Guide to IRPF, Social Security and Running Payroll for Foreign Companies in Spain
Lawants Guide · Payroll in Spain A foreign company hiring in Spain should agree an annual gross salary and specify how it will be paid. That figure is neither the employee’s take-home pay nor the company’s full cost. The applicable convenio colectivo shapes the pay due; employee Social Security contributions and individual IRPF withholding are deducted to calculate net pay, while employer contributions increase the company’s cost. The nómina shows the calculation for one worker. The resumen de nóminas helps the company review salary payments, withholdings, contributions and cost across its employees.
In many cases, a foreign company can hire directly in Spain without forming a local subsidiary. This guide explains how to read a Spanish payslip, calculate net pay, manage monthly payroll and reporting, and distinguish outsourced payroll from an EOR. It also shows when the employment setup calls for a separate legal and tax review.
How Does Payroll Work in Spain?
Payroll in Spain starts with the employee’s agreed gross pay. The employer applies the relevant employment contract and convenio colectivo, calculates the worker’s Social Security contributions and individual IRPF withholding, and issues a nómina showing the net amount due. The employer’s own contributions are an additional cost; they are not deducted from the worker’s net pay.
Consider a foreign company offering €48,000 gross per year to a Spain-based hire. That annual figure does not, by itself, tell the finance team how much to transfer each month. It must establish whether the annual salary is distributed across 12 or 14 payments, which salary components the applicable collective agreement requires, and how the employee’s circumstances affect withholding. It must then budget for its own contributions and arrange the recurring filings.
The legal framework requires regular wages to be paid at intervals no longer than one month and documented in an individual salary receipt. (Workers’ Statute, Article 29).
For a foreign employer, these figures also sit within a wider decision: which company employs and directs the worker in Spain? Registering an overseas company as an employer, establishing a Spanish entity and using a third-party employment arrangement have different legal and tax implications. Payroll should reflect the actual employment relationship from the first payslip onward.
Hiring in Spain? Review the Contract and Payroll Together.
Lawants helps foreign businesses set up employment in Spain and manage the payslips that follow. We assess the contract, employer position and recurring obligations as connected parts of the same hire.
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Gross Salary, Net Pay and Employer Cost in Spain
Three amounts answer different questions. Gross salary is the remuneration agreed and earned before employee deductions. Net pay is what reaches the worker after Social Security deductions, IRPF withholding and any other applicable deductions. Total employer cost adds the employer’s contributions and other applicable employment costs to gross remuneration. A salary offer should therefore be expressed as an annual gross amount, with its payment schedule clearly stated.
Base pay, applicable supplements and extra payments before employee deductions.
Gross pay less employee contributions, IRPF withholding and other applicable deductions.
Gross salary plus employer contributions and other costs arising from the employment terms.
The three amounts can change differently. A change to the employee’s IRPF withholding changes net pay without changing the agreed annual gross salary. A different occupational accident contribution can change the employer’s cost without reducing the worker’s net pay. Finance and HR should review all three figures when approving a Spanish hire.
Salary Rules That Shape Payroll in Spain
Spain’s national rules are the starting point for a salary calculation. The applicable collective agreement and the employee’s contract determine how those rules operate for a particular job. Confirm them before using a gross-to-net estimate or comparing offers across countries.
The Applicable Collective Bargaining Agreement
A convenio colectivo can set pay scales, professional classifications, supplements, working-time rules and the amount and treatment of extra payments. The national minimum wage is therefore not necessarily the salary floor for the role. An incorrect agreement or job category can affect every subsequent payslip; see our guide to common payroll mistakes in Spain.
Minimum Wage and the Salary Floor
The national salario mínimo interprofesional (SMI) is currently €1,221 gross per month across 14 payments, or €17,094 gross per year for a full-time worker. The arithmetic equivalent across 12 payments is €1,424.50 gross per month. These are gross figures, not guaranteed take-home pay. The applicable convenio colectivo may set a higher minimum for the employee’s category (BOE, current SMI decree).
Twelve or Fourteen Salary Payments
Employees in Spain have a statutory right to two pagas extraordinarias each year. One falls at Christmas; the timing of the other and the amounts follow the applicable agreement. A collective agreement can allow the extras to be prorated into the 12 regular monthly payments. They are part of salary, not a discretionary performance bonus. The employer cannot assume that proration is available without checking the agreement (see: Workers’ Statute, Article 31).
| Payment Structure | Gross Amount per Payment | Annual Gross Salary |
|---|---|---|
| 12 equal payments, extras prorated | €4,000 each month | €48,000 |
| 14 equal payments, two separate extras | About €3,428.57 each payment | €48,000 |
Equal payments are used only to show the distribution. The amount of each extra payment and whether proration is permitted must be checked against the applicable collective agreement. Monthly contribution bases can include the proportional share of extra payments even when they are paid separately.
