Key Takeaways

  • Spain has the 13th-largest economy in the world and is expected to experience growth of 2.6% in 2025, owing to its strong economic performance in 2024.
  • To take advantage of Spain’s robust economy by expanding in the country, businesses are encouraged to hire a professional PEO.
  • A PEO in Spain supports workforce expansion without having to establish a legal entity.
  • Spanish PEOs keep businesses compliant with labor laws, from minimum wages to social security contributions.

Spain has become a highly sought-after destination for business expansion owing to its sophisticated infrastructure, dynamic economy, and investment opportunities within the European Union. In 2024, Spain’s economy outperformed many of its Eurozone neighbors with growth of 3.2%, backed by its strong tourism sector and an increase in domestic demand. For the same period, Spain’s GDP reached $1.424 trillion based on data from World Economics. 

In addition to Spain’s dynamic economy, businesses can benefit from grants, and tax incentives, and exemptions. Furthermore, Spain is known for its high-quality healthcare systems and skilled human capital.

Export Category
Export Value (USD)
Cars
$40.4 billion
Refined Petroleum
$19.2 billion
Vehicle Parts
$16.3 billion
Packaged Medicaments
$14.7 billion
Delivery Trucks
$13.5 billion

A necessary part of establishing and growing your workforce and business in Spain is following the Spanish employment laws. New and foreign businesses are often overwhelmed by Spain’s labor framework and need assistance complying with its strict protections for workers. This is where a PEO can prove most valuable.

A Professional Employer Organization in Spain helps all businesses adhere to local labor laws. By following this guide, learn just how you can remain compliant and pursue successful business expansion in Spain with the services of a trusted PEO firm.

What Are PEOs in Spain?

A Spanish Professional Employer Organization, or PEO, is also known as an HR service provider. The PEO serves as your co-employer, assisting with HR administration, employee benefits, payroll, employment contracts, and overall compliance. PEOs in Spain assist with connecting their clients to local top talent, making the hiring process easier and more efficient. 

You remain in control of your employees’ daily performance while the PEO handles the legal documentation required to enter the market with haste.

Start hiring with a Spain PEO

Let us handle the complexities of hiring, compliance, and payroll in Spain while you focus on growing your team.

  • Hire employees in Spain with a Spain EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • RemotePeople can also help you find the best talent in Spain
Get Your Customized Proposal

Why Choose a PEO in Spain?

International businesses find that Spain’s employment laws are quite challenging to understand and implement. Spain has multiple regulations based on regional laws in addition to the Workers’ Statute and the National Constitution. Spain recognizes collective bargaining agreements, and in some instances, these agreements can overrule labor laws in specific sectors. 

With the services of a Spanish PEO, businesses have peace of mind that national and regional employment laws are followed. While the PEO may not get involved in the collective bargaining process, they can advise on Spain’s labor laws to keep employers compliant. This means that your trusted PEO firm can protect against harsh legal penalties for non-compliance and support your expansion into Spain.

Services Offered by Spain PEOs

The role of a PEO company in Spain is to create efficiency, manage HR functions, and ensure you comply with the employment laws. Discover how a PEO can help your business with expansion:

Payroll Management

A Spanish PEO firm handles your payroll by overseeing administrative tasks such as the calculation of taxes, social security, and statutory benefits. The PEO is responsible for timely and accurate payments of wages and taxes, and they will maintain payment records as per Spanish labor laws. Entrusting your payroll to the PEO in Spain frees up time to focus on core tasks and provides peace of mind that your business remains fully compliant.

Employee Benefits

Spain’s labor law requires that employees receive benefits such as social security, leave entitlements, severance pay, and a safe working environment. The Spanish social security system consists of pension, unemployment benefits, and medical coverage. The PEO in Spain ensures that employees contribute 6.48% and employers 30.57% of the gross salary under the 2025 social security law. 

Spain’s severance pay is called indemnización por despido and is issued upon the termination of an employment contract. The PEO will follow labor laws under which employees must receive 20 days of severance pay for every year of service. 

Lastly, a Spanish PEO can negotiate affordable rates for benefits on your behalf. This allows smaller businesses to offer their employees high-quality perks at a fraction of the price.

Tax Compliance

The general corporate income tax in Spain is 25% of the company’s global income; however, this rate may change depending on the industry and the size of the business. In Spain, certain business sectors and new companies pay lower tax rates for the first few years of operation. In such cases, eligible companies pay a 15% corporate income tax. 

With the expertise of a PEO firm in Spain, they will register employees for tax purposes, complete tax reporting, and perform the necessary deductions. In addition to regular tax, the PEO will handle social security contributions.

Onboarding and Recruitment

Companies expanding in Spain will receive assistance with the HR process, including administration, when recruiting and hiring staff. The Spanish PEO firm takes the complexity and time out of recruitment by helping employees find skilled job candidates. PEOs generally handle the interviews, screening, and onboarding process. 

When it comes to onboarding new employees, the Spanish PEO will set up payroll and process paperwork to ensure that new workers are compliant as per local labor laws.

Employment Contracts and Terminations

Legally, employment contracts in Spain must be written in Spanish. PEOs will ensure compliance by including working hours, minimum wages, leave entitlements, and the processes for dismissals in the contract. Where collective bargaining agreements are concerned, the Spanish PEO ensures the employment contract aligns with these agreements. 

