Employment Law

Before hiring local staff, all foreign investors must formally register as employers with the Spanish tax and Social Security authorities. Although it is not mandatory to set up a local company, employers wishing to register must submit various documents proving their corporate status.

• Tax and Social Security Authorities: It is essential to complete the initial registration as an employer with both public authorities before proceeding with the first employment registration.
• Legalisation of documents: The foreign documentation required for this process must be duly legalised and accompanied by the corresponding official translation.

Social Security contributions amount to approximately 32% of the salary payable by the employer and 6.35% payable by the employee, with a progressive “additional solidarity contribution” applied to salaries exceeding the maximum contribution base. These contributions are calculated on the basis of the basic salary and commissions earned, subject to a maximum contribution base set by law at €5,101.20 per month for 2026.

The “additional solidarity contribution” is levied on the amount exceeding this maximum base, with the cost shared between the employer and the employee across the following brackets:

• Bracket 1 (5.5% total; 1.15% in 2026): Applies to the first 10% of the amount exceeding the maximum contribution base.
• Bracket 2 (6% in total; 1.25% in 2026): Taxes the salary excess between 10% and 50%.
• Bracket 3 (7% total; 1.46% in 2026): Applies to the entire salary excess exceeding 50% of the aforementioned maximum threshold.

The Intergenerational Equity Mechanism is an additional and progressive Social Security contribution strategically designed to ensure the long-term sustainability and financial health of the pension system. This tax surcharge is shared between employers and employees alike.

• Initial application: The surcharge began to be levied on wages in the 2023 financial year, starting at an initial rate of 0.6%.
• Progressive increase: The rate will undergo continuous incremental increases until it reaches a tax ceiling of 1.2% in 2050.
• Equity objective: The legislation aims to balance the demographic burden across generations, securing the future of retirement benefits without compromising the state’s current viability.

During the term of an ERTE, companies cease the regular payment of wages but retain the unavoidable legal obligation to continue paying Social Security contributions for the affected employees. This strict financial requirement applies equally whether there is a full suspension of the agreement or merely a reduction in working hours.

• Mandatory payment of contributions: The company must continue to make its social security contributions to the public system throughout the duration of the ERTE.
• Exemption options: Opportunities for exemptions and rebates on social security contributions arise if the company implements training programmes for the suspended workforce.
• Employee protection: Despite the interruption of work, employees retain their full entitlement to state unemployment benefit.

Typically, the gross annual salary under Spanish law is structured and distributed across 14 payments, and the official National Minimum Wage (SMI) for 2026 stands at €1,221 per month under this same structure. The standard remuneration package provides for the payment of 12 ordinary monthly instalments supplemented by 2 extraordinary payments accrued annually.  The exact dates for the payment of these extraordinary payments, as well as the minimum wage by professional classification, are always determined and regulated within the collective agreement applicable to the company.

Legally, an employee is considered to be working under a “remote working” arrangement when they carry out 30% or more of their total working hours from their own home, or a similar location, calculated over a three-month reference period. This arrangement must be agreed in writing, is irreversible due to its unilateral nature, and safeguards the employee’s original rights against any corporate encroachment.

• Prohibition on financial burden: The remote working framework strictly prohibits the passing on of new financial costs to the employee.
• Provision of infrastructure: The employer is fully responsible for providing the devices, tools and physical resources necessary to carry out the work.
• Maintenance costs: The company must bear all operational costs relating to maintenance, obsolescence and connectivity arising from the equipment provided.

Any corporation established in Spain with 50 or more employees has a mandatory legal obligation to carry out an audit to detect any gender pay gap. In addition, it is mandatory to maintain a transparent and disaggregated pay register available to the employees’ legal representatives. At Seegman, we design preventive employment audits to ensure that multinationals are exempt from severe regulatory fines.

• Current justification threshold: At present, the authorities require robust, objective and reasonable justification in any corporate scenario where the pay gap reaches or exceeds 25%.
• Future justification threshold: This low level of legal tolerance will fall sharply to 5% when the mandatory transposition of the European Directive on pay transparency comes into effect by the deadline of June 2026.

Under the doctrine of business succession, the acquisition of a company or a business unit ensures the automatic transfer of all employees to the new ownership, safeguarding both their previous salary level and original length of service.

The purchaser fully assumes the position of the former employer and is prohibited from unilaterally altering any of the employment conditions in force at the time of signing. In view of this, the selling and purchasing entities assume strict joint and several legal liability, which extends for three years, in respect of any pre-existing social or employment-related contingencies or past non-compliance regarding contributions or settlements.

Spanish employment legislation imposes strict limits on extended working hours, setting the absolute maximum limit for permitted overtime at 80 hours per year per employee. Any hours exceeding those stipulated in the agreement, averaged over a nine-hour working day, are counted as overtime, and it is mandatory to record each day worked at the company on a daily basis.

