Hire, manage, and pay employees in Spain

You can do either.

If you set up a legal entity, you must register with local authorities like the Spanish Tax Agency and National Social Security Institute, obtain an NIF tax ID, open a local bank account, notarize documents, and manage tax and labor compliance yourself. This is slower to set up but can be more cost-effective once you have a larger team.

If you use a Spanish EOR, they act as the legal employer. They handle localized contracts, payroll, benefits, and collective bargaining agreement (CBA) obligations, so you can start hiring in days without creating an entity. The tradeoff is that ongoing cost scales with headcount.

Spain is strict on misclassification and “falso autónomo” (fake freelancer) arrangements. In general:

• Contractors

  • Organize their work with autonomy and set their own hours and holidays
  • Are not in the company org chart and usually work on their own premises
  • Use and pay for their own tools
  • Are paid for completed projects or goals, not a regular salary
  • Do not receive employee benefits and pay their own taxes

• Employees

  • Work under the employer’s direction, with guided working methods and hours
  • Are integrated into the organization, often on the employer’s premises
  • Use company-provided or reimbursed tools
  • Receive a consistent salary or wage
  • Are entitled to minimum wage, overtime, vacation, parental leave, and other benefits

Misclassifying employees as contractors can lead to fines and legal exposure.

Any non-EU citizen generally needs a work permit to work in Spain. Employing someone without proper authorization is illegal and can lead to fines, criminal penalties, or even a ban on hiring foreign workers.

Spain offers several types of work permits, including:

• Type A: Seasonal or limited work, up to nine months
• Type B (initial and renewal): Work in a specific occupation and region, up to two years total
• Type C: Renewal after a Type B permit
• Permanent work permit: After Type C, allows unlimited duration but must be renewed every five years
• Extraordinary permit: For non-EU citizens who contribute to Spain’s economic or cultural progress
• Type F: For work at Spanish borders while residing in the country of origin
• EU Blue Card: For highly skilled, highly educated non-EU workers, allowing work in many EU countries

You first need to choose a payroll setup through either your own entity or an EOR. Then:

• Confirm each worker is correctly classified.
• Collect required employee data (name, dates, contact, and bank details).
• Pay in EUR, or obtain written consent if paying in another currency.
• Apply statutory deductions correctly.
• Run payroll on schedule.

Key employer payroll costs include:

• Social security: Typically around 30–32 percent, with a contribution ceiling and higher rates for high-risk work
• Wage Guarantee Fund: 0.2 percent
• Vocational Training: 0.6 percent
• Unemployment insurance: 5.5 percent
• Occupational insurance: Varies by industry and coverage

Spanish employees benefit from protections set by EU law, the Spanish Constitution, the Workers’ Statute, and collective bargaining agreements. At a minimum, you must provide:

• Public holidays: 14 paid public holidays per year, combining national and local days
• Generous vacation: Full-time employees receive 30 paid vacation days per year
• Leave entitlements: Statutory maternity, paternity, sick leave, and other leave types, often enhanced by CBAs
• Strong data and privacy protections: Employees are protected from unfair monitoring under GDPR and Spain’s Data Protection Act

Termination is tightly regulated. Most dismissals require objective grounds, written notice to the employee and their representatives, and often severance pay. Disciplinary dismissals follow different rules and may not require notice or severance if justified and documented correctly.