Episode 9: Payroll in Spain

Luisa Rollenhagen (00:07)

Hello, I’m your host Luisa Rollenhagen, and you’re listening to another episode of Payroll Around the World.

This audio series is your ultimate guide to understanding how payroll operates in a specific country. We dive deep into the intricacies of what drives payroll, featuring insights from ADP experts on-site and locals who share their perspectives on work and pay in their homeland.

After all, payroll can’t really be global if it isn’t local as well.

Today, we’re going to Spain. The country on the Iberian peninsula is one of the fastest-growing economies in the Eurozone, with tourism, agriculture, and renewable energies being the most prominent industries. Ibiza, Mallorca, Barcelona, and Málaga—the islands and cities along the Mediterranean coast are beloved destinations for all those seeking some fun in the sun.

Barbara Gomez (01:06)
Basically our main industry, let’s say is tourism, and this means around 15% of our GDP.

Luisa Rollenhagen (01:17)

In 2023, Spain was the second most visited country in the world, outranked only by its neighbor France. The rush of visitors, especially to the coastal areas and islands, drives demand for seasonal hospitality workers during the busy summer months.

Lorea (01:33)

From the 15th of June to the 15th of September, it’s considered high season. Some people might work up until the 15th of October, but usually you have those three months.

Luisa Rollenhagen (01:45)

That’s Lorea, a seasonal hospitality worker in Valencia who we’ll be hearing from later.

With 48 million people, Spain is also a regionally diverse country where five languages coexist alongside Spanish, including Galician, Basque, and Catalan, the latter of which is spoken by over 11 million people.

Marcela Uribe (02:05)

It’s not just a variety of cultures but also languages, right? Something to keep in mind that maybe, if you’re opening an office in a particular part of Spain, you might need to have, I don’t know, certain documentation done in a different language or make sure that your HR professionals on-site or supporting your workforce is able to engage in the local language.

Luisa Rollenhagen (02:27)

We’ll dig into all of that momentarily. But before we start, I’d like to introduce our experts for this episode. You’ve just heard a little preview from them, but today we’ll have the opportunity to explore all of those aspects of Spanish payroll and working culture in more detail.

So without further ado, welcome Barbara and Marcela! Would you mind introducing yourselves?

Barbara Gomez (02:47)

Hi, my name is Barbara Gomez, and I’m the head of operations for ADP Iberia, and this means Portugal and Spain, and I’m based in Barcelona.

Marcela Uribe (03:00)

Hi, my name is Marcela Uribe, and I’m the general manager for ADP Southern Europe and Africa.

Luisa Rollenhagen (03:07)

Thanks for joining us today. 

So I’d like to start us off by asking: What are some important challenges that multinationals might not be aware of when they come to Spain?

Marcela Uribe (03:17)

So Barbara will laugh at me when I say this, I think every time I talk about this, but one of the first things—because I’ll say this as the non-Spaniard on the call,—is that when I first started working in Spain, one of the things that I discovered was the concept of summer hours.

It’s this intense work period, usually during the month of August. And not everyone does it, but it is not uncommon to understand that companies will agree either with their unions or their works councils, however they come to these arrangements, to say that you will have a shortened period, a shortened work day during the month of August.

So for example, you might work from 9:00 AM to 3:00 PM as opposed to 9:00 AM to 5:00 PM and as I think we all know, the Spanish eat later than most everyone else. And so I think effectively the idea is to make it an intense workday. So you skip lunch, you work through, and then you eat afterward because it wouldn’t be terribly uncommon for someone in Spain to have lunch at 3:00 PM. And by the way, since the summer hours, the summer days are quite long, and the sun shines till 10:00 PM, you still have a really long day ahead of you if you leave the office at seven, sorry at 3:00 PM. But if you come from outside of Spain, so if you’re a multinational setting up an office in Spain, this might seem a little bit surprising to you. And so you might want to consider what that would mean for you or for your clients or how you manage your workforce. But it’s a lovely concept.

Luisa Rollenhagen (04:54)

I love that! However, I can see how employers from outside of Spain might be surprised by this cultural norm.

Barbara Gomez (04:59)

All the associates, all the employees in Spain know that this is something that they can have in most of the companies that we have in Spain, and they want to enjoy this kind of right. And it’s not only in summer. For example, on Fridays there are a lot of companies that on Friday afternoon, they are closing. So now the employees can enjoy a long weekend. And again, this is something that if you want to retain your associates, please keep this in mind.