• Financial compensation: The rate of pay for an hour of overtime may never be lower than the standard rate paid for each ordinary hour of work.
• Compensation in the form of time off: The regulation permits and facilitates the substitution of monetary payment with compensation for such overtime hours in the form of equivalent time off (paid leave).

An employer may make substantial changes to key elements such as the remuneration system and salaries on the grounds of reasons strictly linked to economic, technical, organisational or market-related (operational) shortcomings or challenges that justify such changes. The company must provide factual evidence that such changes are essential to consolidate competitiveness, increase productivity or effectively reorganise operational and technological processes. At Seegman, we structure operations for foreign companies by drafting the documentary and legal files that provide robust procedural safeguards for the implementation of these changes affecting salaries.

Faced with a corporate measure of permanent transfer (geographical mobility) justified on operational grounds that requires an actual change of residence, the affected employee has the option to either accept the company’s decision or formally terminate their employment agreement. Likewise, they have the right to challenge the decision in court; should a court rule against the company’s justification for the transfer, the company would be obliged to immediately reinstate the employee at their previous place of work.

• Acceptance and relocation: If the employee accepts the new geographical posting, they are entitled to reimbursement of all relocation-related expenses.
• Termination and severance pay: If, on the other hand, the employee decides to terminate their employment, they are entitled to severance pay calculated at 20 days’ gross salary for each year of service with the company.
• Statutory maximum limit: The maximum monetary limit payable in compensation arising from a geographical transfer shall never exceed 12 months’ ordinary gross salary.

The fundamental difference lies in the cost of the severance pay: a dismissal on well-justified objective grounds requires the company to pay 20 days’ salary per year worked, whereas a finding of unfair dismissal drastically increases the liability to 33 days per year. At Seegman, we advise foreign corporations on planning workforce restructuring, accurately calculating these scenarios to mitigate any unforeseen financial impact.

From a technical and legal perspective, severance pay is structured within the following limits:

The minimum severance pay in collective redundancy proceedings is statutorily set by the legislator at a rate of 20 days’ pay for each year of service with the company, subject to a cap of 12 months’ full salary. However, case law and practical precedent dictate that trade union representatives usually agree to substantial increases on these statutory severance ratios during the mandatory period of prior consultation with the employer. Our presence in Madrid and Lisbon enables Seegman to act as key legal advisors in high-conflict transactions, securing settlement agreements with the negotiating committees.

A significant reduction in human resources triggers the mandatory legal procedure for collective redundancies under the following specific conditions:

• Termination of the employment relationship of 10 or more employees within a workforce of up to 100.
• A reduction affecting one-tenth of the core workforce in units comprising between 100 and 300 employees.
• Dismissal of more than 30 permanent employees if the company exceeds the internal workforce threshold of 300 employees.

Spanish law presumes by default that all employment agreements are entered into for an indefinite period and on a full-time basis. Therefore, temporary employment is a very strict exception limited to just two legal grounds, always requiring the company to justify in writing the exact reason and the estimated duration of the temporary arrangement.

The only two permitted types of fixed-term contracts are:

• Agreement due to production circumstances: This is used to deal with occasional, unforeseeable increases or temporary disruptions to the company’s ordinary business (including covering staff holidays). Its maximum legal duration is six months, extendable to one year if permitted by the sectoral collective agreement. It may also be used for foreseeable occasional situations, but with a maximum limit of 90 non-consecutive days per year.
• Replacement agreement: Designed exclusively to replace a worker who is entitled to have their job reserved (for example, sick leave or maternity leave) or to make up the working hours of an employee on reduced hours. Additionally, it may be used exceptionally to temporarily fill a post whilst a permanent recruitment process is underway, with a strict maximum limit of three months.

The probationary period in Spain lasts for a maximum of six months for qualified technicians and two months for all other workers, allowing the agreement to be terminated without notice or compensation, except in the case of pregnant workers, where objective protection against termination applies.

Legal Limits on Duration In the absence of different provisions in the applicable collective agreement, the maximum limits are:

Maternity Entitlements and Protection

• Termination without compensation: During this period, both the employer and the employee may terminate the employment relationship unilaterally, without notice and without the employee being entitled to any severance pay.
• Nullity due to Pregnancy: Termination of an agreement during the probationary period of a pregnant employee is considered null and void.
• Exception to Protection: Termination will only be valid if the employer can demonstrate objective and duly justified grounds that are entirely unrelated to the pregnancy or maternity.
• Consequences of Nullity: If the employer fails to prove such unrelated grounds, the court will declare the dismissal null and void, ordering the immediate reinstatement of the employee and the payment of any wages not received.