For international companies hiring employees in Spain, or employing individuals who work remotely from Spain, it is essential to understand the differences between Spanish and foreign employment law systems. Although many countries operate within increasingly international labour markets, Spanish employment law has its own distinct framework governing employment contracts, dismissals, sick leave, restrictive covenants and salary structures.

In practice, we regularly see international employers assume that Spanish employment rules are broadly similar to those in their home jurisdiction. In reality, this is often not the case. Spanish employment law has its own procedures, risks and opportunities for both employers and employees.

In this comprehensive guide to Spanish employment law, we discuss the key aspects of the Spanish system and highlight some of the most important differences that international employers should be aware of.

When does Spanish Employment Law apply?

A common misconception is that employers can freely decide which country’s employment law applies to an employment relationship. In international employment situations, the position is often more nuanced.

As a general rule, the employment law of the country where the employee habitually performs their work will apply. If an employee works on a permanent or long-term basis in Spain, Spanish employment regulations, social security contributions and payroll tax obligations will generally apply. Even if the employment contract states otherwise.

While the parties may choose another governing law in the employment agreement, mandatory provisions of Spanish employment law will often continue to apply.

Employment Contracts in Spain

Less flexibility for fixed-term contracts

One of the main differences between Spain and many other jurisdictions concerns the use of fixed-term employment contracts.

In Spain, a fixed-term contract may only be used where there is a specific legal justification, such as:

• Temporary replacement of another employee;
• A specific project or assignment;
• Seasonal work;
• a temporary increase in workload.

If there is no valid objective reason for a fixed-term contract, the employee should generally be hired on an indefinite-term basis from the outset.

In this respect, Spanish law provides employees with a relatively high level of protection.

Probation periods: Often more flexible than expected

Although Spain is more restrictive regarding fixed-term contracts, probation periods are often more flexible than many international employers expect.

Depending on the employee’s role and the applicable collective bargaining agreement (convenio colectivo), probation periods can extend up to six months.
For certain positions, longer probation periods may even be permitted if provided for in the applicable collective agreement.

This can offer employers greater flexibility at the beginning of the employment relationship.

Many international employers find this somewhat surprising: while Spanish employment law is often perceived as employee-friendly, it can also provide employers with considerable flexibility in specific areas.

Dismissal Law: Spain versus other jurisdictions

How does dismissal work in Spain?

Faster dismissals, but financial compensation

The Spanish dismissal system differs fundamentally from that of many other countries.

In Spain, employers can generally proceed with a dismissal without obtaining prior approval from a court or government authority.

The legality of the dismissal is usually assessed afterwards, if the employee challenges the termination. In that case, a labour court will determine whether the dismissal is fair, unfair or null and void.

In many cases, employers are required to pay statutory compensation to the employee. Spanish law provides clear formulas for calculating these amounts.

Examples include:

• End of a temporary contract: generally 12 days’ salary per year of service;
• Economic, organisational or production-related dismissal: 20 days’ salary per year of service;
• Unfair dismissal: 33 days’ salary per year of service.

Because these formulas are relatively predictable, employers often have a clearer understanding of their potential financial exposure in advance.

Mandatory conciliation before Court Proceedings

A notable feature of Spanish employment law is the requirement to attend a conciliation or mediation hearing (“conciliación”) before most employment disputes can proceed to court.

During this process, the parties are encouraged to reach an agreement, often concerning severance compensation or settlement terms.

Only if no agreement is reached can the matter usually proceed before a labour court. Many countries encourage mediation, but Spain frequently requires this step before litigation can begin.

Non-compete clauses and secondary employment

There are also important differences when it comes to non-compete clauses.

Non-compete clauses in Spain

In Spain, post-contractual non-compete clauses can be agreed upon provided that:

· The employer has a legitimate business interest that justifies the restriction;
· The employee receives adequate financial compensation in exchange for the restriction, 

The maximum duration is generally:

Two years for technical employees and senior positions;

• Two years for technical employees and senior positions;
• Six months for other employees.

This means that employers in Spain must effectively pay for the restriction imposed on the employee.

For international employers, this is an important consideration. A non-compete clause that may be enforceable elsewhere could be invalid in Spain if no financial compensation is provided.

Secondary employment

Spanish employment contracts frequently contain provisions relating to exclusivity or secondary employment.

Where an employer requires an employee to work exclusively for the company, additional compensation may be required. The enforceability of such clauses will depend on the specific circumstances and the applicable collective bargaining agreement.

Employers should therefore ensure that any restrictions on secondary activities are properly drafted and compliant with Spanish employment law.

Salary structure and additional salary payments

Many international employers are surprised by the Spanish salary structure.

In Spain, it is common for employees to receive:

• Fourteen salary payments per year; or
• In some sectors, even fifteen payments.

In practice, however, these additional payments can often be prorated and distributed across the twelve monthly salary payments.

For this reason, salaries in Spain are generally discussed and negotiated on the basis of the gross annual salary, rather than the monthly salary, to avoid misunderstandings.

Unlike some countries, Spain does not have a separate statutory holiday allowance equivalent to the traditional Dutch “vacation pay”. Instead, the additional salary payments often fulfil a similar economic function.

When drafting employment contracts, employers should pay careful attention to how salary is structured and whether the applicable collective bargaining agreement imposes any specific requirements.

Sick leave and incapacity for work

The rules regarding sick leave differ significantly from those in many other jurisdictions.

In Spain, responsibility for salary payments during periods of illness is divided between the employer and the Spanish Social Security system.

As a result, the financial burden on employers may in certain situations be lower than in countries where employers are required to continue paying an employee’s salary for an extended period.

In many cases, Social Security assumes responsibility for paying a substantial part of the employee’s income during sickness absence.