Marcela Uribe (05:31)

We want everyone to be happy, productive and happy, right? Because I think that’s, and I’m sure that’s the theory behind it at its outset when it initiated, and I don’t know when that was exactly. I should have looked that up. That would be interesting to know. But I think people are probably a lot more productive when they get a benefit like that that they so clearly appreciate, and you can just have a super intense day and then have a lovely summer evening. So I guess that’s the thought behind it.

Barbara Gomez (05:57)

And to be honest, I think that we all need to consider or to take into consideration that we, as I mentioned before, we have different regions across the country and we have different cultures, even if it’s a small country and we also have different languages. So of course this is something that a new company needs to take into account when it’s coming to Spain that we have this variety of cultures.

Marcela Uribe (06:27)

No, that’s an excellent point because it’s not just a variety of cultures but also languages, right? And again, something to keep in mind that maybe, if you’re opening an office in a particular part of Spain, you might need to have, I don’t know, certain documentation done in a different language or make sure that your HR professionals on-site or supporting your workforce is able to engage in the local language. So for sure, coming back to the example of Barcelona, it’s important to have people who speak Catalan if you’re going to have a large workforce there.

Barbara Gomez (07:00)

In fact, we have some clients, they are asking us to have the payslip in Catalan, so we need to implement this, the payroll or the payslips and the documentation in Catalan because the unions or the employees are asking for this, and this is something that they can request to the company. So that’s something that we also need to bear in mind that it is the right of the employees to have this in Catalan, even if Spanish is the official language for all of Spain.

Luisa Rollenhagen (07:31)

I don’t even need to ask any questions, you’re already answering everything I was going to ask! That’s a really interesting point.

I’d love to learn a bit more about Spain’s economy right now. What can you tell me about it?

Marcela Uribe (07:41)

One of the things that I would say that’s interesting about the local economy in Spain is that it has been recovering quite well in comparison to some of its neighbors. So the GDP growth post-pandemic has been sort of stronger or healthier than some of its neighbors. So that’s very heartening news, I’m sure, for everyone in Spain and for people looking to perhaps invest in Spain. The market here is very much, I guess I would say it’s dynamic, but the traditional businesses are mostly agricultural and manufacturing. And then tourism plays a really big part in the economy here in Spain.

Barbara Gomez (08:27)

Yeah, no, no, totally agree. Basically, our main industry, let’s say is tourism, and this means around 15% of our GDP, but we also need to consider that in the last few years, we are also investing a lot in technology and innovation. And for example, Barcelona is one of the most attractive cities in Europe to found a tech company. And this is something that we have been seeing in the last years, as I mentioned, we are on the top. So I think Spain, generally speaking, is attracting also new talent, which is also very important for our economy.

We also have different regions, right in Spain, so it’s not only Barcelona or Madrid, or the Basque country, which we have this kind of talent and tech companies. But we are very big. We have different cultures in Spain. We also have the south of Spain. So we cannot compare Barcelona, Madrid, with the rest of the regions where they are more focused, let’s say, on the tourism or the agriculture.

Marcela Uribe (09:33)

No, it’s a fair point, right? Spain is not a small country or a small economy. It’s the fourth largest in Europe. And again, as I said at the outset, it’s healthy, it’s got a pretty healthy economy as it is. So Spain is, I guess I would say it’s an attractive, attractive market as a whole.

Luisa Rollenhagen (09:47)

As you’ve already mentioned, the Spanish economy has really diversified and emerged as a strong contender in various industries, including the tech sector. But I’d like to dive into tourism a little bit more since that still comprises—as Barbara mentioned—a significant chunk of the country’s GDP.

How does tourism affect the country’s workforce, and what do potential employers need to know?

Marcela Uribe (10:11)

Tourism and hospitality is such a massive part of the Spanish economy. So what that leads to is a lot of fluctuation in the workforce itself. So you’ll have peak times of the year, so you’re going to have a lot of joiners and leavers that you need to manage. I’ll let Barbara sort of speak to the complexity that leads to as an employer. But absolutely, what that absolutely means is that employers are going to have to be equipped to manage a lot of turnover over the course of any given year.

Barbara Gomez (10:50)

And yeah, we need also to consider that we have 85 millions of tourists, people visiting our country every year. So we are now the second country in the world with more tourists. And this means that, again, 15% of our economy is focused on that.

