Spain is one of Europe’s most attractive markets for talent, with a well-educated workforce spread across major cities from Madrid and Barcelona to Valencia and Seville. But running payroll here isn’t straightforward. Between Social Security on-costs that can push employer costs well above gross salary, mandatory 13th and 14th month payments, and new digital time-tracking requirements, there’s a lot to get right before you send your first payslip.
This guide covers everything a foreign employer needs to know about Spanish payroll: how contributions work, what you’re required to withhold, how to structure pay, and where compliance risks tend to surface.
How payroll in spain works
Spanish payroll runs on a monthly cycle, with the standard pay date falling on the 27th of each month. Every employer must register with the Tesorería General de la Seguridad Social (TGSS), Spain’s Social Security treasury, and use the Sistema RED platform to manage employee registrations and monthly contribution filings.
A few things set Spanish payroll apart from other European systems. First, salaries are structured across 14 payments rather than 12, with two extra payments representing summer and Christmas bonuses. Second, employer Social Security contributions are substantial, adding roughly 30–31% on top of gross salary. And third, collective bargaining agreements (convenios colectivos) are widely used and often set conditions that go well beyond the legal minimums.
Here’s what the payroll cycle involves at a high level:
- Employer contributions: Added on top of gross salary to fund health, unemployment, training, and other programs
- Employee deductions: Subtracted from gross salary, covering Social Security contributions and income tax withholding (IRPF)
- Sistema RED filing: Monthly submissions to the TGSS covering all employee Social Security data
- Payment timing: Standard pay date is the 27th of each month
Employer social security contributions
Spain’s Social Security system is funded through employer and employee contributions calculated as a percentage of each worker’s contribution base (base de cotización). The contribution base broadly tracks gross salary, with a monthly cap of €5,101.20.
Employer contributions typically add around 30–31% on top of gross salary, broken down as follows:
| Contribution | Employer rate |
|---|---|
| Common contingencies (health, retirement, etc.) | 23.60% |
| Mecanismo de Equidad Intergeneracional (MEI) | 0.75% |
| Unemployment | 5.50% |
| Professional training | 0.60% |
| FOGASA (wage guarantee fund) | 0.20% |
| Professional contingencies (by industry) | 1.5% to 7.5% |
The professional contingencies rate varies by sector and covers workplace accident and occupational disease insurance. Higher-risk industries pay more. As a result, total employer Social Security cost for most roles lands in the 30–31% range above gross, but can exceed this in sectors with elevated occupational risk classifications.
Employee social security deductions
Employees also contribute to Social Security. These amounts are deducted from gross salary before the employee receives their net pay:
| Contribution | Employee rate |
|---|---|
| Common contingencies | 4.70% |
| Unemployment | 1.55% |
| Professional training | 0.10% |
| MEI | 0.15% |
Combined, the employee contribution totals around 6.50% of the contribution base. Like the employer side, this is capped at the monthly contribution ceiling of €5,101.20.
Irpf: income tax withholding
Spain operates a pay-as-you-earn income tax system called IRPF (Impuesto sobre la Renta de las Personas Físicas). Employers withhold IRPF from each monthly payslip and remit it to the Spanish tax authority, the Agencia Tributaria.
The withholding rate isn’t fixed. It depends on the employee’s total expected annual salary, their personal and family circumstances, and any other declared income. Rates are progressive, running from 19% at the lower end to 47% at the top. Employers calculate the appropriate withholding rate at the start of each year and adjust it during the year if the employee’s situation changes.
The beckham law
Foreign employees who recently moved to Spain may be eligible for the Beckham Law (Régimen Especial de Trabajadores Desplazados). Under this regime, qualifying individuals pay a flat 24% IRPF on Spanish-source income up to €600,000 per year, rather than the standard progressive rates. The regime can apply for up to six years.
This matters for payroll because the applicable withholding rate for these employees will differ from standard calculations. If you’re hiring foreign nationals relocating to Spain, confirm whether they’re applying for or already enrolled in this regime, and adjust withholding accordingly.
Minimum wage (smi) and collective agreements
Spain’s statutory minimum wage is known as the Salario Mínimo Interprofesional (SMI). Under Real Decreto 126/2026, the SMI for 2026 is set at €1,221 per month across 14 payments, equivalent to €17,094 per year. When prorated over 12 monthly payments (to simplify payroll administration), this works out to €1,424.50 per month. The 2026 rate is effective retroactively from 1 January 2026.
The SMI is the floor, not the standard. Most industries in Spain are governed by collective bargaining agreements (convenios colectivos), which typically set higher minimum salaries for specific job categories and sectors. Before finalising any offer, check which convenio applies to your industry and the employee’s role. Failing to apply the correct agreement can expose you to back-pay claims and labour inspectorate scrutiny.
Working hours and overtime
Spain sets a maximum working week of 40 hours, with a daily limit of 8 hours. The annual ordinary working hours cap is 1,826 hours. Employers and employees can agree on flexible distribution, but the total can’t exceed these limits.
Overtime rules
Overtime in Spain is voluntary, unless a collective agreement says otherwise. Employees can’t be required to work more than 80 overtime hours per year. Those hours can be compensated either with time off in lieu or additional pay, but the minimum rate is the employee’s regular hourly rate. There’s no statutory requirement to pay a premium, though many collective agreements do set one.
Separate rules apply to workers under the age of 25 and to part-time employees. Part-time workers have specific “complementary hours” frameworks that govern any additional hours beyond their contracted schedule.