However, the precise level of compensation, the timing of payments and any employer obligations will depend on factors such as:

• • The reason for the incapacity;
  • The duration of the absence;
  • The applicable collective bargaining agreement;
  • Whether any salary supplements are required.

Employers should therefore carefully assess their obligations on a case-by-case basis.

Working hours and overtime

Spanish working culture and labour regulations have traditionally differed from those of many other countries. Spanish employment law contains specific rules regarding:

• Maximum overtime hours;
• Mandatory compensation for overtime, either through additional pay or time off in lieu;
• Working time registration requirements;
• Daily and weekly rest periods.

Since the introduction of mandatory working time registration, employers are required to maintain accurate records of employees’ working hours.

Failure to comply can lead to labour inspections and financial penalties.

For this reason, employers should ensure that employment contracts, internal policies and HR processes are fully aligned with Spanish employment legislation and any applicable sector-specific collective bargaining agreements.

Collective redundancies in Spain

Where multiple employees are dismissed within a relatively short period, the situation may qualify as a collective redundancy (“despido colectivo”).

In such cases, Spanish law imposes a specific and often highly formalised procedure.

Additional obligations may include:
· Consultation with employee representatives;
· Submission of documentation to the labour authorities;
· Compliance with statutory consultation periods;
· Detailed justification of the business reasons underlying the redundancy process.

Failure to follow the required procedure can result in dismissals being declared invalid.

Because collective redundancy rules are complex and highly technical, employers should seek legal advice before initiating any large-scale workforce restructuring in Spain.

Setting up a company or subsidairy in Spain

In addition to hiring employees, many international businesses choose to establish a company or subsidiary in Spain. This not only raises corporate law considerations, but also has a direct impact on employment law obligations.

The choice between a Spanish company, branch office or other legal structure can determine, among other things:

• Which employment regulations apply;
• Whether collective bargaining agreements must be observed;
• How social security contributions and payroll taxes are handled;
• The legal relationship between the parent company and the Spanish entity.

The structure selected may also have important implications regarding employer liability and employment responsibilities.

For this reason, the incorporation of a business in Spain should not be viewed separately from the employment law framework.

Our lawyers can assist with both the coprporate and employment law aspects of establishing a business in Spain, ensuring that the structure is compliant, efficient and future-proof from the outset.

Mandatory protocols and internal policies

While many employers focus on employment contracts and employee handbooks, Spanish legislation also imposes specific obligations relating to equality, workplace conduct and employee protection.

Anti-Harassment Protocol Is mandatory

Every employer in Spain, regardless of the number of employees, is legally required to have an anti-harassment protocol (“protocolo de acoso”) in place.

This obligation applies from the very first employee.

The protocol must address both workplace harassment and sexual harassment and should include procedures for reporting, investigating and addressing complaints.

Many foreign employers are unaware of this requirement until it is raised during a labour inspection or following an internal dispute.

Additional obligations for companies with 50 or more employees

Companies with 50 or more employees are subject to additional compliance requirements.
These include:

1. An Equality Plan (“Plan de Igualdad”);
2. An LGBTI Protocol (“Protocolo LGTBI”) aimed at protecting the rights and equal treatment of LGBTI employees.

Failure to implement these measures may result in administrative sanctions and compliance issues.

Employee Handbook not mandatory, but highly recommended

Unlike the anti-harassment protocol and certain equality measures, an employee handbook (“Manual del Empleado”) is not legally required.

Nevertheless, it can be an extremely valuable management tool.

An employee handbook may contain provisions relating to:

* Internal company policies;
* Codes of conduct;
* IT and technology use;
* Remote working arrangements;
* Leave procedures;
* Health and safety policies;
* Other workplace guidelines.

A well-drafted handbook not only improves clarity within the organisation but can also help prevent disputes and misunderstandings.

For international employers operating in Spain, it is advisable to assess at an early stage which policies, protocols and internal documents are legally required or commercially desirable.

OTIS practical tip

Many international employers are unaware that an anti-harassment protocol (“protocolo de acoso”) is mandatory in Spain from the moment the first employee is hired.

In practice, we regularly encounter situations where this obligation only comes to light during a labour inspection or after an internal workplace issue has already arisen. At that stage, it is often too late to take preventive measures.

Our recommendation is straightforward: ensure that the protocol is prepared and implemented as soon as you hire personnel in Spain.
Doing so can help prevent future disputes, administrative penalties and unnecessary legal proceedings.

Why legal guidance is essential

For businesses operating internationally, a single incorrect assumption can have significant consequences.
An employment contract that appears perfectly valid under the laws of one country may still be unenforceable or expose the employer to legal risks under Spanish law.

Specialised legal guidance is particularly important when dealing with:

• Employees working remotely from Spain;
• Hiring local Spanish personnel;
• Dismissal procedures;
• International payroll structures;
• Non-compete and restrictive covenant arrangements;
• Cross-border employment relationships.

Obtaining advice at an early stage can help avoid costly mistakes and ensure compliance with Spanish labour regulations.

Conclusion: Spanish Employment Law requires a different approach

Spanish employment law differs from many other legal systems in several key respects. While some jurisdictions place greater emphasis on preventive dismissal controls, Spain often relies on statutory compensation mechanisms following termination. At the same time, fixed-term contracts are subject to stricter regulation than many employers expect. 

As a result, standard employment contracts developed for use in another country will frequently be unsuitable for employees working in Spain.

Businesses that wish to hire employees in Spain, engage remote workers based in Spain or establish local operations should ensure that employment arrangements are properly structured in accordance with Spanish law from the outset.

Taking proactive legal advice can significantly reduce risk and provide clarity for both employers and employees.

With OTIS you are better informed in Spain.