If you have a business in Spain and it is doing well you are probably going to have hire staff at some point. Here is a step by step guide to the process with some links to some more detailed information about Spanish employment.
Next consider the cash flow and budgetary implications of your new staff. Although Spanish wage rates are generally reasonable you can expect to pay approximately an additional 40% in non-wage costs, mainly being employer's social security contributions which are very high in Spain. Also consider the timing - salaries are paid monthly in arrears and national insurance a month later. Income tax withheld from employees is payable at the end of each quarter which can be a nasty shock for the uninitiated who haven't budgeted for this payment. As has been mentioned severance pay can be substantial if you have to let staff go.
Next you need to consider the type of contract to be granted. This is vital because if you don't take advice on this and just select an ordinary employment contract, the law assumes it is a permanent contract with many obligations and consequences for you. EG severance pay up to a maximum of 3 1/2 years, full employer social security contributions, granting of maternity leave etc
There are other contract types which reduce the obligations to you as an employer: trainee contracts which reduce social security costs, subsidised contracts for taking on women or the unemployed, part time contracts, "casual" contracts (good for seasonal businesses) and temporary contracts. Many businesses start by offering temporary contracts and convert to permanent as needs and demand dictate.
Hire a good accountant to help you though the paperwork, deal with the tax and social security and advise on the contract types. The bureaucracy is substantial with a lot of the burden falling on the employer.
For the purposes of this article I am assuming the reader has a Spanish business and has decided to hire some extra help. I also assume that a candidate for the job has been found and advice is needed on the tax and legal framework for employment in Spain as well as the potential pitfalls and implications of the move.
The first step is to decide the wages and conditions of employment. In fact, for most types of job, there is little room for negotiation because wage rates and terms of employment (like holiday entitlements) are set by industry employee bodies called "Convenios Colectivos" which govern each sector and province e.g. there will be a minimum wage and set benefits for hotel workers in Malaga. If you have any scope to negotiate or feel you have to pay more than the minimum remember that wages are generally lower in Spain so don't be too generous unless you need to push for the right quality of staff.
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