Spain: The ever-changing spectrum of employment legislation Spain: The ever-changing spectrum of employment legislation

Spain: The ever-changing spectrum of employment legislation
17 Aug 2016

Last December the Spanish government announced legislative changes, which brought about substantial modifications to social security contributions, as well as a major overhaul of pension rights. The retirement age is now 67, although the introduction of this measure will have a gradual effect

Communications with the Employment and Social Security authorities have now been changed. It is now mandatory for employers to obtain an electronic signature (an online credential so to speak) in order to make or request any change with these official bodies.

Paper filing is now ‘out the window’. It is unbelievable to think that such a bureaucratic body is turning electronic. Initially clients may be set back by the idea of having to obtain an electronic signature, but once it is downloaded onto their PC, it has proven to speed up processes. A couple of months ago it took 10 days to request a new social contribution account code. Now it can be done with a couple of clicks.

Monthly social security contributions will be calculated by the pertaining authority based on the data files submitted by the employer´s payroll team. The idea is that Social Security will check the records and produce the payment file accordingly. This file is sent to the employer´s payroll team by electronic means. The method of payment does not change.

Companies that employ individuals from the EU, or have the intention to do so, will need to ensure that these persons are in possession of a registration number issued by the Ministry of the Interior. The numero de identificacion de extranjeros, commonly known as NIE can also be obtained from Spanish embassies or consulates, directly in person by the individual or by a third party through a power of attorney (along with a social security number). Without these identification numbers, Social Security will not register the employment.

Trainee employees must now also register with Social Security and their employer must pay the relevant contributions. It is essential to have an agreement with the university and employer.

Self-employed individuals now have the right to obtain unemployment benefits, if they cease working. In order to receive a benefit they must make the relevant contributions during a minimum period of 18 months prior to stopping work.

Spain continues to be under considerable pressure from the Organisation for Economic Co-operation and Development (OECD) to reduce dismissal costs. A huge gap still exists and needs to be addressed, given that a top rate of 45 days per year of service is still in place, in many instances.

It is also a requirement to go to conciliation (the court hearing where dismissals are agreed/disagreed) in order for a judge to determine if the severance is tax free or not. Often an agreement on the exact severance payment is reached in conciliation.

As mentioned above, contributions to Social Security (SS) were changed substantially last December. From the 22 December the following sources of employment remuneration are subject to contribution:

• Transport allowances

• Meal vouchers

• Company stock options

• Child care support

• Personal insurances

• Private medical insurance

• Contributions to pension plans etc

Each of these benefits is treated differently, but the common denominator is that all remuneration must be recorded via payroll whether it is monetary or not. As a result there will be additional social security payments.

A period of grace until the 31 May is allowed for payment of the additional social security contributions and taxes. However, the input must be recorded on payroll by March 2014.



ASEC has been active in the Spanish payroll world for over 15 years. Our key aim is to provide a ‘one stop shop’ quality professional services in onshore accounting, auditing and assurance, tax, business consultancy, HR and payroll. We assist international businesses coming into Spain and support our Spanish business clients’ outward expansion plans through our global network of professionals. Contact us at www.asec.es.

 

Last December the Spanish government announced legislative changes, which brought about substantial modifications to social security contributions, as well as a major overhaul of pension rights. The retirement age is now 67, although the introduction of this measure will have a gradual effect

Communications with the Employment and Social Security authorities have now been changed. It is now mandatory for employers to obtain an electronic signature (an online credential so to speak) in order to make or request any change with these official bodies.

Paper filing is now ‘out the window’. It is unbelievable to think that such a bureaucratic body is turning electronic. Initially clients may be set back by the idea of having to obtain an electronic signature, but once it is downloaded onto their PC, it has proven to speed up processes. A couple of months ago it took 10 days to request a new social contribution account code. Now it can be done with a couple of clicks.

Monthly social security contributions will be calculated by the pertaining authority based on the data files submitted by the employer´s payroll team. The idea is that Social Security will check the records and produce the payment file accordingly. This file is sent to the employer´s payroll team by electronic means. The method of payment does not change.

Companies that employ individuals from the EU, or have the intention to do so, will need to ensure that these persons are in possession of a registration number issued by the Ministry of the Interior. The numero de identificacion de extranjeros, commonly known as NIE can also be obtained from Spanish embassies or consulates, directly in person by the individual or by a third party through a power of attorney (along with a social security number). Without these identification numbers, Social Security will not register the employment.

Trainee employees must now also register with Social Security and their employer must pay the relevant contributions. It is essential to have an agreement with the university and employer.

Self-employed individuals now have the right to obtain unemployment benefits, if they cease working. In order to receive a benefit they must make the relevant contributions during a minimum period of 18 months prior to stopping work.

Spain continues to be under considerable pressure from the Organisation for Economic Co-operation and Development (OECD) to reduce dismissal costs. A huge gap still exists and needs to be addressed, given that a top rate of 45 days per year of service is still in place, in many instances.

It is also a requirement to go to conciliation (the court hearing where dismissals are agreed/disagreed) in order for a judge to determine if the severance is tax free or not. Often an agreement on the exact severance payment is reached in conciliation.

As mentioned above, contributions to Social Security (SS) were changed substantially last December. From the 22 December the following sources of employment remuneration are subject to contribution:

• Transport allowances

• Meal vouchers

• Company stock options

• Child care support

• Personal insurances

• Private medical insurance

• Contributions to pension plans etc

Each of these benefits is treated differently, but the common denominator is that all remuneration must be recorded via payroll whether it is monetary or not. As a result there will be additional social security payments.

A period of grace until the 31 May is allowed for payment of the additional social security contributions and taxes. However, the input must be recorded on payroll by March 2014.



ASEC has been active in the Spanish payroll world for over 15 years. Our key aim is to provide a ‘one stop shop’ quality professional services in onshore accounting, auditing and assurance, tax, business consultancy, HR and payroll. We assist international businesses coming into Spain and support our Spanish business clients’ outward expansion plans through our global network of professionals. Contact us at www.asec.es.

 

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