The first part of this blog series offered an overview of some of the most important aspects of Spain’s labor legislation. This follow up post will provide some more details about the nation’s complex policies regarding payments and deductions.
Although companies have much to gain when establishing operations in Spain, they could face serious repercussions if they don’t follow the country’s complicated payroll regulations. Although the rules may be complex, and vary from region to region, they are designed to protect one of the country’s most valuable resources: its workforce. In order to successfully employ and pay workers in Spain, consider the following rules regarding salary payments and deductions to ensure all employees are compensated appropriately.
- Number of Payments – Employers in Spain are required to pay their workers in 12 monthly payments. In most collective agreements, there are also two extra paychecks, typically in July and December, which are prorated and included in monthly payrolls through social security contributions.
- Leave Pay – When an employee is sick for one to three days, they receive no compensation for those missed days. However, when an employee is out for 4 to 15 days, the employer must pay 60 percent of the salary for each day. For sick leaving longer than that, Spain’s National Institute of Social Security takes over the payments, paying 60 percent for up to 20 days, and 75 percent for 21 days up until the maximum leave period of 18 months. For injuries that occur on the job, Social Security pays 75 percent from the first day going forward.
- Personal Income Tax – Employers are responsible for deducting personal income tax from their employees. The calculations are based on both national and regional standards. Such factors to be considered are annual gross amount, disability degree, place of residence, and number of children. Taxes must be filed by the 20th of each month, and the annual filing deadline is January 31st of the following year.
- Social Security Tax Rates – Employee social security tax rates fall between 4.8 percent and 6.4 percent of their salaries, depending on factors like contract type (permanent, temporary, full-time or part-time) and social security modality. Additionally, employers are required to pay a tax rate of 29.9 percent for each employee.
- Social Security Contributions – Social security contributions are determined by the sum of the amounts of monthly payments that are taxable. For 2012, the maximum contribution amount is 3,262.50€, and the minimum is between 748.20€ and 1045.20€ for full-time employees, depending on each employee’s professional group or contribution group.
Establishing operations in a new country is never easy, and hiring and compensating employees is often one of the biggest challenges. With complicated and often-changing regulations, it can be particularly difficult for employers in Spain to understand such policies and accurately reflect them on employee paychecks. But instead of trying to follow all of these rules and procedures on their own, employers can benefit from working with a company experienced in all of the nuances of Spanish payroll. Patersons and its payroll partners in Spain can help any organization handle the complexities of payroll, allowing them to devote more time and resources to more strategic business operations.