As Marcela mentioned with this seasonality, we know that if I am a hotel or a restaurant that is in the coast, I’m going to need these people only a few months per year because this is the summer period. So the government launched a specific contract that names, fixed this continuous contract to have always the same people hired, let’s say they are working with us, but only for a few months. So this is something that is not in other countries, and we create these kinds of contracts because of our needs, how this is coming from our needs in terms of tourists. 

For example, there are some different kind of employees. We also have the ones that are working during summer in the coast for example. But then and during the winter they are more focused on the agriculture. But it’s important also to highlight that we have many students that are working during the summer in the coast or in the islands. We have Ibiza, for example, that it’s very well known around the world and there is a lot of people who is going there to spend some months and to gain some money to go there, to continue studying.

Luisa Rollenhagen (12:23)

What kind of payroll challenges can arise from this kind of labor situation?

Barbara Gomez (12:27)

The seasonality, it’s a challenge. Also the flexibility on the work time. We need to cover a long day. So we also need to consider that maybe we are going to start at 7:00 AM and we will finish very late. So we also need to work with these kind of employees to cover different work times. So these are the main challenges that we have.

And also to find people that are able to work during these periods and also in places that during summer, the prices increase a lot too. So this is one of our main challenges that we had last year. For example, as I mentioned before in the Balearic Islands, they were asking for many employees, but the employees from Spain couldn’t go to Mallorca, Ibiza or another island because it was very, very expensive. Expensive to live there during summer, because there is a lot of people who wants to go to these islands, but then we don’t have enough people working in the tourist sector to provide this kind of service. So this is something that for sure we need to fix at some point.

Marcela Uribe (13:40)

So another thing comes to mind when you think about the difficulties of having so many joiners and leavers, from an employer perspective, is that Spain has a particular rule about declaring anyone who joins the company or leaves the company or goes out on sick leave, but not really applicable to this example. But anyone joining or leaving has to be filed with, you have to make a declaration to the social security in some cases or in most cases within 24 hours. So you can imagine this becomes, it has the potential to be quite burdensome if you’ve got large numbers of this happening at any given moment. So that’s something that I’ve not seen anywhere else in Europe or anywhere else. It is really a peculiarity to Spanish regulations.

Barbara Gomez (14:25)

And the penalties can be huge. So you can imagine a big company who is a hotel that is managing a hundred of joiners every day, they need also to ensure that they are meeting the deadlines with the social security.

Marcela Uribe (14:43)

And by the way, that deadline could occur on a weekend as well. So it’s not always the case that you’ve got your HR professionals working on Saturdays and Sundays.

Luisa Rollenhagen (14:53)

Since seasonal workers make up a significant part of Spain’s workforce, I was curious to hear how they managed to juggle this kind of temporary work in order to earn enough to live year-round.

Because ADP prioritizes local expertise on the ground, this series also gives a platform to the experiences of people who live and work in the country we’re featuring. Remember Lorea, who you heard from at the very beginning of the episode? We asked her to tell us about her particular working situation in Spain.

Lorea (15:26)

Hi, my name is Lorea. I’m 44 years old. I currently live in Cullera, Valencia. And yeah, I’ve been here for a while now after living abroad for almost 20 years.

Luisa Rollenhagen (15:42)

Lorea lived in the UK for many years, and when she returned to Spain, she found it difficult to land a job without specific qualifications.

Lorea (15:50)

Every day I checked for possible work offers and things like that. But it was very difficult for me to get the idea of what they needed because in the UK it worked really differently. I moved there when I was 18 and right after high school and I didn’t have any qualifications, but it didn’t matter back then.

Luisa Rollenhagen (16:14)

So she decided to take a job at a restaurant in southern Spain for the summer season.

Lorea (16:20)

So I went straight to hospitality. So hospitality in Cullera, where it’s brutal [laughs]. I never worked in a coastal town of Spain in hospitality. But I did it. In a way, I had fun because I enjoy working with other people.

Luisa Rollenhagen (16:44)

Despite having a consistent gig at the same restaurant in the summer months, she realized she needed another job to tide her over during the off-season.

Lorea (16:52)

From the 15th of June to the 15th of September, it’s considered high season. Some people might work up until the 15th of October, but usually, you have those three months, and that’s it. So there’s no way to make a living out of a seasonal job like that.

