The Spanish payslip: from gross to net, with contributions, withholding and benefits in kind

Lucía runs a bakery in Valladolid through her limited company and has just hired Diego on a permanent contract at €30,000 gross a year, paid in twelve instalments. She planned to wire him €2,500 every month. Her adviser explains that Diego will receive noticeably less, and that the bakery keeps none of the difference: it belongs to the Social Security and to the Tax Agency.

The payslip, a compulsory document

Article 29 of the Workers' Statute requires wages to be settled and paid on time and with documentation, and the period covered by regular, periodic pay may not exceed one month. The documentation is an individual receipt handed to the worker that justifies the payment: in Spain, that receipt is the nómina.

The receipt follows the template approved by the Ministry, unless a collective agreement, or an agreement with the staff representatives, sets another one that clearly separates what the worker earns from the deductions the law allows. Those deductions are the core of this module, and none of them is left to the employer's discretion.

Article 31 adds two extraordinary bonuses a year, one at Christmas and another in the month set by the collective agreement or by agreement with the representatives, which also fixes their amount. The collective agreement may spread them over the twelve monthly payments, which is why some workforces are paid fourteen times a year and others twelve.

The definition reaches Lucía's limited company and the self-employed person hiring a first employee alike. The size of the business does not change the duty to withhold; as the next module shows, it only changes how often the amounts withheld are declared and paid in to the Treasury.

First deduction: the employee's social security contributions

Order PJC/297/2026 sets the contribution rules for 2026, and every rate is split between the company and the worker. For common contingencies the rate is 28.30 per cent: 23.60 is borne by the company and 4.70 is deducted on the payslip, under the heading the Spanish payslip calls contingencias comunes.

Unemployment depends on the contract: 7.05 per cent for open-ended hiring, with 1.55 borne by the worker, and 8.30 for fixed-term hiring, with 1.60, except for replacement, relief and training contracts, which follow the open-ended rate. Vocational training adds 0.10, and the intergenerational equity mechanism a further 0.15.

Added together, the four rates come to 6.50 per cent on an open-ended contract and 6.55 on a fixed-term one charged at 8.30. That is the share the worker sees deducted. The company also pays its own, much larger share, which never appears as a deduction on the payslip but does weigh on the cost of the job.

On top of the employer's share of those items come two contributions that only the company pays: the Wage Guarantee Fund, at 0.20 per cent, and cover for workplace accidents and occupational diseases, whose rate comes from a premium tariff set by activity and whose premium is charged to the employer alone.

The contribution base: between a floor and a ceiling

The rates do not apply to any amount whatsoever. The contribution base is capped at €5,101.20 a month from 1 January 2026, under article 2 of the Order. Pay above that ceiling still contributes, but through an additional solidarity contribution with its own bands and its own rates.

There are floors too. The minimum monthly base for contribution groups 4 to 7 is €1,424.40, and groups 1 to 3 have higher minimum bases. A monthly salary below that floor only makes sense for part-time work, and the calculator in this path flags it with a warning rather than silently accepting it.

Second deduction: IRPF withholding

Withholding is not a percentage the employer picks. Articles 82 to 86 of the IRPF Regulation set out a procedure that starts from the worker's annual pay, in cash and in kind, and ends with a rate stated to two decimal places. That rate is then applied to every payslip of the year.

The first step is the base used to compute the rate. From the pay you subtract the social security contributions, €2,000 a year of other expenses provided for in article 19.2 f) of the IRPF Law, and a reduction for employment income that only exists when net earnings are modest.

That reduction is worth €7,302 when net employment income does not exceed €14,852, shrinks in steps above that figure and disappears once net income reaches €19,747.5. For an average salary, then, the base is usually the pay minus the contributions and minus those €2,000 of other expenses.

The second step is the personal and family allowance. The taxpayer's own allowance is, as a general rule, €5,550 a year, and it grows with age and with each descendant entitled to an allowance of their own. That is why two colleagues on the same salary can have different amounts withheld by the same employer.

The withholding scale

The third step applies the scale in article 85 of the Regulation twice: once to the base and once to the personal and family allowance. The withholding amount is the difference between the two results and can never be negative. The rate is that amount divided by total pay and multiplied by one hundred.

Two rules protect low earners. If pay does not exceed the exempt amount under article 81, which depends on the family situation, nothing is withheld, except on contracts under a year: in the third situation with no descendants, that amount is €15,876. Up to €35,200 of pay, the withholding may not exceed 43 % of the gap above that amount.

The rate also has a floor. For contracts or working relationships lasting less than a year, article 86.2 prevents it from falling below 2 per cent, and article 81.3 disapplies the amount exempt from withholding: even if the worker earns little over the year as a whole, the company withholds on every payslip.

What the employee must disclose

The whole computation rests on facts the company cannot know on its own. Article 88 of the Regulation requires the worker to tell the payer about the personal and family situation that affects withholding, and requires the payer to keep that signed statement. Without it, the company cannot take those circumstances into account.

The statement may be made electronically if the authenticity of its origin, the integrity of its content, its retention and access by the tax authorities are guaranteed. It is worth collecting on the first working day and again whenever something changes, such as the birth of a child, because each change can move the rate.

Withholding is only a payment on account. The final tax is settled in the worker's own income tax return, which credits what was withheld. That is why article 108.3 requires the company to issue a certificate of the withholding made and to make it available to the worker before the filing period for that return opens.

Benefits in kind: the company car

Not all pay is paid in cash. Article 42 of the IRPF Law defines income in kind as the use, consumption or obtaining, for private purposes, of goods, rights or services free of charge or below the normal market price, even when they cost nothing real to whoever provides them.

In a small business the most common case is a car handed over to an employee. Article 43 of the Law values its use at 20 per cent a year of the payer's acquisition cost, taxes included. When the car is leased rather than owned, the percentage applies to its market value as new.

The Law allows that valuation to be reduced by up to 30 per cent for energy-efficient vehicles, and article 48 bis of the Regulation turns this into three steps based on emissions, type of engine and a maximum market value before taxes. The technical conditions are checked on the vehicle's registration data, not on the invoice.

The valuation follows how far the car is available for private use, whether or not it is actually used. The calculator in this path applies that criterion, taken from the Tax Agency's practical Renta manual, and pro-rates by month when the car is available for part of the year only, a convention it declares as its own.

Nothing is withheld on a benefit in kind, since there is no cash to deduct anything from: the company makes a payment on account instead. Article 102 of the Regulation computes it by applying the worker's withholding rate to the value of the benefit, a rate that is itself obtained on total pay, in cash and in kind.

If the company does not pass that payment on account on to the worker, article 43.2 of the Law adds it to the value of the benefit, and the worker reports both amounts in the tax return. Passing it on or not has tax consequences, and the choice deserves a line in the company's vehicle policy.

From the payslip to the payment

What the company deducts does not stay in its bank account. The worker's contributions are paid to the Social Security together with the company's own; withholding and payments on account are declared to the Tax Agency on modelo 111, which the next module walks through box by box.