Hiring Employees in Spain in 2025: What You Need to Know

Spain has rapidly risen as a leading destination for global talent, with a workforce renowned for its high skill levels, adaptability, and multilingual proficiency. 

The country’s strategic position in Europe, coupled with a large pool of professionals in technology, engineering, finance, and renewable energy, has placed Spain firmly on the international talent hiring map. 

The Spanish economy has fostered innovation and boasts a robust startup ecosystem, making it an attractive location for organizations seeking both technical expertise and business acumen.

For U.S. companies, hiring in Spain offers significant advantages. Access to a diverse talent pool with strong educational backgrounds, competitive salary expectations, and a work culture increasingly oriented towards remote and flexible arrangements can give American businesses a strategic edge. 

Whether expanding into new markets or building distributed teams, U.S. organizations can leverage Spain’s talent base to drive growth while navigating cost efficiencies and time zone overlaps that benefit global operations.

How to Hire Employees in Spain

Assess Your Hiring Needs

• Full-time vs. project-based support: Determine whether your needs are for permanent employees (for ongoing business and long-term operations) or for contractors (for short-term projects or specialized expertise).
• Local compliance requirements: Understand Spanish labor laws, tax obligations, and statutory benefits that apply to your preferred hiring model. These can vary greatly between full-time employees and contractors.
• Onboarding speed vs. long-term control: If you need to hire quickly without establishing a local presence, an EOR can help. For long-term growth and deeper control, setting up a legal entity may be preferable.

Hiring Options in Spain

Set Up a Legal Entity:

• Establishing a local company or branch in Spain allows you to hire directly, run local payroll, and build a long-term presence.
• Gives you full control over HR processes, compliance, and operations.
• However, it is time-consuming, costly, and requires in-depth expertise in Spanish corporate, legal, and payroll regulations.

Partner with an Employer of Record (EOR):

• An EOR is a third-party provider that legally employs your workforce in Spain on your behalf.
• They handle payroll, benefits, employment contracts, compliance, and risk mitigation while you manage the team’s daily tasks.
• Enables you to hire quickly without establishing a Spanish company and minimizes compliance risks.

EOR vs. Legal Entity Comparison

Aspect	Employer of Record (EOR)	Legal Entity
Setup Time	Immediate to a few weeks	Several weeks to months
Initial Costs	Low (EOR service fees)	High (legal, registration, admin costs)
Ongoing Costs	Monthly service fee, payroll, statutory contributions	Payroll, local admin, accounting, statutory contributions
Compliance Responsibility	EOR handles compliance	Your company is fully responsible
Payroll & Benefits	EOR manages payroll & benefits	Your company manages payroll & benefits
Scalability	Highly scalable for testing new markets	Best for long-term, large teams
Control Over Operations	Less direct control	Full control

Understanding Worker Classification in Spain

Employees vs. Contractors

Criterion	Employee	Contractor
Control	Employer dictates work hours, methods, and tasks	Contractor has autonomy over how and when work is done
Integration	Part of the organization, subject to internal policies	External to company, not integrated into organizational structure
Payment	Monthly salary, benefits, and social security	Paid per project, invoice, or deliverable; no statutory benefits
Legal Protections	Protected under Spanish labor law	No labor law protections; governed by commercial law
Tax Treatment	Employer withholds and remits payroll taxes	Contractor responsible for their own taxes
Statutory Benefits	Entitled to leave, severance, social security, etc.	Not entitled to employee benefits

• Legal and Tax Implications: Misclassifying employees as contractors can lead to significant penalties, including back pay, tax arrears, fines, and legal action. Spain also recognizes a third category (“dependant self-employed”) for contractors financially dependent on one client, making classification audits essential.

• Hire and Pay Contractors: Engaging contractors is suitable for flexible, project-based work but requires clear contracts. Regular audits and legal counsel are advised to avoid misclassification risks.

Hiring Costs and Payroll in Spain

Hiring Costs Overview

• Employers must budget for a minimum of 30.4% on top of gross salary for social security (24.1%), unemployment (5.5%), wage guarantee fund (0.2%), and professional training (0.6%).
• Additional industry-specific costs may include work accident insurance and special levies.
• Minimum wage for 2024: €1,134/month.

Payroll Setup Steps

• Establish a local legal entity or partner with an EOR.
• Register for tax and social security with Spanish authorities.
• Set up a local bank account for payroll transactions.
• Onboard employees with compliant contracts and collect necessary documentation (tax IDs, bank details, etc.).
• Implement monthly payroll cycles, issue payslips, and ensure timely payments.

Income Tax Rates

• Spanish income tax is progressive, ranging from 19% to 47% depending on income bracket and region.
• Employers are required to withhold and remit appropriate income tax and social security on behalf of employees.

Payment Methods (direct deposit, transfers, EOR payroll)

Employees are typically paid monthly in euros via:

• Direct deposit (bank transfer)
• Check (less common)
• Cash (rare, discouraged for compliance)

Working with an EOR streamlines payments and ensures compliance with local banking and reporting requirements.

Using Global Payroll Services

• Global payroll providers and EORs handle currency conversions, local compliance, tax filings, and benefits administration.
• This approach is ideal for U.S. companies looking to simplify international payroll, avoid local banking hurdles, and ensure error-free compliance.