Should an employee’s contract be terminated, PEO’s can facilitate the process as per the Workers’ Statute. The PEO in Spain will present a 15-day notice to the employee and determine whether they are eligible for unemployment benefits and severance pay.

Advantages of Using a PEO in Spain

Using a PEO in Spain allows you to easily, efficiently, and compliantly hire and expand a workforce while pursuing business growth opportunities. The following benefits of partnering with a PEO can help you determine whether the co-employment relationship is best for your business:

  • Cost Savings: If you were to start a company in Spain, you would have to register with the Mercantile Registry (Registro Mercantil), complete incorporation documents, and pay the registration fees, which can be extensive depending on the type and size of the business. A PEO can ease the cost burden of business registration or hiring an in-house HR team. Firstly, you don’t need to set up a legal entity to hire a Spanish PEO. This eliminates the costs of registering a business. Secondly, the PEO in Spain helps with HR functions for efficient and economical operations.
  • Speed to Market: Setting up a business in Spain can take up to four weeks. Onboarding new employees will increase the time it takes to start operating your business. With the services of a PEO, you can hire a workforce in a matter of days. A dedicated Spanish PEO accelerates the employment process by handling essential HR tasks on your behalf, which means faster market entry.
  • Risk Mitigation: The Spanish PEO is knowledgeable in the country’s labor laws from drafting employment contracts to following collective bargaining agreements. If your business were to violate these employment regulations, it could face fines, sanctions, and possible criminal charges. The PEO firm in Spain guarantees compliance and protects your business from labor law violations.
  • Focus on Core Business Activities: Entrusting your company’s payroll, benefits administration, taxes, and even onboarding to a reliable PEO firm gives you the time and resources that you need to focus on core activities and professional growth.

How RemotePeople Facilitates PEO Services in Spain?

At RemotePeople we are a leading PEO service provider assisting businesses from all over the world with compliant, efficient, and cost-effective expansion. Our trusted PEO company offers clients dedicated services from HR support and onboarding to payroll and compliance with Spanish labor laws. We understand how important it is to hire employees with the right skills and background, along with mitigating risk when establishing your business in Spain.

For these reasons and many more, all client companies can benefit from our fully compliant payroll, tax reporting, employee benefits administration, and compliance guidance services. To make employee management simpler and faster, we offer a secure self-service platform to onboard employees in minutes and access compliant documents. 

Our solutions are compliant, and scalable, and we never leave you in the lurch. Our expert team will serve as your all-in-one PEO partner for successful expansion and hiring solutions in Spain.

Steps to Engage a PEO in Spain

When you hire a PEO, there process starts with a consultation followed by the drafting of a service agreement as follows:

1

Initial Consultation

The initial consultation can be conducted telephonically in person. It covers the goals of your business, the services you’re looking for, and the solutions provided by the PEO company in Spain. During this stage, you’ll need to assess the PEO’s knowledge of Spanish labor laws, which includes handling processes for work permits and whether they assist with visa sponsorships. The PEO will present a custom plan including the costs of their services.

2

Service Agreement

The service agreement is the formal document that is signed once both parties agree to the PEO’s services. The contract typically covers the services discussed in the consultation, how they will be delivered, and legal measures to be upheld by the PEO and client. Always assess the costs stipulated in the contract. Are there hidden fees or clauses you don’t understand? The contract should contain confidentiality clauses.

3

Onboarding Process

Upon signing the Spanish employment contract, the PEO will prepare new employees for onboarding. This includes enrolling employees for tax with the Agencia Tributaria or the Kingdom of Spain’s Revenue Service. During this stage, employees are registered for social security, and personal information will be collected to establish compliant payroll. Furthermore, the PEO in Spain will manage the visa and work permit requirements of employees following labor and immigration laws.

The Difference Between PEO and EOR in Spain

PEO and EOR (Employer of Record) may seem to describe similar services; however, each provider has its own legal obligations and overall business structure. The Spanish PEO adopts a co-employment position with the client company, which means that they share certain employee responsibilities. These responsibilities include processing payroll and administering employee benefits while you, as the employer, remain in charge of your workforce’s daily activities.

This includes the implementation of employee training programs and providing objectives and direction for your staff. The EOR, with infrastructure in Spain, becomes the legal employer of your workforce. They handle various tasks from payroll and benefits administration to tax withholding.

While they offer convenience and cost savings as you don’t need a legal entity to hire a workforce, there are limitations concerning Spanish EORs. The employer in Spain is recognized as the one who directly manages the tasks and performance of their employees. Even though an EOR serves as a legal employer, you, as the client company, are still in control of your employee’s performance.

Before you decide to hire an EOR, ensure that you and the service provider have clear roles stipulated in the contract. This can prevent legal issues such as the illegal assignment of employees or cesión ilegal de trabajadores.

Partner With a PEO in Spain To Expand Your Business Successfully

Spain remains one of the most attractive business destinations in Europe, thanks to its stable economy, strategic location, and skilled workforce. However, entering the Spanish market requires navigating complex labor laws and tax regulations. A PEO can simplify this process and help you hire confidently.

Unsure which PEO to pick in Spain? Contact RemotePeople, your trusted PEO, to be the best solution for your business. We provide top-rated PEO services that help unlock your business potential in Spain. Reach out today to get started!