Zero payroll errors in 3 years — 800+ payslips monthly, bank file delivered by the 27th

Outsourced payroll services in Spain cover the complete monthly payroll cycle for Spanish-employed workers: salary calculation under the applicable collective agreement (convenio colectivo), Social Security contribution management via Sistema RED and Siltra, IRPF (income tax) withholding and filing of Modelo 111 (monthly/quarterly) and Modelo 190 (annual summary), and processing of employment registrations and deregistrations with the TGSS (Tesorería General de la Seguridad Social). Employers are legally required to submit Social Security contributions by the last day of the following month; late payments incur automatic surcharges of 10 to 20% with no grace period.

Our payroll team acts as a specialist extension of your HR department: we calculate, file, and deliver every month without you needing to track regulatory changes, collective agreement updates, or the particularities of each contract type operating under Spanish law.

Why payroll errors are more expensive than outsourcing the function

SMEs with between 5 and 50 employees face a payroll administration dilemma: they do not have sufficient volume to justify a dedicated HR administration department, but informal internal management — an administrator who “also handles payroll” — generates costly errors. The most frequent errors are incorrect IRPF withholding calculations (which generate unpleasant surprises in the annual Modelo 190 and potential regularisation payments by the employee), Siltra file submission outside the regulatory period (minimum fine of EUR 300, scalable per employee), and incorrect dismissal settlement calculations (which generate judicial claims frequently within 20 days of termination). The cost of these errors regularly exceeds the cost of outsourcing the service.

The monthly payroll cycle is one of the most critical processes in any company, and also one of the most frequently underestimated for technical complexity. An updated collective agreement, a change to the SMI minimum wage or Social Security contribution rates, a maternity leave with an employer supplement, or an annual bonus with the corresponding benefit-in-kind treatment: each requires a specific calculation that, if done incorrectly, generates discrepancies that erode employee confidence and can trigger Labour Inspectorate sanctions.

Our payroll outsourcing process

Our professionals manage the payroll cycle with a monthly four-phase protocol. Before the 23rd we receive the month’s incidents: TGSS registrations (AFI) and deregistrations via Sistema RED, data changes, sick leave certificates processed with the mutual insurer, overtime, and variable components. Between the 23rd and 26th we calculate all payslips applying the collective agreement, TGSS TC1/TC2 contribution rates, and individualised IRPF withholdings. On the 27th we deliver digitally signed payslips and the SEPA bank payment file. Within the regulatory period we submit social security contributions via Siltra and Modelo 111 to the AEAT. The annual Modelo 190 is filed in January with reconciliation of all year’s withholdings.

Sistema RED and Siltra management is a core part of the service. Our team holds authorised access to our clients’ Sistema RED accounts and manages every filing within its deadline without incident. For international groups establishing their first Spanish entity, we handle the initial TGSS registration and system setup as part of the entity management onboarding.

What our payroll services include

The service covers individualised monthly payroll calculation applying the collective agreement and current contribution rates, TGSS registration and deregistration processing via Sistema RED (AFI/FAN/FLA), monthly contribution settlement submission via Siltra, monthly Modelo 111 and annual Modelo 190 with the AEAT, SEPA bank payment files before the 27th, dismissal settlement calculations with settlement documentation, employer certificates for SEPE unemployment benefit, and for expatriates the special impatriate regime with coordination with the international mobility team.

Real results in payroll outsourcing

Zero payroll errors in three years of service across our entire active client base. Bank payment file delivered before the 27th in 100% of months without exception. Clients that outsource payroll to our team save between 15 and 40 hours of internal administrative management per month, depending on headcount and collective agreement complexity. In companies that have grown from 10 to 50 employees, outsourcing has allowed scaling without expanding the administrative team. And the risk of penalty for errors in TGSS or AEAT filings is zero with our service.

Frequently asked questions about payroll outsourcing

For payroll for internationally mobile employees operating in Spain, the special impatriate tax regime (Beckham Law) offers significant tax advantages but involves technically complex withholding calculations that must be coordinated with the IRPF regularisation and the Social Security coverage certificate (A1). Split payroll situations — where an employee’s compensation is borne by entities in multiple jurisdictions — require a precise allocation methodology that satisfies both Spanish tax and Social Security requirements and the requirements of the other jurisdiction. For complementary HR services, our people services covers the full employment lifecycle including contracts, equality plans, and labour inspection readiness.

Payroll in Spain: a complex and high-stakes compliance area

Payroll services in Spain encompass a legally complex and operationally intensive set of obligations — monthly payroll calculation, IRPF withholding and remittance, Social Security contributions (cotizaciones), nómina delivery to employees, tax authority filing, and year-end certificate issuance. Errors in any of these areas can result in AEAT penalties, Social Security sanctions, and labour law claims from employees — all of which carry disproportionate cost relative to the payroll value involved.

