When it comes to salaries, the key elements that a Spanish employer must consider is what a certain salary will really cost the employer/company. Of course, any employee will tend to only focus on the net amount he will receive each month; but the employer, in an effort to make ends meet, must bear in mind that the net salary is a relatively small portion of the company’s total economic burden in terms of employment costs.
So, what does an employee really cost a Spanish employer? Let’s move from bottom to top.
- Net salary: the total amount the employee receives on a monthly basis, once all personal income taxes and social security expenses have been withheld by the employer, and therefore deducted.
- Gross salary: the net salary incremented in contributions and employee coverages the company must pay on behalf of the employee, as well as the Personal Income Tax withheld by the employer. Consequently, the gross salary is the basis of calculation of employer contributions to the Social Security System. Such contributions under normal labor conditions are, mainly, as follows:
- Ordinary contingencies (Contingencias comunes). The total percentage on the gross salary is 28.30%. The employee bears with only 4.70% of the latter, whereas the employer will bear the remaining 23.60%.
- Work accidents and work-related illnesses: 1.50%.
- Unemployment fund: Out of a total 7.05%, the employer will bear with 5.50%.
- Training/formation: Out of a total 0.70%, the employer will bear with 0.60%.
- Wage Guarantee Fund (“FOGASA”): 0.2% at the expense of the employer.
Let’s clarify the above through a practical example: Say that an employee receives a net salary of € 1,600. This amount is to be incremented in the amount of the Personal Income Tax withheld by his employer and the contributions payable by the employee, which results in a gross salary of approximately € 2,000. This amount will be the contribution base so, considering the abovementioned percentages, the employer can expect a total economic burden of € 2,600.
Therefore, we can conclude that from the monies the employee receives on a monthly basis in his bank account to the cost of such employee for the employer there is an increase of roughly 62%.
Notwithstanding the above, Spanish employers must also bear in mind that Spain offers a great amount of deductions and subsidies in consideration of the personal situation of the employee as well as the modality of employment contract. At Lawants we can help you find the best option for your company.