecutive short-term contracts and to promote greater job stability.
An exception applies during periods of high unemployment, allowing companies to offer longer fixed-term contracts.
If a fixed-term contract is unlawfully established or extended beyond the permissible limits, it is deemed permanent, and the employee may claim compensation upon termination. Employers should be aware that offering permanent contracts is often more cost-effective and legally secure in Spain, reducing the risk of potential lawsuits.
What should be considered when posting employees abroad?
When posting employees to Spain, employers must comply with certain regulations. A posting occurs when an employee whose usual place of work is outside Spain is temporarily assigned to work in Spain on behalf of their employer.
Requirements for employers when posting employees
For posted workers in Spain, the provisions of the EU Posting of Workers Directive apply. This directive ensures that employees posted to Spain are entitled to the same fundamental working conditions as local employees.
These include:
- Minimum Wage and Salary Payments: In accordance with Spanish labour law or applicable collective agreements.
- Compliance with Maximum Working Hours and Overtime Regulations.
- Observance of Spanish Holiday Entitlements.
Social security and reporting obligations
Posting employees to Spain requires careful planning regarding social security registration. Depending on the length of stay and contractual terms, the employer must ensure that the employee is covered either by social security in Spain or in their home country. Compliance with reporting obligations to the Spanish social security system is essential.
Under the EU Posting of Workers Directive, companies sending employees to Spain must ensure that all necessary documents and certifications are available. These include:
The A1 form for social security, the employee’s employment contract and evidence of compliance with Spanish minimum wage and working hours regulations.
Thorough preparation is crucial to ensure compliance and avoid potential legal complications during the assignment. Let us know if you’d like additional information or specific guidance on this process!
What should be considered when hiring EU Nationals?
Hiring EU nationals is facilitated by the principle of freedom of movement, allowing employees to work in Spain without the need for a visa or special work permit. However, employers must pay attention to certain requirements.
Registration and tax identification number (NIE)
Every EU national wishing to work in Spain must obtain a NIE (Número de Identidad de Extranjero), a personal tax identification number. This number is essential for registration with the Spanish social security system and is required for all tax and legal processes. Employers should assist their new employees in applying for the NIE.
Working conditions and non-discrimination
EU nationals in Spain are entitled to the same legal protections as Spanish workers, including dismissal protection, continued pay during illness, and a statutory minimum holiday entitlement of 30 calendar days. Discrimination based on nationality is strictly prohibited. Employers must ensure compliance with these legal standards to avoid potential legal consequences.
Which tax aspects should be considered?
Non-compliance with tax regulations in Spain can expose employers to significant penalties. The tax obligations for employees newly arriving in Spain differ in some respects from those in other European countries.
Social security contributions and income tax
Employers in Spain are required to pay social security contributions for their employees. The contribution rates are set by law and include pensions, healthcare, unemployment, and workplace accident insurance. The employer’s share amounts to approximately 30% of the gross salary, while the employee contributes around 6%. These contributions are calculated monthly and must be paid to the social security authority.
Taxation of employees based in the Netherlands
The Netherlands-Spain Double Taxation Agreement ensures that individuals are not taxed twice on the same income by outlining where taxes are due. According to this agreement, salaries are generally taxed in the country of employment—in this case, Spain.
However, for employees who work in Spain for fewer than 183 days in a given year, their income may be subject to taxation in the Netherlands, their home country, depending on specific circumstances. Global Tax Saving can provide assistance with calculations and ensure compliance with these regulations, helping employees navigate the complexities of cross-border taxation.
Tax implications of severance payments
Severance payments in Spain are subject to tax regulations that depend on the nature of the termination. Only in cases where a court has declared the dismissal invalid can severance payments be tax-exempt up to a certain limit. Employers should ensure that severance payments are thoroughly documented and recorded to optimise potential tax liabilities.
Specific requirements for tax registration
Employees who are either resident in Spain or spend more than 183 days per year in the country are considered tax residents and are required to file a tax return in Spain. Employers should be prepared to provide employees with the necessary information and assist them with their tax registration.
Companies that hire highly qualified foreign professionals in Spain should be aware of the Lex Beckham: A regulation that allows foreign employees to be subject to a fixed tax rate of 24% on their income earned in Spain for the first six years of their stay. The attractive tax rate can help companies by making them even more attractive to highly qualified applicants.
Employment law in Spain: Opportunities and challenges for employers
Spanish employment law shares some similarities with other European employment laws, but there are significant differences, such as working hours, notice periods, and sick pay. Global Tax Saving helps you navigate Spanish employment law and supports you with all legal and tax matters.
Contact us for a free consultation – we are here to assist you with any issue.
