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.