Payroll in Spain for Startups and Foreign Business Owners

Payroll in Spain for startups is more than just a box to tick. It’s a legal requirement and a crucial part of building a compliant business from day one.

For foreign founders setting up a Spanish SL (Sociedad Limitada), hiring employees, or even paying yourself as a director, means navigating a detailed payroll system. This includes social security contributions, income tax withholdings, and monthly filings with Spanish authorities.

With Spain’s growing startup ecosystem and easy access to EU markets, more international entrepreneurs are launching companies here. But many quickly discover that local payroll compliance is best handled with expert support.

In this blog, discover how payroll in Spain for startups works, what employer costs you’ll need to budget for, and why so many founders choose to outsource payroll to local professionals who understand the system inside and out.

Payroll Obligations for Startups in Spain

Once your Sociedad Limitada is officially registered in Spain, your legal responsibilities as a business owner don’t stop there, especially if you plan to employ staff or pay yourself a salary as a company director.

One of the first compliance steps is registering with Spain’s Social Security system (Seguridad Social). This step is mandatory, not optional. Every employer in Spain is legally required to enroll and contribute to the system for each employee or director on payroll, even if the only employee is you.

This applies to:

• Company founders or directors receiving remuneration
• Employees under fixed or indefinite contracts
• Freelancers who work for their own company and provide non-professional services.

If you fail to register or submit payroll correctly, it can lead to penalties, delayed tax filings, or legal issues with labor authorities. For many foreign founders unfamiliar with Spain’s employment regulations, this step is often more complex than expected, especially given the language barrier and evolving legal requirements.

Need help setting up a company in Spain? Let our legal team guide you through each step.

How Payroll in Spain for Startups Works (Process Overview)

Setting up and managing payroll in Spain for startups involves several moving parts, but the good news is that with the right guidance, it can be a smooth and compliant process. Below is a simplified overview of what you need to know as a startup founder or foreign business owner:

1. Register as an Employer

Once your SL is incorporated, you must register with the General Treasury of the Social Security (TGSS) to comply with social security obligations.

In this process, the company is assigned a Company Number in the TGSS (NET), which identifies it within the TGSS system, and a main Contribution Account Code (CCC), used to manage employee contributions. Each CCC corresponds to a specific work centre or activity, and additional codes may be required if the company operates in different locations or sectors.

2. Register Employees or Directors

Next, as part of setting up payroll in Spain for startups, you’ll need to register each employee (or yourself as the founder or company director if you’re drawing a salary) with the Social Security system. This includes selecting the appropriate contribution scheme, such as the General Regime for employees or the Special Regime for company directors.

3. Draft Employment Contracts

In Spain, written contracts are mandatory and must be filed with the SEPE (Spanish Public Employment Service). The contracts should outline key details of the agreement such as job conditions, salary, hours, and benefits.

4. Run Monthly Payroll

Each month, you’ll need to calculate wages, tax withholdings (IRPF), and both employer and employee Social Security contributions. Employees receive payslips (nóminas), containing a detailed breakdown of gross pay, deductions, and net pay.

5. File and Pay Social Security Contributions

By the end of each month, employers must file declarations and pay contributions via the RED system. The declarations include the total owed for both the employee and employer portions. It is important to do it within the deadline; otherwise, surcharges will apply.

6. File Withholding Taxes with the Tax Agency

As an employer, it’s also mandatory to submit periodic tax filings (usually quarterly and annually) to report and pay IRPF income tax withholdings on behalf of employees. It is important to do it within the deadline; otherwise, surcharges will apply.

7. Stay Compliant

Spanish employment law is strict and paperwork-heavy. Timely filings, accurate records, and correct classification of workers are key to avoiding penalties.

While payroll in Spain for startups may seem complex, the process becomes manageable with professional support, especially from a team that understands the needs of non-resident founders and international companies.

Want to avoid costly mistakes? Get legal clarity on payroll in Spain for startups.

Employer Costs – Social Security and Payroll Taxes

Once you are registered as an employer and have begun paying yourself or your team, one of the most important things to plan for is payroll-related costs. In Spain, these costs go beyond just gross salary, and they can be substantial. Let’s take a look at these payroll-related costs and their typical amounts.

Employer Contributions: ~31% on Top of Gross Salary

As an employer in Spain, you’re responsible for paying Social Security contributions on top of your employees’ gross wages. These contributions typically add about 31% to the total cost of employment, covering things like pensions, healthcare, unemployment, and training funds.

For example, if you hire someone on a €2,500/month gross salary, your actual monthly cost as an employer is likely closer to €3,275.

Employee Deductions: ~6–7% of Gross Pay

Employees also contribute to Social Security through deductions from their paychecks. This is usually around 6–7% of their gross pay. On top of that, employers withhold IRPF income tax based on each employee’s personal situation (salary, family status, contract type, etc.).

These taxes must be calculated monthly, reported accurately, and filed on time with both the Social Security system and Spain’s tax authority.

Plan Ahead for Cash Flow

Employer costs in Spain are significant, especially when compared to other countries, and they require careful financial planning. It’s easy to underestimate your total employment expenses if you’re only thinking in terms of net salary.

Why Foreign Founders Outsource Payroll in Spain for Startups

For many international entrepreneurs, managing payroll in Spain for startups can feel like a full-time job on its own. Between Spain’s complex tax rules, submitting filings through Spanish-language portals, and obtaining digital certificates for every official step, it’s a lot to take on without local experience.

Even simple mistakes in payroll filings or Social Security registration can lead to fines or delays, which can be especially stressful for startups in particular, who are trying to stay lean and compliant.

That’s why most foreign-owned businesses in Spain choose to outsource payroll to a trusted local partner.

How Lexidy Helps Foreign Founders Manage Payroll in Spain for Startups

At Lexidy, we go beyond basic payroll support for startups in Spain. We offer a fully integrated solution for foreign founders who are launching and operating companies in Spain.

If you’ve already formed your Spanish SL or are just getting started, our team helps you connect the dots between Company Formation and Payroll Compliance, ensuring that everything runs smoothly from day one.

Here’s what we handle:

• Registration with Social Security for the company (NET) and its directors (when applicable)
• Obtaining the CCC number (mandatory for employer contributions)
• Employment contract drafting compliant with Spanish labor law.
• Monthly payroll processing, payslip generation, and tax withholdings
• Filing of Social Security and tax declarations
• Ongoing compliance monitoring and legal updates
• Ongoing communication with the administrations when needed

Whether you’re paying yourself as a director or hiring your first employees, Lexidy makes the payroll process fast, compliant, and stress-free, all with a single point of contact in English.

Need Support Managing Payroll in Spain for Startups?

Payroll in Spain for startups isn’t optional; it’s a legal obligation, and it’s a core part of operating a business in Spain. For foreign founders, getting it right from the start avoids costly mistakes and ensures smooth operations. 

Ready to simplify the process? Fill out the form below to connect with a local expert and streamline your payroll setup today.