As part of our continuing effort to help payroll professionals everywhere address the complexity of global payroll, we’re asking our internal experts about the unique challenges and requirements of processing payroll in some key countries. In this spotlight, we delve deeper into payroll in Spain, the vibrant south European nation known for its enticing culture, rich history, and beautiful scenery. Read on to discover seven things multinational employers should know about operating payroll in Spain.
What do global enterprises need to know before setting up their payroll in Spain?
It’s important for organizations to understand that payroll regulations in Spain are quite complex. Depending on where the company is based and the payroll team’s experience with highly regulated locations, the amount of legal requirements and the breadth of them can be surprising. Adding to that complexity is the fact that legal requirements, particularly concerning data protection, financial reporting, and labor regulations, are subject to constant updates and changes. Local payroll teams and providers really need to stay on top of the shifting requirements.
Companies also need to understand the role of the collective bargaining agreement (CBA) in employment and compensation in Spain. CBAs establish basic terms of employment, such as working hours, holiday allowances, and minimum wages. All payrolls are set up according to the CBA applied by the company. In some cases, companies have multiple CBAs, which mean multiple payroll configurations and added complexity.
Can you describe a unique challenge or requirement for global payroll in Spain?
Because payroll is Spain is so complex and regulations are subject to constant change, the greatest challenge for companies is finding the right payroll specialists or choosing the right provider to run their payrolls. Experience with the system is possibly more important than expertise with current requirements, because they can change so frequently. The right person, team, or provider needs very specific knowledge of the system in Spain, a thorough understanding of the expectations within the workforce, and experience with the way payroll and data requirements change, as well as how those changes may affect statutory requirements from pay period to pay period.
How can global enterprises benefit from doing payroll in Spain?
Spain is very supportive of companies and has a number of incentives for businesses that set up in the country, including tax breaks and social benefits. The location of an entity within Spain will impact the amount of tax it pays, as well as the schedule for tax payments. And the National Institute of Social Security is of great benefit to employers as well as employees. The extent of social security programs really protects the workforce and helps maintain good relationships between employee and employer by supporting both. The burden of an extended sick leave, for example, doesn’t rest solely on the employer; for an absence of more than 20 days due to injuries sustained on the job, Social Security pays 75% of the employee salary.
Why is Spain a good location for multinational organizations?
Spain’s location makes it an excellent choice for companies looking to do business within Europe and North Africa, as well as Latin America, and its climate and culture are particularly inviting. One of the greatest assets for companies operating in Spain, however, is the workforce. In general, the people of Spain are highly educated, well trained, and very competent—and are often experienced with foreign cultures.
How have the recent changes in compliance regulations affected payroll operations in Spain?
As part of Europe, Spain has had to comply with the General Data Protection Regulations brought into effect in May 2018. But in fact, changes in compliance regulations are very common in Spain. Payroll teams must stay alert and be ready to adapt quickly to changes in wage requirements, taxes, social programs, data protection laws, and nearly every other aspect of payroll regulations in order to meet requirements and avoid penalties.
What is the typical payroll window in Spain, and what can organizations do to shorten that cycle?
The majority of companies in Spain pay employees on a monthly basis. Due to the complexity of the Spanish system, the length of the processing window can vary quite a bit, depending on how an organization is set up and how many payrolls and CBAs are involved. An entity with one, straightforward payroll could have a window as short as two days. However, more complex payrolls involving more agreements and withholdings could be five or more days.
During the implementation process, we take into account all the aspects of an entity’s payroll to determine the expected cycle time. On an ongoing basis, the window can be maintained through strict control over processes that affect payroll, such as the process of recording sick leave or maternity and paternity leave. Additionally, implementing various means of automation such as robotic data validation can help reduce the processing time.
Spain is known for having generous holidays and paid leave. What should employers know going in?
Employees in Spain enjoy around 22 days of paid leave every year, plus 14 bank holidays. It’s important for companies to work with employees and local legislation to determine how those days are distributed throughout the year, so that employees are able to use their leave as they desire without leaving the company short during key periods. According to legislation, employers may decide when half of the days make be taken, for example, by closing an office during the week of Christmas and stipulating that employees use a portion of their annual leave for those days. The key for employers is to be upfront with employees and include them in the decision making.