Compliance Risks When Hiring Employees in Spain

Incorrect Payroll Contributions

• Failing to correctly calculate and remit social security, unemployment, and tax contributions can result in fines, interest charges, and audits from Spanish authorities.

Permanent Establishment Risk

• Hiring employees in Spain may trigger permanent establishment status, making your company liable for local corporate taxes. Consult tax advisors to assess risk based on your activities.

Statutory Benefits

• Employers must provide all statutory benefits, including annual leave, public holidays, maternity/paternity leave, and sick leave. Non-compliance can lead to legal claims and penalties.

Misclassification Risks

• Improperly classifying employees as contractors (or vice versa) exposes your company to back payments, penalties, and reputational damage. Regular audits and clear contracts are essential.

Provincial/Regional Law Variances

• While Spain has national labor laws, some regions may impose additional requirements, especially regarding holidays, leave, and collective bargaining agreements. Always check for local variations.

Onboarding New Employees in Spain

Before Their First Day

• Issue a compliant offer letter and employment contract outlining role, compensation, benefits, and statutory rights.
• Collect required documents: identification, tax ID (NIF), Social Security number, and bank details.
• Register the employee with local authorities and social security.

On Day 1

• Introduce the employee to the team and assign a mentor or onboarding buddy.
• Provide access to necessary systems, equipment, and workspaces.
• Review internal policies, code of conduct, and employee handbook.

During Their First 90 Days

• Monitor performance and provide feedback during the probationary period (up to 2 months for most employees; 6 months for qualified technicians).
• Set goals, provide training, and check in regularly to support integration.

Offer Letter Essentials

• Clearly state job title, compensation, start date, working hours, probation, benefits, and notice period requirements.
• Include references to applicable collective bargaining agreements if relevant.

NDAs and Confidentiality

• Issue Non-Disclosure Agreements (NDAs) to protect company secrets and sensitive information.
• Ensure confidentiality clauses are included in employment contracts.

Running Background Checks

• Background checks are permitted within privacy laws. Obtain employee consent before conducting checks on criminal record, references, or qualifications.

Managing Remote Employees in Spain

Computer and App Access

• Provide secure laptops, VPNs, and access to necessary collaboration tools before the employee’s start date.
• Implement security protocols and remote IT support to address technical issues swiftly.

Intellectual Property Protections

• Include clear IP assignment clauses in employment contracts to ensure the company owns all work products created during employment.
• Types of IP rights: Copyright, patents, trademarks, and trade secrets. Spanish law generally assigns IP created in the course of employment to the employer, but explicit contracts provide extra protection.

Complying with Spain Labor Laws

Working Conditions by Employment Type

• Standard work week: 40 hours. Overtime must be compensated at 175% of the regular wage.
• Minimum wage: €1,134/month as of 2024.
• Annual leave: Minimum 30 days, plus 14 national public holidays and relevant regional holidays.
• Probation: Up to 2 months for most; 6 months for technicians.
• Maternity/Paternity leave: 16 weeks each.
• Sick leave: 17 days at 65% pay, then 75% up to 365 days.

No At-Will Employment

• Spain does not recognize at-will employment. Terminations require valid, legally accepted reasons and must follow due process.

Trade Unions and Collective Bargaining

• Many sectors are governed by collective bargaining agreements (CBAs), which may offer enhanced benefits, pay, or leave beyond statutory minimums.
• Unions play an active role in workplace representation and negotiations. Employers must be aware of CBA requirements applicable to their sector and region.

Terminating Employees in Spain

Acceptable Termination Reasons

• Valid grounds include redundancy, economic necessity, or disciplinary reasons.
• All terminations must be justified and documented according to Spanish labor law. Unlawful or unfair termination can result in reinstatement or significant compensation.

Notice Periods and Legal Protections

• Minimum 15 days’ notice required for both employer and employee (unless otherwise specified in CBAs).
• Severance pay: Minimum 20 days’ wages per year of service, capped at 12 months for terminations with just cause.
• Additional protections apply to pregnant employees, employees on leave, and union representatives.

Why U.S. Companies Can Consider Hiring in Spain

Access to Skilled Talent

• Spain offers a deep pool of professionals in IT, engineering, finance, and renewable energy.
• High levels of tertiary education and widespread English proficiency, especially among younger professionals.
• Growing startup and tech scene fosters innovation and digital skills.

Cost Efficiency

• Salary expectations in Spain are often lower than in the U.S., allowing companies to save on labor costs while maintaining high talent quality.
• Leveraging EOR or remote-first models further reduces overhead associated with office space and local administration.

Time Zone Overlap

• Spain’s time zone (CET/CEST) allows for significant overlap with both U.S. East Coast and EMEA operations.
• Ideal for supporting distributed teams, facilitating real-time collaboration, and enabling 24/7 support or development cycles.

Growing Remote-Friendly Infrastructure

• High internet penetration, modern coworking spaces, and a vibrant remote work culture support distributed teams.
• Spain’s startup and tech ecosystem continues to mature, offering networking opportunities and access to innovation hubs.

Tap into Spain’s Talent Market

Hiring in Spain provides U.S. companies with a strategic gateway to European markets and a highly skilled, cost-efficient talent pool. 

By understanding local employment laws, worker classification, payroll obligations, and compliance risks, American businesses can build successful teams in Spain with confidence. Leveraging solutions like EORs or global payroll services streamlines hiring and reduces risk, making Spain an attractive choice for growth-minded organizations seeking to expand their global footprint.