Spanish payroll is particularly complex for businesses with: international employees (determining the applicable Social Security regime and IRPF/IRNR treatment requires careful analysis), employees on special remuneration arrangements (benefits in kind, stock options, multi-year incentive plans), or operations across multiple autonomous communities (applicable regional collective agreements may differ).

The Spanish Social Security system

Social Security contributions in Spain are shared between employer and employee, at combined rates that represent a significant employment cost:

• Common contingencies (contingencias comunes): employer 23.6% + employee 4.7% on the contribution base (bounded between minimum and maximum bases by category)
• Professional contingencies (accident and occupational disease): employer rate varies by activity sector (from 0.9% to 7.15% on the contribution base)
• Unemployment (desempleo): employer 5.5% + employee 1.55%
• Professional training (formación profesional): employer 0.6% + employee 0.1%
• Guaranteed wage fund (FOGASA): employer 0.2%
• Overtime: employer 23.6% + employee 4.7% for structural overtime; 14% total for occasional overtime

The combined employer Social Security cost on a EUR 40,000 gross salary is approximately EUR 13,200 — representing a total employment cost of EUR 53,200. Understanding and managing Social Security costs is central to workforce planning for Spanish businesses.

Payroll compliance: nómina, IRPF, and year-end certificates

The Spanish payroll compliance cycle involves:

Monthly nómina: preparation of the payslip (nómina) for each employee, reflecting gross salary, Social Security deductions, IRPF withholding, and net pay. The nómina must be delivered to the employee by the last day of the month.

IRPF withholding (Modelo 111): monthly or quarterly remittance of the IRPF withheld from employees and professional contractors to the AEAT. The withholding rate is calculated based on each individual’s expected annual income and personal circumstances (family situation, other income, applicable deductions).

Social Security remittance (TC2 — now Sistema RED): monthly payment of employer and employee Social Security contributions through the Sistema RED (electronic) platform, by the 28th-31st of the month.

Annual certificate (Modelo 190 and certificado de retenciones): year-end filing summarising all IRPF withholdings for each individual, and delivery of the individual certificate to each employee for their annual income tax declaration.

Our people services team handles labour law and HR matters that interact with payroll, including contract drafting, collective agreement interpretation, and dismissal management.

Contact our payroll team to discuss outsourced payroll services for your Spanish workforce.

Regulatory Framework: Spanish Payroll Obligations

Spanish payroll compliance operates within a complex regulatory framework:

Estatuto de los Trabajadores (ET, Real Decreto Legislativo 2/2015): the Workers’ Statute defines the fundamental rules of the employment relationship — working time (Art. 34), overtime calculation (Art. 35), minimum pay (linked to the SMI — Salario Mínimo Interprofesional), and payslip content requirements (Art. 29).

Ley General de la Seguridad Social (LGSS, Real Decreto Legislativo 8/2015): the Social Security framework governing employer and employee contribution rates, contribution bases (base de cotización), maximum and minimum limits by category group (grupos de cotización), and the Sistema RED electronic submission obligations. Social Security contributions in Spain are among the highest in the EU — employer contributions typically represent 29-32% of gross salary depending on the contribution category.

Ley del IRPF (Ley 35/2006): the Income Tax Law governs the IRPF withholding obligation on employment income (Art. 83 LIRPF). Employers are required to withhold IRPF on each payroll payment at the employee’s applicable rate, calculated at the start of each year based on annual expected income, personal circumstances, and geographic location (autonomous communities have their own IRPF rates). Modelo 111 (quarterly summary) and Modelo 190 (annual summary) are the filing obligations.

Real Decreto-ley 8/2019 (working hours register): mandatory daily working hours registration for all employees. Employers must maintain and preserve records of actual daily hours worked. ITSS inspections consistently check hours register compliance, and failure to maintain it creates a rebuttable presumption of unpaid overtime in judicial proceedings.

RDL 32/2021 (labour reform): eliminated the majority of temporary contract types. The reform requires that the vast majority of new contracts be indefinite (fijo or fijo discontinuo). Payroll processing must apply the correct contract type and Social Security contribution codes — using post-2021 contracts with pre-2021 codes is an infringement detected immediately in ITSS audits.

Sectors Most Affected

Hospitality and tourism: high employee turnover, seasonal contracts (fijo discontinuo), tipping income management, night supplement calculation, and irregular hours all create payroll complexity specific to the sector. Collective agreements in hospitality vary by province and affect salary floors, working time, and social benefits.

Technology companies and startups: increasing use of remote work (teletrabajo) contracts requiring the Law 10/2021 written agreement and expense allowance treatment (electricity, internet — EUR 26 per day of remote working, or a flat allowance with IRPF implications). Equity compensation (stock options, RSUs) for employees and founders has specific IRPF withholding implications under the Startup Law (Law 28/2022).