I came back from the UK and had all my friends here that have children and needed a bit of English classes and things like that. Naturally, I ended up doing some private classes for children during the winter, when I had no work at the restaurant. It was little hours and that was just at the beginning. But eventually, it has grown. So I have enough classes during the winter to not rely so much on the seasonal job but still have to work at least two months in the summer in a restaurant to even up my wages.

Luisa Rollenhagen (17:15)

Because she is on a contract during the summer seasons and then self-employed as an English teacher in the off-season, Lorea’s tax situation changes during the year. But her earnings as a self-employed worker are low enough that they don’t affect her overall tax bill.

Lorea (18:06)

The wages are so low that it doesn’t really affect your taxes that much. Some years you pay a bit more, others they return, and it’s always the same.

Luisa Rollenhagen (18:18)

Lorea admits that she does find the arrangement challenging at times.

Lorea (18:22)

There are downsides, instability, economic instability, and not knowing how long that job is going to last for. It’s temporary contracts, so you never know. With the teaching, you rely on how many students you have. It might change every year. The hours keep swapping, what worked one month doesn’t work two months after, so it’s changing all the time.

Luisa Rollenhagen (18:50)

However, she highly values the flexibility that her working arrangement provides.

Lorea (18:55)

You have quite a lot of freedom to choose your free time and what you want. You can plan ahead things, you can travel, you can spend quality time with people you love. And yes, I would say the only reason I keep doing it, it’s because I got so used to having time off that is not a schedule, that they don’t tell you, okay, you have those 28 days and it has to be two weeks here, two weeks there. No, you can plan and decide and change, and if something doesn’t work, you can, most of the time, obviously, there are moments where you have to be at your work obviously, but in general, and that’s the main advantage that I can see, that it allows me to travel and be with the people I want to be with and spend quality time.

Overall it brings me lots of flexibility to do things that I really like and enjoy. And I’m learning that in the last few years. It was difficult at the beginning, but now I’m coming to terms with it, my peace with it.

Luisa Rollenhagen (20:03)

Lorea’s story made me wonder what issues an employer, and more specifically a payroll provider, might encounter when it comes to managing things like social security contributions. Because even though Lorea is on a temporary contract during the summer months, her employer is still responsible for social security contributions. 

Barbara and Marcela, could you tell me a bit more about how social security works in Spain?

Barbara Gomez (20:25)

Some years ago, the social security changed the way how to submit social security declarations. And in the past, this was a process that took some few days and today, this takes around one month. We have to submit different files to the social security to reconcile all the employees. And if there is only one difference between what the information that has the social security or our information, then we cannot close the social security declarations for this company. If we are not doing, we are also missing the deadlines, so we can also automatically have 20% penalty of the total amount of the declaration.

Luisa Rollenhagen (21:16)

Oh, so it’s actually gotten more complicated. And it sounds like there are way more reconciliations that need to be done?

Marcela Uribe (21:22)

So actually hearing you mention the word, the reconciliation that happens in payroll, this is another that is again very particular to Spain. And Barbara, I’ll let you explain it, but effectively you run two payrolls each month in Spain, which again, I’ve not seen in other places, right? It’s something that is quite unique to Spain.

Luisa Rollenhagen (21:46)

What do you mean by two payrolls?

Barbara Gomez (21:49)

I didn’t know another country with these two runs. And basically, what we are doing in Spain is we are running the payroll and more or less, and depends on the client and depends on the collective agreement, depends on the agreement with the company and the union. So depends on different things. We have a different date for the payment to our employees, but generally speaking we, more or less, it’s around 23th, 24th, 25th of each month.

So we are running the payroll until 23, 24 or 25. Once we are paying to our employees, then… we pay on 25, let’s imagine. But from 25 to 30 of the month, at the end of the month, we still have five or six days that we can have some changes on the payroll for these employees. We can have sick leave, we can have a termination, or we can have an accident or maternity leave.

And this needs to be recalculated or rerun in order to be compliant with the social security and with the taxes. So that’s why we are obliged to rerun this payroll again and then to be able to submit the right declarations to the tax agency and to the social security. So if we want to be compliant with our legislation, we need to do these two runs. Of course only for those associates that has had some changes in the payroll, but this is how we are working. So it’s like to have two payrolls in one month.

But on top we are not facing every two or three months some changes that need to be implemented. Then in January, we always have new changes on the contributions to, and for example, we are working right now on this gender gap or the salary transparency that is coming. And we have been working in the last period to be transparent, to have this gap, let’s say reduce or minimize or even eliminate.

Luisa Rollenhagen (23:58)

Tell me more about this gender pay gap reporting.

