Key Takeaways

  1. Andorra’s combination of Europe’s lowest corporate tax rate (10%) and a multilingual workforce fluent in Catalan, Spanish, French, and Portuguese positions the principality as a strategic location for companies targeting European and South American markets.
  2. The 2018 Labor Code modernized employment practices by eliminating verbal contracts, enhancing worker protections, and mandating comprehensive benefits, including 30 days of paid leave, structured overtime, and extensive parental leave.
  3. Employers must contribute 15.5% to CASS (social security). Many companies choose to offer supplementary benefits like private health insurance or pension plans to attract talent in this region.

With Europe’s lowest corporate tax rate at 10% and a workforce fluent in four languages, Andorra is a stronghold for global talent acquisition. This small principality of 88,800 residents in the Pyrenees Mountains has evolved from a tourism haven into a business hub attracting international organizations. 

With professionals speaking Catalan, Spanish, French, and Portuguese, Andorra’s talent pool offers companies built-in access to diverse European and South American markets. The country’s growing focus on digital infrastructure has attracted a new wave of IT professionals and digital nomads, making it an increasingly attractive destination for tech companies.

Plus, grants are available to Andorran-based companies that generate employment in the region. Andorra Business has already awarded over €1,000,000 to nearly 300 companies in the country. With that in mind, Here’s what you need to know about labor laws and mandatory employee benefits when hiring in Andorra.

Andorra Labor Laws

Andorra’s labor laws are governed by the Labor Relations Act (Llei de relacions laborals), which established the rights and obligations of employers and employees. In 2018, a new Code of Labor Relations, Law 31/2018, was introduced,  eliminating verbal work contracts, making hiring processes easier, extending parental leave, and enhancing collective rights for salaried employees. 

The Labor Inspection Service (Inspecció de Treball) is Andorra’s primary authority for implementing these labor laws. This government body enforces labor regulations and investigates workplace violations. Inspectors have the authority to conduct unannounced site visits and initiate proceedings to maintain employment standards throughout the principality.

Engaging legal or HR expertise is highly recommended to ensure full compliance with Andorran regulations. Choosing to partner with an Employer of Record (EOR), which assumes the full legal responsibility for employing your Andorran team, avoids costly compliance errors. And it creates a positive, legally sound employment experience for your Andorran employees.

Mandatory Employee Benefits in Andorra

Andorra’s labor law requires employers to provide these benefits to employees:

Social Security Contributions

Andorra’s social security benefits are controlled and administered by CASS (Caixa Andorrana de Seguretat Social). All working individuals must contribute, with employees paying 6.5% and employers 15.5% of gross salaries, totaling 22%. 

The system is structured into two branches: a general branch covering medical expenses and parental leave and a retirement branch managing pensions through a points-based system. To qualify for retirement benefits, individuals must contribute for 15 years and reach age 65. CASS  also provides additional coverage for disability, temporary incapacity, and survivor benefits.

Annual Paid Leave

In Andorra, employees are legally entitled to a minimum of 30 calendar days of paid annual leave after one year of employment. Before completing a full year of service, employees accrue vacation leave at a rate of 2.5 days for each month worked.

Employers generally determine when vacation leave is taken but must consider the employee’s preferences and the company’s operational needs. Leave is generally taken within the same calendar year it is accrued. 

Working Hours

The Andorran workweek follows a standard 40-hour schedule, typically divided into five 8-hour days. For employees working consecutive shifts, the law mandates at least 12 hours of rest between shifts and one full day off each week. For any workday longer than six hours, employers must provide a minimum 30-minute break.

Overtime Pay

Overtime compensation follows a tiered system based on weekly hours worked. The first four overtime hours earn a 25% premium, the next four hours warrant 50% extra, and any additional overtime commands a 75% increase above base pay.

All overtime hours require a minimum 40% surcharge for companies without specific contractual agreements. Night work, performed between 10 PM and 6 AM, earns at least 20% above standard minimum wage.

The law also sets strict limits on overtime: workers can’t exceed 12 hours daily, with overtime capped at 2 hours per day, 48 hours monthly, and 426 hours annually. All overtime arrangements must be mutually agreed upon between the employer and adult employees over 18 years old.

Paid Public Holidays

Andorrans are entitled to 14 public holidays each year, celebrating occasions like Carnival, Constitution Day, Labor Day, and White Monday. Employees who need to work during these holidays are compensated with either double pay or an extra day off to enjoy at another time.

Paid Sick Leave

Short-term sick leave starts with three days in the first year of employment, increases to six days in the second year, and reaches nine days annually from the third year onward. Beyond these annual allowances, employees are protected by a long-term sick leave system that provides coverage for up to 12 months, with possible six-month extensions up to three years when medically necessary. 

During extended illness, workers receive 53% of their salary for the first 30 days, followed by 66% through day 540 and 60% thereafter. Employees must submit a medical certificate within 48 hours of their absence to activate any sick leave benefits. 

The CASS (Caixa Andorrana de Seguretat Social) manages these benefits, though employers may offer more generous terms through individual contracts.

Maternity Leave

New mothers in Andorra receive 16 weeks of fully paid leave, extending to 18 weeks in cases of medical complications or multiple births. The payment is calculated at 100% of the mother’s average daily earnings from the previous year. 

After taking the mandatory first six weeks, mothers can choose to transfer some of their remaining weeks to the father if they wish. These benefits are also funded through Andorra’s social security system, ensuring comprehensive support for new parents during this important time.

Paternity Leave

Fathers in Andorra are entitled to 14 days of fully paid paternity leave, which must be taken within six months of their child’s birth.

Severance Pay

Severance pay applies to employees who have worked for at least six months and are dismissed without valid cause. For standard dismissals, employees receive fifteen days’ wages for each year of service, calculated using their most recent salary. 

However, in cases of objective dismissal due to economic or structural reasons, the compensation increases to 25 days’ salary per year worked, with a maximum cap of one year’s salary.

Fixed-term and project-based contracts also warrant severance pay at 25 days’ salary per year when terminated. Importantly, employees dismissed for serious misconduct forfeit their right to severance pay.

Supplementary Benefits in Andorra

While not mandated by law, many Andorran employers offer these additional benefits to attract and retain talent:

  • Private Health Insurance: Provides quicker specialist access, private clinic coverage, and additional dental and vision care.
  • Supplementary Pension Plans: Offers retirement savings options beyond the standard CASS benefits.
  • Company Cars: Available for personal or business use, though specific tax rules may apply.
  • Meal Benefits: Includes vouchers or subsidized canteen access to reduce daily food expenses.
  • Wellness Programs: Features subsidized gym memberships and company-sponsored health initiatives.
  • Stock Options: Common in startups and larger firms, allowing employees to share in company growth.
  • Life and Disability Insurance: Provides financial protection for employees and their dependents.
  • Performance Bonuses and Flexible Work: Includes merit-based compensation and adaptable scheduling options.

Enhance Employee Benefits with Remote People

Looking to hire talent in Andorra? While the principality balances strong worker protections with employer flexibility, navigating local requirements takes expertise. Our Andorra EOR services handle key employment details – from CASS contributions to benefits administration – ensuring your hiring practices meet compliance standards. Whether you’re bringing on your first Andorran employee or expanding your team, Remote People manages the employment logistics.

Connect with us to discuss your Andorran hiring plans, and let’s make your expansion straightforward.