The annual salary has not increased in the 14-payment example; its cash-flow pattern has changed. This distinction matters when a foreign head office compares monthly payslips or budgets the months in which separate extras are due.
How to Calculate Net Pay in Spain
Net pay equals gross pay for the period minus the employee’s Social Security contributions, IRPF withholding and any other applicable deductions. The employer’s own Social Security contribution is calculated separately and added to the employment cost. The actual contribution bases and withholding rate must be determined for the employee and pay period; a single headline percentage cannot produce a reliable net salary for every hire.
IRPF Withholding and Modelo 145
IRPF is Spanish personal income tax. For an employee subject to the ordinary withholding rules, the employer calculates a payroll withholding rate using expected remuneration and relevant personal and family circumstances.
The worker communicates relevant details or changes through Modelo 145; the employer uses those details in the calculation. An individual’s final income tax position and the percentage withheld on a particular payslip are different concepts. (see AEAT, Modelo 145 and AEAT withholding calculation service).
Ordinary IRPF is progressive, with state and autonomous-community components in the final tax calculation. That is why a quoted range of headline income-tax rates is not a reliable payroll withholding rate for a particular employee in Madrid, Barcelona or elsewhere in Spain. Use the worker’s actual information and the applicable rules rather than applying the top marginal rate to the entire gross salary.
Personal circumstances can affect withholding without appearing as a separate “family deduction” line on the payslip. Inbound employees who may qualify for a special regime, including the Beckham Law in Spain, need an individual review before a different withholding treatment is assumed. This guide’s example uses ordinary payroll rules.
Employee and Employer Social Security Contributions
Under an ordinary permanent employment contract in Spain’s general scheme, both sides contribute to Seguridad Social, but the percentages apply to the relevant contribution bases, subject to the rules and limits of the period. The employer withholds the employee share and also owes its own share. Occupational accident and disease contributions are employer-only and vary with the applicable activity or occupation classification.
| Contribution | Employee | Employer |
|---|---|---|
| Common contingencies | 4.70% | 23.60% |
| Unemployment | 1.55% | 5.50% |
| Professional training | 0.10% | 0.60% |
| FOGASA | 0% | 0.20% |
| MEI | 0.15% | 0.75% |
| Total of listed rates | 6.50% | 30.65% |
Rates for the stated ordinary case, not a universal percentage of gross salary. Employer occupational accident and disease contributions are additional. Contribution bases, contract type, upper limits and any solidarity contribution require separate review. Source: BOE, current contribution order.
For temporary contracts, high salaries or special employment situations, the applicable percentages or contribution base can differ. The table is a way to identify the main lines on a Spanish payslip and estimate the employer-side burden; it is not a replacement for an individual payroll calculation.
A Gross-to-Net Payroll Example
Take the €48,000 annual gross salary distributed over 12 monthly payments. If the contribution bases for this simplified example equal the €4,000 monthly gross and the ordinary employee rates in the table apply, employee Social Security contributions total €260. If we assume an illustrative IRPF withholding of 20%, or €800, the resulting net is €2,940 for that month. The 20% is an assumption for the example, not the rate prescribed for a €48,000 salary.
On the same simplified base, the listed employer contributions total €1,226. Employer cost therefore starts at €5,226 for the month, before the applicable occupational accident contribution and any other costs. In a real payroll run, contribution bases, withholding and employment terms must be checked individually. The Lawants guide to the cost of an employee in Spain examines the broader budget beyond a single payslip.
How to Read a Spanish Payslip (Nómina)
The Spanish payslip, or nómina, is the individual salary receipt for a pay period.
Its main sequence is devengos → deducciones → líquido a percibir: earnings, deductions and the net amount payable. It also identifies the employer and employee, the contribution and withholding bases, and the employer’s Social Security contribution. Spain has an official salary-receipt model, although an applicable agreement or agreed format can be used if it presents the required information clearly.
