Spain

All companies must comply with the collective bargaining agreement’s (CBA) liabilities applicable to their employees. CBAs differ significantly by sector and can include a variety of benefits. The most commonly included benefits are accidental death and dismemberment insurance, life insurance, and a retirement or early retirement scheme.

As the benefits of the CBA’s mandatory coverage for death and disability are usually not high, companies often implement voluntary benefits to provide higher coverage and attract and retain talent.

Supplementary benefits highly valued by the average Spanish employee would be in the following order of importance: private medical insurance, life and accidental death and dismemberment insurance, and a retirement plan. Tax-exempt benefits through salary sacrifice and travel insurance are valued benefits as well.

Tax-exempt benefits offered through flexible compensation platforms (salary sacrifice) have gained importance in the past years due to the constant growth of the consumer index price and, consequently, in the cost of living.

Flexible compensation platforms include tools to automate payroll calculations, reduce administrative burdens, give employees the freedom to adjust their benefits according to their changing needs, and increase their satisfaction and commitment to the company.

Products like private medical insurance (including for family members), meal vouchers, nursery, training, and transportation can be offered through salary sacrifice with significant employee tax advantages.

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Voluntary corporate pension schemes are an employee benefit in Spain that is in the spotlight due to significant tax changes that have been approved lately.

In general, the contributions to tax-qualified individual pension plans are limited to €1,500.

However, the following limits apply to contributions to a tax-qualified occupational pension plan:

1. General limit of €1,500 per year.
2. Possibility of increasing this limit by €8,500, provided that this increase comes from employer contributions or from employee contributions to the same tax-qualified occupational pension scheme, for an amount equal to or less than the amounts determined by the following table based on the annual employer contribution:

However, the multiplier of 1 will apply in all cases if the employee’s gross salary exceeds €60,000 from the company making the contribution. The company must notify the managing entity or insurer in such cases.

Average Cost for Employer-Sponsored Benefits

An average cost considering Private Medical Insurance, Life Insurance, and a Defined Contribution Retirement Scheme could represent 10% of the gross salary.

Tax legislation may have some differences among the Spanish Autonomous Communities. For example, the private medical insurance premium paid by the employer on behalf of an employee is tax-exempt for an annual amount of up to €500  per person (including the same amount for family members) in most communities, but not so in the Basque Country.

Also, there is a labor risk regulation to be complied with and not related to voluntary employee benefits. It implies, among other technical specialties, offering voluntary annual checkups to employees. Large companies have a specific department and even doctors to comply with these regulations. However, small and medium-sized companies contract the Services of Private Occupational Risk Prevention Companies (different from Insurance Companies) to comply with the requirement. 

Mandatory Employee Benefits in Spain

The collective bargaining agreement (CBA) applicable to the sector or company will define the mandatory employee benefits.

Supplementary Employee Benefits in Spain

Private Medical Insurance

Private medical insurance is the employee benefit in Spain that complements the public medical service, and together with the attractive tax treatment, it’s considered one of the highest-valued benefits by employees. People use the public system; however, employees may experience delays for medical tests or non-urgent surgery.

Basic Private Medical Insurance typically provides access to medical services through a provider network of doctors and hospitals. A higher level of benefits provides an 80% to 90% reimbursement for out-of-network medical expenses and includes dental coverage.

Private medical insurance typically covers:

• Medical consultations (general physician and specialists)
• Hospitals: in-patient and out-patient
• Home medical visits
• Physiotherapy
• Podology
• Dental
• Medical tests
• Hospital
• Surgical interventions
• Ambulance
• Payment per day of hospital stay
• Additionally:
• 24-hour call center to access medical assistance
• Local travel insurance (for trips under 90 days duration)

Private medical insurance usually covers all employees and may be extended to their spouses and dependents. Employees’ premiums, in most cases, are fully paid by the employer, while spouse and dependents’ premiums are paid either by the employer or (partly) by the employee. If the employee pays the premium or part of it, it is market practice to include this benefit through salary sacrifice.

Life and Accidental Death and Dismemberment Insurance

Usually, all employees receive coverage under group life insurance, and employers pay 100% of the premium. Standard coverage profiles are:

• Death by any cause is often two times the annual salary (double the amount if by accident), though a fixed amount is provided in some cases.
• Permanent disability for the usual or all occupations guarantees an amount equal to two times the annual salary (double the amount if by accident) though in some cases, a fixed amount is provided

These benefits are in addition to Spain’s Social Security benefits.

It is often mandatory through the CBA to top up the short-term illness Social Security benefits to 100% of the base salary.  The employer can also provide this benefit voluntarily.

Retirement Scheme

Spain has a pay-as-you-go system to finance the public retirement pension. The standard retirement age will gradually increase by 2027. The standard retirement age will be 67 years unless someone has 38 years and 6 months or more of contributions, in which case they can retire at 65.

The public retirement pension is calculated using a formula considering the years quoted to Social Security and the quotation basis paid under a specific period.

The 2025 maximum social security retirement pension amounts to €45.746,29. The higher the salary, the higher the gap between the final salary and the public pension. Consequently, a supplementary corporate pension scheme is highly valued by higher-salaried employees and is an important retention tool.

On 2 July 2022, new legislation (Law 12/2022) regulating the promotion of occupational pension plans came into force.

Key provisions of Law 12/2022 include:

• Creation of open public promotion occupational pension funds
• Development of simplified occupational pension plans
• New government incentives and tax-favorable measures
• Government tax and contribution incentives
• Law 12/2022 creates open public promotion occupational pension funds (Fondo de pensiones de empleo de promoción pública abierto, FPEPP), consisting of a collective supplemental savings vehicle for retirement.
• Private financial institutions will manage the FPEPPs under the supervision of the Special Control Commission.

Simplified occupational pension plans are a new kind of occupational defined contribution (DC) plan with a streamlined implementation process, promoted by companies covered by sectoral collective bargaining agreements (CBA)

New corporate income tax deduction applies to Corporate Pension Plans only-

Effective 1 January 2023, a new corporate income tax deduction applies for employer contributions to occupational pension plans.

Reduction in Social Security contributions is effective 1 January 2023. Employers’ social security contributions for common contingencies will be reduced by the full amount of their occupational pension plan contributions with a maximum application.

The Spanish government’s plans to change the supplementary retirement scheme have already started with the abovementioned legislation. Its goal is to prioritize occupational pension plans over individual pension plans (second pillar). Currently, the government is aiming its efforts at small and medium-sized enterprises and self-employed workers.

Today, employers have no obligations to offer a supplemental pension scheme other than anything named in the CBA. Most multinational companies offer voluntary pension plans based on defined contribution schemes ranging from 3% to 5% of total salary. The more generous plans are between 5 and 10% of total salary.

In general, an employer contribution is combined with a mandatory smaller employee contribution. Employees can pay additional voluntary contributions.

Employee Perks

Tax-efficient benefits – can be included as salary sacrifice benefits:

• Meal vouchers (maximum amount of €11/working day, typically €220/ month with a maximum of 11 months/ year)
• Public Transportation vouchers for commuting (maximum €1.500 /year)
• Kindergarten (0-3 years of age – no maximum amount)

Discounts are offered via third-party vendors and include:

• Childcare discounts
• Restaurant discounts
• Shopping discounts
• Gym discounts
• Travel Agencies discounts

Others

• Professional training/language courses. Exempted under personal tax if training is directly related to the employee’s job
• Stock options (under special buying conditions)
• Cars – tax exempted up to 20% of car market value, applying the percentage of type of use

PIB GROUP IBERIA, Asinta’s employee benefits consulting Partner in Spain, provided this information about employee benefits in Spain.