Barbara Gomez (24:01)

One of the main actions that we will need to implement is this transparency of salaries in your company. So we will need to share with all the associates the range. It’s not exactly the salary, but the range of the salary of each associate because of these gaps that we had in the past between male and female or between also different types of workers.

Marcela Uribe (24:28)

Spain was at the forefront, and they were the first, among the first, if not the first, to require reporting with respect to the gender pay gap. So they’re really focused on that. And so now there’s a lot of EU-wide directives about pay transparency, which everyone has to comply with now. But in this case, Spain was absolutely ahead of the game on that one. And so there’s been these reporting requirements in place for a while now to really try to address the pay gap, the gender pay gap, to try to again do whatever they could to narrow that gap.

Barbara Gomez (24:59)

And to be honest, I think that also the new joiners, people that are young, they are expecting to have this kind of behavior from the company. So it’s not only related to the salary.

So the new joiners are also asking for different type of benefits, like to have a good environment, to have a program of diversity and inclusion, to have a health influence, but they want more flexible hours working from home every role. So it’s not only salary, it’s also this kind of benefits that they are asking even more. We have an example, we had some roles that we wanted to cover, technical roles that we wanted to cover, and the associate, the candidate were not asking for the salary, they only ask if they can work from home.

Luisa Rollenhagen (25:54)

You basically just answered my next question. I was curious to know what employee requests are popping up in contract negotiations lately. What are some trends that you think we’ll be seeing more of?

Marcela Uribe (26:05)

I think the first thing that comes to mind, and Barbara already touched on this, but it comes up often, and I think we’ll continue for the short to midterm is, and potentially the long-term, is the flexible work hours and working from home capabilities. We’re seeing more and more of that as we do our own recruiting and just understanding from what we hear in the market and from what we hear from our clients is this need or this demand for some sort of flexibility, whether it’s the hours or some hybrid work or the ability to work from home.

Barbara Gomez (26:41)

And work-life balance, to be honest, this is what we are seeing from our new associates, that they don’t want to spend 12 hours as my grandfather did in the past, so they don’t want this anymore. So they want to add value to the company and they are putting a lot of effort into what they are doing, but they have also their life and they want to live it. So I think that we are going to see more about this.

Luisa Rollenhagen (27:08)

Absolutely, we’ve been hearing that a lot from many different places. 

So we’ve talked about some challenges that multinationals might encounter in Spain, especially pertaining to reporting requirements and various payroll runs. So what is ADP doing to help clients in Spain stay compliant?

Barbara Gomez (27:24)

I already mentioned at the beginning of this podcast, in Spain we have a lot of changes in terms of law, in terms of labor changes in general, and we are experts on this, so we are on top of this. We are always, we have on the radar always this kind of legal updates and we are very quick implementing this. So I don’t want to talk about COVID because this was in the past, and I want to move forward, I want to leave this in the past, but it was a good example for us of how a company like ADP can manage this kind of situation and can support our clients. We were very quick trying to understand what the legislation was asking us. We did the changes in our systems also very quick and compliant to the law, which is the most important thing.

Marcela Uribe (28:18)

I think that’s exactly it, right? That’s spot on for me as I was thinking about it, is that we have a team of experts that this is what they do, this is all they do, this is our core business. So we spend our time monitoring all the different legislation and what that means in how it needs to be applied and so that our clients can focus on doing their core business, on running their businesses, and doing what they do best and what they need to do.

Luisa Rollenhagen (28:45)

That’s great, thank you. We’re going to start wrapping up, but before we do, I’d love to hear from both of you: What do you personally find exciting about working in payroll?

Marcela Uribe (28:55)

So working in payroll, there’s never a dull moment. You never quite know what’s coming next.

Barbara Gomez (29:01)

It’s very dynamic. So it’s not always like what’ve you seen yesterday.

Luisa Rollenhagen (29:06)

Very true!

Barbara and Marcela, thank you very much for joining us today! It was so fun to chat with you and learn more about payroll in Spain. I’m particularly delighted about the concept of summer hours, and I can imagine that anyone trying to get rid of them will have a tough road ahead. 

I hope you got a bit of a deeper insight into how payroll in Spain works today. If this episode has piqued your interest or your company is considering expanding into Spain and you want to learn more about payroll there, please go to the ADP Spain website es.adp.com. 

And don’t forget to subscribe to learn more about payroll around the world with each new episode.

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