Construction: sectoral collective agreement (Convenio General del Sector de la Construcción) with complex categorisation of trade skills, site-specific supplements, and health and safety bonuses. Subcontracting chains require specific attention to the joint Social Security liability provisions.

Healthcare and social services: management of on-call duty (guardia localizada), night shifts, and professional category distinctions. Social Security contributions for healthcare workers have specific calculation rules for certain bonuses and irregular payments.

Company Size Segmentation

Autónomos (self-employed): autónomos are not employees but must register with the RETA (Régimen Especial de Trabajadores Autónomos) and pay their own Social Security contributions. The 2023 reform introduced income-based contribution bases for autónomos. We manage RETA registration, quarterly income estimates, and contribution base adjustments for self-employed professionals and business owners.

Microenterprises (1–9 employees): the payroll processing obligation is identical to large companies — Modelo 111 quarterly, Modelo 190 annual, Sistema RED monthly. For micro-companies, outsourced payroll is typically the most efficient solution given the high per-employee cost of maintaining in-house payroll software and expertise.

SMEs (10–100 employees): the primary complexity arises from diversity of contract types, multiple collective agreements within the same company, and the increasing pace of regulatory change. Monthly payroll must incorporate changes to the SMI, updates to the applicable convenio, and any changes in the employee’s IRPF circumstances (family events, second jobs).

Large companies (100+ employees): typically have in-house HR departments but outsource payroll calculation and Social Security filing. We provide payroll processing as a specialist function alongside in-house HR, with direct Sistema RED filing and a dedicated payroll manager for the account.

Worked Example: Payroll for an International Tech Company Setting Up in Spain

A UK-headquartered SaaS company hired its first 8 Spanish employees (mix of sales, engineering, and customer success) and needed to set up compliant Spanish payroll from zero.

BMC payroll setup:

• Company registration with Agencia Tributaria (NIF, census declaration) and TGSS (employer Social Security registration) — completed in 2 weeks.
• Employment contracts drafted under the Startup Law regime — eligible for the startup IS rate and qualified for stock option IRPF deferral for employees with qualifying options.
• IRPF withholding calculation: individual withholding rates calculated for each employee based on annual gross, personal circumstances, and the Comunidad de Madrid regional IRPF scale.
• Monthly payroll processing: payslips in Spanish and English, Sistema RED monthly Social Security filing, Modelo 111 quarterly IRPF filing.
• First-year total payroll admin cost for 8 employees: EUR 3,200 (fully outsourced vs estimated EUR 8,000+ in-house HR software, filing subscriptions, and dedicated time).

Common Mistakes We Fix

1. Using incorrect contract types post-2021 labour reform. The reform eliminated indefinite-term and specific-project temporary contracts for most cases. Companies still using pre-2021 contract types for new hires are creating Social Security debt and ITSS exposure.

2. Incorrect IRPF withholding rates. Withholding must be recalculated at the start of each year and whenever the employee’s personal circumstances change (birth of a child, change in personal deductions). Under-withholding creates employee IRPF debt; over-withholding creates employee cash flow disadvantage.

3. Not maintaining the working hours register. Every employer must maintain a daily hours record for each employee, regardless of whether overtime is worked. Absence of the register in an ITSS inspection results in automatic infringement findings.

4. Not applying the correct collective agreement. The applicable convenio colectivo is determined by the company’s activity (CNAE code) and the geographic province. Applying the wrong agreement — or the national agreement when a sector-specific provincial agreement applies — can result in payment below the legal salary floor for certain categories.

5. Not accounting for all components of the Social Security contribution base. Many non-cash benefits, extraordinary payments, and bonuses must be included in the contribution base. Companies that exclude computable elements — such as meal vouchers above the exempt limit, fuel cards, or irregular bonuses — create Social Security underpayment debt discovered on ITSS audit.

How We Work

Payroll is processed monthly with the following workflow: client provides variable payroll data (hours, bonuses, absences, new joiners and leavers) by the 15th of each month. We calculate payslips, Sistema RED submission, bank transfer file, and Modelo 111 by the 20th. Payslips are delivered electronically to each employee through our payroll portal. Modelo 190 and annual certificates are prepared in January for the prior year. Changes in employees’ personal circumstances (that affect IRPF) can be submitted at any time and we recalculate the withholding rate for the next payroll cycle.

Our service is available for companies from 1 to 500+ employees. Pricing is per employee per month with volume discounts above 25, 50, and 100 employees.

Geographic Coverage

Our payroll service is available across all Spanish autonomous communities. The applicable Social Security regime, collective agreement, and IRPF regional rates vary by autonomous community — Basque Country and Navarre have their own foral tax administrations and specific IRPF and Social Security rules that require specialist treatment. We cover payroll compliance under both the common regime (mainland Spain and islands) and the foral regimes (País Vasco and Navarra). For companies with employees in multiple autonomous communities — including remote workers registered in their home region — we manage the geographic diversity of contribution and withholding rates as part of the standard monthly payroll processing.