Employment Laws in Spain: The Essential Guide

As the fourth largest economy in the European Union, Spain has all the hallmarks of a country poised for continued growth. In 2022, the European Commission rated it as the one of the most advanced digital economies in Europe, with both Madrid and Barcelona hailed as emerging tech hubs. It’s also becoming a leader in renewable energy and biotech. By extension, the Spanish labour market boasts a skilled and educated workforce—ideal for international companies looking to hire specialised talent. 

But employment in Spain is highly regulated, and it’s vital to have a good understanding of employment laws in Spain if you’re going to hire there.

There’s no single body or authority governing employment laws in Spain. Regulations derive from a range of sources, including:

• The international community
• The Spanish Parliament and government
• Regional laws
• Collective bargaining agreements (by sector and geographical application)
• Employment contracts
• Working practices

Some legal provisions will also be interpreted and shaped by Spanish case law.

Types of Employment Contracts in Spain

Employment contracts in Spain are split into three main categories: permanent contracts, temporary contracts, and part-time contracts. While it’s worth noting it’s not a legal obligation to draw up contracts, we’d always recommend doing so!

Permanent Contracts

Permanent contracts do not have a specified end date. In practice, an employee on a permanent work contract can theoretically work the same job until retirement, provided that neither they nor the employer have a valid reason to end it.

Temporary Contracts

Outlined in Spain employment laws, a temporary employment contract is defined as a type of contract that has a predetermined end date.

Part-time Contracts

Part-time contracts can be both permanent and temporary, but the number of work hours agreed upon between the employee and the employer cannot exceed 77% of a full-time contract.

Certain terms must be implied in every Spanish employment contract. For example, the employee would have a duty to obey the law, serve the employer faithfully and take reasonable skill and care in the completion of their work.

Working Hours and Overtime Regulations in Spain

The standard work week in Spain is 40 hours. Any additional hours worked beyond that are counted as overtime. With some exceptions, working overtime at night is illegal. The mandatory rest period between two working days is set at a minimum of 12 hours.

Employers based in Spain should note their are some exemptions.

Annual Leave and Spanish Public Holidays

Full-time employees in Spain are entitled to 22 working days of paid leave per year. The number of public holidays varies depending on the region. With that being said, there are nine national public holidays in Spain.

Paternity and Maternity Leave Policies in Spain

Paternity and maternity leave in Spain is 16 weeks for both parents. During this time period of parental leave, both the mother and the father receive their salary in full in the vast majority of cases. Adoptive and foster parents in Spain enjoy the same rights and privileges.

Social Security and Tax Obligations

Like in most countries, both employers and employees in Spain contribute to the social security system and have tax obligations.

Employer Contributions

Employers in Spain generally contribute around 30.40% of the employee's gross salary to social security.

Employee Deductions

Employees typically contribute around 6.45% of their gross salary to social security.

Termination, Severance Pay, and Disciplinary Dismissal

Severance pay and termination procedures in Spain depend largely on whether an employee is fired on objective or disciplinary grounds. 

If dismissed on objective grounds (e.g., economic downturn), an employee is entitled to 20 days' worth of pay for each year of employment. Employees dismissed for disciplinary dismissal reasons are not entitled to severance pay.

Health and Safety Regulations

Spanish Law 31/95, or the Prevention of Workplace Risks Law, regulates health and safety at the workplace. Though this law grants employers a degree of freedom in choosing how to tackle health and safety issues regarding working conditions, most outsource this to specialists. Obligations vary depending on the size of the company, but all employers have a duty to protect workers from risk.  

Employee Benefits and Perks

Employees in Spain are granted extensive benefits by law, but some additional perks are also common.

Mandatory Benefits

Mandatory employee benefits include paid leave, maternity and paternity leave, paid sick leave, and overtime compensation.

Common Additional Benefits

Employers in Spain commonly also provide supplementary pension plans, additional paid leave, and life insurance.

Independent Contractor Classification in Spain

Independent contractors provide services to businesses, but they are not employees. Unlike employees, contractors in Spain file their own taxes and are not entitled to benefits or severance pay.

If you want to understand how Spanish employment law expresses the difference between employees and contractors, it’s useful to think of it like this:

• A self-employed person (‘autónomo’) renders services on their own account and outside the scope of an organisation and direction of another person.
• An employee or worker is an individual who voluntarily renders their services for compensation on behalf of another party, within the scope of the organisation and management of another physical or legal person (ie, the employer).

The Spanish employment law recognizes a sub-type of contractor known as "dependent self-employed" or "TRADE" (Trabajador Autónomo Económicamente Dependiente). These individuals are unique in that they receive 75% or more of their annual earnings from a single client. Key characteristics include:

• Earnings: they derive a substantial portion of their income from one primary client.
• Equipment: they own and use their own equipment to perform their work.
• No Employees: they do not have employees working for them.

Avoiding Worker Misclassification in Spain

Though the differences between employees and contractors may seem straightforward, there can be grey areas in practice. If an employer claims that their full-time employees are independent contractors, they could face the consequences of employee misclassification in the form of labour fraud fines. Employee misclassification penalties and fines can go up to €10,000.

For more serious offences, an employer may be required to pay back taxes and social contributions. If criminal charges are brought against the employer, they may face imprisonment of up to six years. The Spanish government takes worker misclassification very seriously, so employers should strongly consider consulting with qualified experts to learn how to manage contractor relationships effectively.