Hiring your first employee in Spain: cost, contract and the rules nobody warns you about.
The salary is not the cost. Employer social security adds roughly a third on top, the applicable collective agreement may set terms you never negotiated, and dismissal is expensive by design. Here is what hiring in Spain actually involves.
Foreign founders budget the first Spanish hire from the salary figure, then discover three things in quick succession: the employer's social security bill, the extra payments built into the Spanish salary structure, and a convenio colectivo — a sector-wide collective agreement — that sets minimum pay, working hours, holiday and sometimes benefits for the role, whether or not anyone at the company has heard of it.
None of this makes Spain a difficult place to employ people. It makes it a place where the terms are set more by law and sector agreement than by the employment contract, which is the opposite of the assumption most Anglo-American founders bring with them.
What an employee actually costs.
The employer pays social security contributions on top of gross salary covering common contingencies, unemployment, professional training, the wage guarantee fund, workplace accident cover and the intergenerational equity mechanism. Together these typically land in the region of 31–35% above gross, varying with contract type, sector risk classification and applicable reductions.
Spanish salaries are usually quoted in 14 payments, not 12.
Two extra payments — pagas extraordinarias — are standard, typically in summer and December, and are frequently required by the sector agreement. They can be prorated across twelve months if the agreement permits, but they are not a bonus and they are not discretionary. An offer quoted as a monthly figure without specifying the number of payments will be misread.
The convenio colectivo: terms you did not negotiate.
Almost every activity in Spain falls under a collective agreement, negotiated at national, regional or provincial level between employer associations and unions. It binds companies in the sector regardless of membership, and it commonly fixes minimum salary by job category, annual working hours, holiday entitlement, overtime treatment, probation length and notice periods.
Contract types, and why indefinite is now the default.
The 2021 labour reform substantially restricted temporary contracts. The indefinite contract is now the ordinary form, and temporary hiring requires a specific justified cause. Using a fixed-term contract without a valid ground is one of the more common and more expensive errors a foreign employer makes, because the contract is liable to be treated as indefinite from the outset.
| Contract | When it applies | Watch for |
|---|---|---|
| Indefinido | The default form of employment | Probation period limits set by the collective agreement |
| Temporal por circunstancias de la produccion | Genuine, documented demand peaks | Duration limits; misuse converts it to indefinite |
| Temporal por sustitucion | Covering a specific absent employee | Must identify the person replaced and the reason |
| Fijo-discontinuo | Seasonal or intermittent but recurring work | Employee retains rights between activity periods |
| Formacion / practicas | Training and early-career contracts | Strict eligibility and formal training requirements |
| Falsely self-employed | Not a contract type — a risk | Engaging an "autonomo" who works like an employee invites reclassification, back contributions and penalties |
Hiring your first Spanish person as an autonomo to avoid payroll.
If the person works your hours, with your tools, under your direction, exclusively for you, the label on the invoice does not determine the relationship. Reclassification brings back contributions, penalties and an employee with full rights and accrued seniority. It is a common entry shortcut and a poor one.
Entity or employer of record?
A foreign company cannot simply put a Spanish resident on its foreign payroll and consider the matter closed. Employing someone in Spain generally requires registration with the Spanish social security system, which in turn generally requires a Spanish presence — or the use of an employer of record that employs the person on your behalf.
Direct employment through a Spanish SL
Full control of terms and culture, lower per-head cost at scale, no third party between you and your staff, and the entity you probably need anyway for invoicing, VAT and credibility. Requires setup and ongoing payroll administration.
A third party employs them for you
Faster for one or two people and useful for testing a market. Higher per-head cost, less control over terms, and it does not solve invoicing, VAT or the trust problem. Also worth checking against permanent establishment risk if the person is doing sales.
There is a further consideration that catches groups by surprise: employing people in Spain, particularly in commercial roles, can contribute to creating a permanent establishment for the foreign parent — a tax presence with filing and profit-attribution consequences that exists whether or not anyone intended it.
Payroll in Spain needs an entity, a NIF and a social security account.
Incorporation, tax activation, social security registration and the first payroll set up in the right order — so the offer you make is one you can lawfully deliver.
The sequence for a first hire.
- Daily working time records — mandatory for all employees, retained and available for inspection
- Occupational risk prevention — assessment and training obligations apply even to a single office worker
- Income tax withholding — correct rate per employee, remitted and reported quarterly and annually
- Holiday — a statutory minimum of 30 calendar days, plus public holidays that vary by region and municipality
- Data protection — employee records, and any monitoring, require a lawful basis and information duties
- Equality obligations — pay records and, above certain headcounts, a formal equality plan
- Severance provisioning — accrues with seniority; treat it as a liability from the first day, not a surprise at the end
- Convenio colectivo
- Sector collective agreement setting binding minimum terms by activity and often by province.
- Seguridad Social / TGSS
- The social security system and its treasury, where the employer registers and pays contributions.
- Nomina
- The payslip, with a legally prescribed structure and content.
- Pagas extraordinarias
- The two extra annual payments standard in Spanish salary structures.
- Periodo de prueba
- Probation period, with maximum duration set by law and the applicable agreement.
- Finiquito
- The final settlement on termination — accrued salary, holiday and extra pay, distinct from severance.
- Indemnizacion
- Severance compensation, calculated on seniority and the legal ground for dismissal.
- Alta / baja
- Registration and deregistration of an employee with social security.
- ITSS
- Inspeccion de Trabajo y Seguridad Social — the labour inspectorate.
How much does an employee really cost in Spain?
Can we employ someone in Spain without a Spanish company?
Is it cheaper to engage a freelancer instead?
How hard is it to dismiss someone in Spain?
Do we need to worry about the collective agreement for one employee?
Building a team in Spain.
The salary is the smaller number. Plan for the whole one.
Book a free call ↗Alexander Baranov
Seventeen years designing and delivering cross-border corporate structures — incorporation, tax, holding, banking and market entry — for founders and companies expanding into Spain and the EU. Author of professional books on entering the Spanish market.
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