Digital time tracking
As of 2025/2026, employers in Spain must implement digital, real-time, tamper-proof time-tracking systems. Paper-based or manually edited records don’t meet the standard. This requirement affects all employers regardless of size and feeds directly into payroll by providing an auditable record of hours worked, overtime accrued, and leave taken.
13Th and 14th month pay
One of Spain’s most distinctive payroll features is mandatory extra-month payments. Spanish law requires two bonuses each year, commonly referred to as the summer bonus (paga de verano) and the Christmas bonus (paga de navidad). These are typically paid in June or July and in December respectively.
Each bonus is equivalent to one month’s salary, bringing annual compensation to 14 monthly amounts. Employers and employees can agree, either individually or through a collective agreement, to prorate these payments across 12 monthly instalments instead of paying them as lump sums. This is a common arrangement that simplifies cash flow on both sides but it must be explicitly agreed, not assumed.
Employment contracts and registration
Every employee in Spain must have a written employment contract in Spanish. The contract must specify the employee’s salary, working hours, role, and contract type (indefinite, fixed-term, and so on). Verbal contracts aren’t enforceable in the same way and create significant legal risk.
Employers must register new employees with the TGSS via the Sistema RED platform within 10 days of their start date. Late registration triggers penalties and can affect the employee’s Social Security coverage from day one.
How to calculate spain payroll cost
Walking through the maths helps you budget accurately before extending an offer.
1. Start with gross salary
Agree on the annual or monthly gross salary. For simplicity, assume a monthly gross of €3,000.
2. Add employer social security
Apply approximately 30–31% on top of gross. For €3,000 gross: €3,000 × 30.65% (approximate) = approximately €919.50 in employer contributions. Total employer cost: roughly €3,920 per month.
3. Calculate employee deductions
Subtract employee Social Security (approximately 6.50% of gross) and IRPF withholding. For €3,000 gross: Social Security = €195; IRPF varies by personal circumstances but might be €350–€500 for a mid-range salary. Net pay lands somewhere around €2,305–€2,455.
4. Don’t forget the 14th payment
Divide annual bonus obligations across 12 months to get the true monthly cost. If you’re paying bonuses as lump sums rather than prorating, account for the cash flow impact in June and December.
Payroll options for foreign employers
Foreign companies can run Spanish payroll through several routes, each with different implications for entity requirements and compliance ownership.
| Approach | Setup complexity | Compliance burden | Best for |
|---|---|---|---|
| Internal management | High | Full ownership | Long-term, high-volume presence with local HR |
| Local payroll bureau | Medium | Shared with provider | Companies with a Spanish entity needing local expertise |
| Global payroll platform | Medium | Centralised but you stay the employer | Multi-country operations with existing entities |
| Employer of Record (EOR) | Low | EOR handles compliance | Hiring without a Spanish entity |
Managing payroll in-house
Running Spanish payroll internally requires deep familiarity with Sistema RED, Social Security calculations, IRPF withholding tables, and collective agreements. This approach suits companies with significant Spanish headcount and dedicated local payroll expertise.
Outsourcing to a local payroll bureau
A Spanish payroll provider handles calculations, payslips, and TGSS submissions. You remain the legal employer but gain local expertise. This works well once you have a Spanish entity and don’t want to build the competency in-house.
Using an Employer of Record
An EOR becomes the legal employer in Spain, handling contracts, payroll, Social Security filings, and day-to-day compliance. You direct the employee’s work while the EOR manages everything else. This is the fastest route to hiring in Spain without establishing your own Spanish entity.
RemotePass offers EOR services in Spain, letting you onboard employees in days with built-in compliance and support for Spanish labour law.
Common compliance mistakes
Even careful employers run into problems. Here are the most common payroll errors in Spain.
Underpaying relative to the collective agreement
Applying the SMI as the salary floor without checking the relevant convenio colectivo is one of the most frequent mistakes foreign employers make. Most sectors have higher minimums, and some have very detailed salary scales by job grade and seniority.
Late employee registration
Failing to register new starters with the TGSS within 10 days of their start date creates gaps in Social Security coverage and triggers administrative penalties. Build registration into your onboarding checklist before the employee’s first day.
Incorrect irpf withholding
Getting the withholding calculation wrong, especially for foreign employees under the Beckham Law, leads to year-end adjustments and potential penalties. Confirm the applicable rate with each employee at the start of employment and review it annually.
Non-compliant time tracking
As of 2025/2026, manual or paper-based time records don’t meet Spain’s digital time-tracking requirements. Non-compliance exposes you to fines and undermines your ability to defend against overtime claims.
Frequently asked questions about payroll in spain
When are salaries paid in spain?
The standard pay date in Spain is the 27th of each month. Exact timing can vary by company or collective agreement, but the 27th is the most common practice.
What is spain’s minimum wage in 2026?
The SMI for 2026 is €1,221 per month across 14 payments (€17,094 per year), effective from 1 January 2026 under Real Decreto 126/2026. Prorated across 12 monthly payments, this equals €1,424.50 per month.
Do employers have to pay a 13th month salary in spain?
Yes. Spanish law requires two extra monthly payments each year: a summer bonus and a Christmas bonus. These can be paid as lump sums in June/July and December, or prorated across 12 monthly instalments if agreed in the contract or collective agreement.
Can a foreign company hire employees in spain without setting up a local entity?
Yes. Using an Employer of Record allows you to hire Spanish employees without registering a local entity. The EOR acts as the legal employer, handling payroll, Social Security, contracts, and compliance. You retain day-to-day control of the work.
