How to hire employees in Spain

Hiring an employee in Spain means either setting up a Spanish entity and registering with Social Security as an employer, or engaging an employer of record (EOR) that employs the person for you. The first is the right foundation once you intend to build a Spanish team; the second gets a first hire working without a local company. Capstan does not offer EOR services, so if that is the route you need, engage a provider directly.

Spain is a popular European hiring market with a couple of features that trip up first-time employers: salaries are often quoted across fourteen payments rather than twelve, and sector collective agreements set binding minimums you cannot go below. This guide is a conceptual map, not a rate card. Rates, bases and rules change, so confirm current figures with Spanish counsel or a Spanish payroll provider before you rely on them.

Entity or employer of record

If you form a Spanish entity, you register with Social Security, withhold and remit contributions and income tax, and carry the employment yourself. That is worth doing once you plan to hire several people or stay for the long run.

If you are not ready for that, an EOR employs the person under its own Spanish entity, handles their payroll and contributions, and invoices you. You direct the work; they hold the employment. It costs more per head and gives you less control, and it is a common bridge for early hires. In both cases the person is an employee with substantial statutory protection, not a contractor. Many small employers also work with a gestoría, a local firm that handles payroll and administrative filings.

Social Security and IRPF

Every Spanish payroll run calculates Social Security contributions and withholds income tax. You do not need to master the maths, but you should recognise the structure, because the employer share of Social Security is a real cost on top of gross pay.

Social Security (Seguridad Social). Contributions are paid by both employer and employee on a contribution base, funding pensions, healthcare, unemployment and more, with the larger share falling on the employer.

IRPF. Personal income tax is withheld from each pay at a rate reflecting the employee’s circumstances, and remitted to the tax authority.

The figures and bases change year to year, which is why the calculation belongs with a provider who tracks it, and why this guide gives you none of the numbers.

Extra payments and collective agreements

Spanish pay is traditionally structured with extra payments (pagas extraordinarias), most commonly two a year, so an annual salary is often expressed across fourteen payments. Many contracts instead prorate these across twelve months, so agree explicitly which approach applies, because it changes the monthly figure the employee receives.

Above the statutory floor, a convenio colectivo, frequently set at sector and provincial level, can bind you on minimum pay, job classifications, working hours and leave, whether or not you signed it. Identify the applicable agreement before you set an offer, because it may dictate the minimum you can offer and the structure you must follow.

Contracts, severance and dismissal

Spain’s labour reforms have pushed strongly toward indefinite (permanent) contracts and narrowed the situations in which temporary contracts are lawful, so the default is a permanent contract unless a specific temporary ground genuinely applies. Probation periods are regulated. Dismissal is structured and consequential: it is generally categorised as objective, disciplinary or collective, each with its own grounds and procedure, and statutory severance (indemnización) is generally payable, with a higher amount where a dismissal is found unfair. Getting the classification or procedure wrong is expensive, so plan any exit with Spanish counsel before you hire.

Data protection: GDPR

Employee data in Spain falls under the GDPR and the national data-protection and digital-rights law (LOPDGDD), which adds specific worker protections including rules on monitoring and digital disconnection. You need a lawful basis for processing employee data, clear retention, and strong security. Keep employee data in one controlled place with proper access limits rather than scattered across tools. Our note on handling employee data under the GDPR covers the security and access practices worth insisting on.

The contractor line

Spain takes the employee-versus-self-employed distinction seriously, and treating someone as an autónomo (self-employed) who in substance works as an employee (a falso autónomo) can be recharacterised, bringing back Social Security contributions and penalties. There is also a defined category for the economically dependent self-employed worker, which sits between the two and has its own rules. A genuine contractor runs an independent business with real autonomy; someone integrated into your team, under your direction, on your schedule, looks like an employee. If you are unsure, read contractor versus employee and take Spanish advice before you commit.

Where Capstan fits

Capstan does not run Spanish payroll and is not an employer of record. It holds no Social Security bases or IRPF tables and files nothing with any authority. What it does is be the system of inputs around the calculation: employee records, pay structures, joiners and leavers, leave, attendance, and adjustments, compiled into a documented export for your Spanish payroll provider or gestoría. Their computed results come back onto the employee record, so your record and their filings agree. Contractors live in the same workspace as your team, and the contractor module adds their portal, invoices and payout register on top; like every module it needs a paid plan under it. Because Capstan runs from one self-contained EU region, with data resident in Frankfurt (eu-central-1) and compute in Amsterdam (eu-west-1), a Spanish workspace sits inside the same European deployment as the rest of your team.

Public holidays. There is no bundled Spanish holiday set, so you create the calendar, set its working week, add the dates, and assign it to the locations it covers. Spanish public holidays vary by autonomous community and municipality, so a company hiring in two regions already keeps more than one calendar. Bundled sets exist today for a short list of countries and Spain is not on it, which is worth knowing before you plan a first-day setup rather than after. The calendar itself works the same way everywhere: holidays typed as public or restricted, a cap on how many restricted days an employee may pick, and an employment inheriting its calendar through its location.

Jurisdiction rules are data, not code. Nothing in Capstan hardcodes a country. Contractor tax content is a country pack your workspace configures per jurisdiction. You fill in each country’s contractor withholding, tax lines and document requirements yourself: a draft pack appears the moment you add a contractor in that jurisdiction, and you activate it once the values are ready. It covers contractor invoicing, not employee payroll. For Spain, the tax treatment comes from you and your provider.

Where to go next

If your Spanish hire is one part of a cross-border team, the guide to hiring global contractors covers the wider structures, and the France country note follows the same shape and is a close comparison for another contribution-heavy market. For the current Social Security bases, IRPF rates and severance figures this guide has left out on purpose, speak to a Spanish payroll provider or employment lawyer. The structure is the durable part; the numbers you confirm each year.