See: BOE, salary receipt model.
| Section | Spanish Label | What the Employer Checks |
|---|---|---|
| Identification and pay period | Empresa / trabajador | Correct employer, employee, category, dates and agreed employment terms. |
| Earnings | Devengos | Base salary, applicable supplements, extra payments and other earnings. |
| Deductions | Deducciones | Employee Social Security, IRPF withholding and any other lawful deductions. |
| Net salary | Líquido a percibir | Amount to pay the employee for that payslip. |
| Calculation bases and company contributions | Bases de cotización / aportación de la empresa | Bases used for contributions and withholding, plus the employer-side Social Security amounts. |
The labels and layout may vary. The employer’s contribution is a company cost, not a second deduction from the employee’s salary.
The payslip confirms what is due to one worker. The employer must still compare the payslip with the approved contract, monthly changes and the amounts it will pay and report. An apparently correct net transfer can conceal an incorrect classification, contribution base or withholding.
The Resumen de Nóminas for the Employer
A resumen de nóminas is a payroll summary used by finance and HR to review the workforce together. It brings the individual net amounts, IRPF withheld, employee and employer contributions, and total employment cost into one control view. Unlike an individual nómina, its purpose is to support approval, accounting and reconciliation. The exact format depends on the payroll process. For an employer with staff in Spain, the useful question is whether the summary can be matched to the actual salary transfers and statutory payments.
How to Run Payroll in Spain Each Month
A Spanish payroll cycle begins before the first payslip. The company establishes who the legal employer is, selects the applicable employment terms, completes employer and employee registrations, and gathers the information needed to calculate IRPF.
Each month it processes changes, reviews the payslips, approves salary payments and completes the corresponding Social Security and tax reporting.
Before the First Payroll Run
The employer needs the relevant Spanish identification and a código de cuenta de cotización (CCC) from the Tesorería General de la Seguridad Social (TGSS); it must arrange the worker’s Social Security alta before work starts.
The contract, professional category and convenio colectivo determine the salary inputs. The employee’s Modelo 145 supplies personal and family information relevant to IRPF withholding. The registrations and tax position of a foreign company require case-specific review rather than a universal checklist.
Confirm the employer, contract, collective agreement and registrations. Gather the worker’s tax information.
Review changes, calculate the individual payslips and employer cost, then approve net salary payments.
Reconcile payments, settle Social Security contributions and submit the applicable withholding returns.
Monthly changes can include absences, variable pay, a change in working time, an extra payment or a change in the employee’s withholding circumstances. A sound process makes those inputs visible before the payroll is approved. Salaries are paid on the agreed date under the contract or applicable practice; Spanish law requires the period between regular wage payments to be no longer than one month, rather than setting one nationwide payday.
IRPF and Social Security Reporting in Spain
Social Security contribution information is handled electronically through the TGSS systems, including Sistema RED; contributions for a month are generally paid in the following month. IRPF withheld from salaries is declared through Modelo 111 on the applicable monthly or quarterly schedule, with Modelo 190 serving as the annual summary where required. The filing pattern must be checked against the employer’s Spanish tax registration and obligations.
Outsourcing the calculation does not eliminate the employer’s approval role. HR and finance need a clear route to provide payroll changes, confirm the net amounts and reconcile salary payments with the reported deductions and contributions. If an existing process has produced discrepancies, the Lawants guide to payroll errors in Spain explains the issues to investigate.
Already Employing Staff in Spain? Review Your Payroll Setup.
Lawants can review an existing setup or take on recurring payroll for your employees in Spain. We prepare monthly payslips and manage Social Security contributions and the applicable IRPF withholding filings, with legal, tax and accounting advice in the same team.
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Can a Foreign Company Run Payroll in Spain Without a Local Entity?
In many cases, yes. A foreign company can hire an employee in Spain and arrange Spanish employer registrations without first incorporating a Spanish subsidiary. Whether this is the right structure depends on the work, the actual employer functions and the company’s tax position. Payroll processing is only one part of that decision.
Our guide explains how a foreign company can hire in Spain without setting up a company.
Direct Employment and Outsourced Payroll in Spain
Under a direct hire, the foreign company remains the employer. A Spanish payroll services provider can calculate payslips and support the related employment, contribution and withholding obligations, while the employer makes staffing decisions and authorizes salary payments. The company should assess its registration and Spanish tax obligations before the first hire, then maintain an approval process for each payroll run.
Outsourced Payroll and EOR Are Different Arrangements
A payroll provider processes pay for the company that employs the worker. An Employer of Record (EOR) instead uses a third party as the formal employer. The label in the service contract does not decide whether the structure works under Spanish employment law; the parties’ actual roles and direction of work matter.
Where a third party formally employs someone who in practice works under another company’s direction, the arrangement needs particular scrutiny under Article 43 of the Workers’ Statute on unlawful supply of workers. That is a fact-specific risk, not a conclusion about every EOR arrangement. Our EOR in Spain guide examines the distinction in more detail.
