Payroll setup for a German manufacturer's first Spanish subsidiary

The Challenge

A German industrial group specialising in precision components for the automotive sector had made the strategic decision to establish its first production subsidiary in Spain, on an industrial estate in the Region of Murcia. The project involved relocating four managers from the Munich headquarters, hiring forty-one operators and technicians locally, and having the plant operational within two months.

The group had a well-established human resources function in Germany, but no prior experience in the Spanish labour market. The differences were substantial: the social security contribution system, the payslip structure, mandatory sector collective bargaining agreements, overtime regulations, holiday entitlements, and employment termination timelines all operate under a completely different logic from the German system. The group’s legal department had specifically identified the risk of incorrect collective agreement application as the main potential source of penalties and employment claims.

In addition, the subsidiary needed to be registered as an employer with the TGSS, enrol each worker before their first day, submit monthly contribution returns, and ensure that all Social Security payment deadlines were met from the first cycle — as delays in the early months trigger automatic surcharges that can reach 20% of the outstanding amount.

Our Approach

We began the project eight weeks before the anticipated start date of the first employee, with an analysis of the subsidiary’s production activity to determine the applicable collective bargaining agreement. In the metal components manufacturing sector in Murcia, the company fell under the scope of the General Metal Industry Agreement, supplemented by the Murcia provincial agreement — a two-tier system requiring detailed analysis to identify which conditions prevailed on each matter.

We registered the company with the TGSS, including employer registration, opening the contribution account code, and filing the activity notification. In parallel, we designed the salary structure for each job category — first-grade operators, second-grade operators, maintenance technicians, process technicians, and managers — calculating the agreement base salaries, attendance bonuses, and shift and night-work supplements applicable to the plant’s three-shift regime, as well as the pro-rated Christmas and summer bonus entitlements.

For the onboarding of all forty-five workers, we established a registration protocol that included prior document verification (NIE numbers for the relocated German employees, contribution documentation for locally hired staff), Social Security affiliation or registration for each worker before their start date, and employment contracts reviewed by our labour law team to ensure compliance with the collective agreement. The four managers relocated from Germany also required the processing of A1 posted-worker forms to maintain their German social security coverage during the initial period.

We implemented a cloud-based payroll management system accessible to both the local team in Murcia and the HR department in Munich, with SEPA-format bank transfer files and monthly payroll cost reports broken down by category and cost centre in a format compatible with the group’s consolidation system.

Results

The subsidiary processed its first payroll cycle without incident in week six of the project, four days ahead of the internal deadline the company had set. All forty-five employees received their salary on the agreed date and all Social Security and tax authority payments were made on time.

During the first twelve months of operation, the company received no notifications from the TGSS or the Labour Inspectorate. The contribution documentation, worker registrations, and collective agreement application were reviewed by the group’s legal department in month nine and assessed as fully compliant in all areas examined.

The cost of the outsourced service compared to the alternative of hiring a full-time payroll specialist in Spain — with the level of experience required to manage the complexity of a metal industry collective agreement and intra-EU posted-worker rules — represented a saving of €35,000 per year, with the additional benefit of integrated employment law support for any queries or issues that arose during the operation.