🇪🇸 Can Foreign Companies Hire Employees in Madrid?
Yes — both Spanish SL companies and foreign branches operating in Madrid can legally employ staff.
✅ SL companies must register with the General Social Security Treasury (TGSS)
✅ You must designate an in-country legal representative
✅ Payroll is regulated by Spanish labor law — strict compliance is required
✅ All contracts must be filed with SEPE (public employment service)
📝 Labor Contracts in Madrid
| Contract Type | Description |
|---|---|
| Indefinido (Permanent) | Default contract — unlimited duration |
| Temporal (Temporary) | For seasonal or specific projects |
| Part-time | Fewer hours, must specify schedule clearly |
| Internship / Trainee | Linked to education programs or upskilling |
💡 Spanish law discourages long-term temporary contracts — fines may apply if misused.
💶 Payroll Obligations for Employers in Madrid
| Item | Employer Obligation |
|---|---|
| Gross salary | Must meet minimum wage (SMI) |
| Social security (Seguridad Social) | ~30% employer contribution |
| IRPF withholding | Deducted from employee salary (based on income) |
| Payslips | Must be issued monthly in legal format |
| Bank transfer | Employees must be paid by traceable means |
| Finiquito (termination pay) | Mandatory for end of contract |
📌 Employers must register each employee with TGSS and submit monthly contributions via Sistema RED.
📅 Hiring & Payroll Process Timeline
-
Register your company as an employer with TGSS
-
Sign contract and report it to SEPE
-
Add employee to social security system
-
Begin payroll, file IRPF and social security monthly
-
Terminate contract with notice, severance, and final settlement (if applicable)
All filings in Madrid must be digital, with a firma digital (digital certificate).
📊 Payroll Tax Filing in Madrid
| Tax Form | Frequency | Purpose |
|---|---|---|
| Modelo 111 | Quarterly | IRPF withheld from salaries |
| Modelo 190 | Yearly (Jan) | Annual summary of IRPF withholdings |
| Social Security (TC1, TC2 / RLC, RNT) | Monthly | Employee/employer contributions |
We manage all Modelo filings + TGSS submissions for foreign companies.
🧑⚖️ Employment Law Protections in Madrid
Spain has one of Europe’s strongest labor protection systems. As an employer, you must:
✅ Justify any termination (cause or severance required)
✅ Track working hours (including remote work)
✅ Grant paid vacation (30 calendar days)
✅ Comply with collective agreements (convenios colectivos)
✅ Handle sick leave and maternity leave via social security
📎 Violations can result in labor court claims and fines from the Inspección de Trabajo.
❌ Common Mistakes to Avoid
⛔ Hiring without registering with TGSS
⛔ Using non-Spanish contracts (not enforceable)
⛔ Paying cash salaries (illegal)
⛔ Forgetting to file IRPF withholdings (Modelo 111)
⛔ Misclassifying freelancers as employees
🧑💼 Our Payroll & Hiring Services in Madrid
Borderless Lawyers provides:
✅ Employment contract drafting in Spanish
✅ Full payroll setup and monthly payslips
✅ Social security registration and filings
✅ Remote hiring via Power of Attorney
✅ Dismissal support and labor risk mitigation
📞 Hire Legally and Safely in Madrid
We help foreign businesses grow compliant teams in Madrid — with complete labor law and payroll support.
👉 Contact us to manage hiring and payroll in Madrid.