Permanent Establishment Risk for the Foreign Employer
Spanish payroll registration does not, by itself, establish or eliminate a permanent establishment (PE). The assessment depends on the foreign company’s actual activity in Spain, including any fixed place of business, the employee’s authority and how contracts are concluded, together with the applicable tax treaty. A foreign business planning to hire should consider this before treating payroll setup as the entire Spanish compliance project.
See also our guide to permanent establishment in Spain.
Payroll Services in Spain With Lawants
Employment Contracts in Spain
Support with the legal framework and the terms on which the employee will be paid.
Payroll and Ongoing Obligations
Spanish payslips and recurring employer obligations coordinated with the agreed employment setup.
Legal, Tax and Accounting Context
Employment decisions assessed alongside the company’s broader Spanish position.
Lawants works with foreign companies and entrepreneurs operating in Spain. We advise on employment contracts and the employer’s legal and tax position, then support the ongoing calculation of Spanish payslips and related obligations. Payroll sits within our legal, tax, accounting and employment work, so the recurring payslip is reviewed in the context of the relationship that produces it.
For a new hire, we can assist from the employment setup and contract through to recurring payroll. For a company with staff already in Spain, we can review the current arrangement and take on the agreed payroll work. The employer retains its decisions about personnel and approves the salary payments. The scope is defined after reviewing the company’s Spanish situation and workforce.
This integrated view is relevant whether a company is comparing payroll services in Spain, replacing a payroll company in Spain or planning its first employee. The preliminary assessment identifies the employment arrangement and the support the business actually needs.
Make Spanish Payroll Part of a Sound Employment Setup.
Lawants supports foreign businesses from the employment contract through recurring payroll, with legal, tax and accounting issues considered together. Tell us whether you are planning a first hire or reviewing employees already on payroll in Spain. We will identify the appropriate scope for a structured preliminary assessment.
Payroll in Spain FAQ: Frequently Asked Questions
These short answers address the questions foreign employers most often need to settle before a first Spanish payroll run or a change of provider. The applicable agreement and the company’s tax position can change the answer in an individual case.
What Is Payroll Called in Spanish?
The individual payslip is a nómina. Employers also use gestión de nóminas or elaboración de nóminas for payroll management and processing. A resumen de nóminas is a summary for reviewing the pay run across employees, rather than the worker’s individual salary receipt.
Are 14 Separate Salary Payments Required in Spain?
Workers have a statutory right to two extra salary payments. They may be paid separately, giving a 14-payment pattern, or prorated across 12 monthly payments if the applicable collective agreement allows it. State the annual gross salary and check the agreement before setting the payment schedule. Workers’ Statute, Article 31.
What Day Must Employees Be Paid in Spain?
The payment date follows the agreed terms or established practice. There is no single statutory payday for all Spanish employees, but regular wage payments must be made at intervals of no more than one month. Check the contract and applicable collective agreement. Workers’ Statute, Article 29.
How Is IRPF Withholding Calculated for Spanish Payroll?
The employer calculates a withholding rate from expected annual remuneration and the worker’s relevant personal and family circumstances, using information such as Modelo 145. The rate on a payslip is a withholding, not a flat tax rate for every employee. Changes during the year may require an adjustment. AEAT withholding information.
Can a Foreign Company Hire and Pay Employees in Spain Directly?
Often it can, subject to the applicable employer registrations and employment, Social Security and tax obligations. Incorporating a Spanish subsidiary is not automatically required for one hire. The work performed in Spain and the company’s broader tax exposure should be assessed before choosing the structure.
Is Outsourced Payroll the Same as an EOR in Spain?
No. Under outsourced payroll, the business remains the employer and another firm supports payroll processing. In an EOR arrangement, a third party is the formal employer. Spanish employment law requires an assessment of how employer functions and direction of work operate in practice; see our EOR analysis.
What Do Payroll Services in Spain Cover?
The scope can include payslip calculation, employer contributions, withholding and recurring employment obligations. At Lawants, payroll support is coordinated with employment law, tax and accounting advice for foreign businesses. The precise work depends on the employer’s setup and is defined in the engagement.
Does Running Payroll in Spain Create a Permanent Establishment?
Payroll registration alone does not answer the PE question. The foreign company’s actual Spanish activity, the worker’s role, any fixed place of business, authority to conclude contracts and the relevant treaty must be reviewed together. Employment and tax analysis should precede a conclusion. Spanish Tax Agency guidance.
