Technical Guide to Accurately Calculating and Managing Payroll in Spain

Managing payroll correctly is not only a legal obligation but also an essential strategy to optimize labor and financial relations in any company. From regulatory compliance to ensuring transparency with employees, understanding the processes and calculations associated with payroll is crucial. In this article, we delve into the technical aspects of payroll preparation and how expert advisory firms like Ríos Espinosa can make a difference.

What is a payroll and what is it for?

Payroll is a legal and accounting document that reflects the economic relationship between employer and employee. It details gross salary, applied deductions, and net salary, as well as other key aspects like employer contributions to Social Security. Essentially, payroll not only ensures regulatory compliance but also serves as a financial control tool within the company.

The importance of proper payroll management

A poorly calculated payroll can have serious consequences, from legal sanctions to labor disputes. Additionally, in medium or large companies, managing multiple payrolls without errors becomes a complex task requiring specialized knowledge and constant monitoring of regulatory changes.

Key components of payroll

Header

The top section of the payroll includes basic information about the employer and employee:

• Company details: name, CIF, fiscal address, and contribution account code (CCC).
• Employee details: full name, DNI, Social Security affiliation number, professional group, contract type, and seniority date.
• Settlement period: start and end dates of the corresponding month.

Earnings

Earnings include all economic perceptions that form the employee’s gross salary:

• Salary items: base salary, supplements for seniority, hazard pay, night shifts, overtime, and bonuses.
• Non-salary items: compensations, per diems, mileage, and other concepts exempt from taxation and contributions.

Deductions

Deductions are amounts subtracted from gross salary, resulting in net salary. These include:

• Social Security contributions:
  • Common contingencies: 4.70%.
  • Unemployment: 1.55% for permanent contracts; 1.60% for temporary contracts.
  • Professional training: 0.10%.
  • Overtime: 4.70% (or 2% in cases of force majeure).
• Income tax (IRPF) withholdings: applied according to progressive brackets established by the Tax Agency.
• Other items: advances, union dues, and in-kind compensation.

Contribution bases

Payroll must detail the contribution bases used to calculate both employee and employer contributions:

• Contribution base for common contingencies: consists of the monthly salary and salary items excluding overtime.
• Contribution base for professional contingencies: adds the previous base plus overtime.

Payroll footer

The footer summarizes employer contributions to Social Security, including:

• Common contingencies: 23.60%.
• Unemployment: 5.50% for permanent contracts; 6.70% for temporary contracts.
• Professional training: 0.60%.
• Salary Guarantee Fund (FOGASA): 0.20%.
• Overtime: 23.60% (or 12% in cases of force majeure).

Technical steps to calculate payroll

Accurately calculating payroll involves following a detailed technical process:

1. Gather basic information: employee details, applicable collective agreement, contract type, and contribution group.
2. Determine earnings: calculate the base salary, salary, and non-salary supplements.
3. Apply deductions: calculate Social Security contributions and IRPF withholdings according to current legislation.
4. Obtain net salary: subtract deductions from the gross salary.
5. Complete the payroll footer: detail employer contributions to Social Security and verify the final result.

Common errors in payroll management

Although payroll calculation may seem straightforward, common errors can cause legal or administrative issues:

• Incorrect application of IRPF brackets or contribution rates.
• Failing to consider changes in collective agreements.
• Incorrectly calculating contribution bases.
• Overlooking specific deductions such as garnishments or advances.

Ríos Espinosa: Expertise and trust in payroll management

Since 1985, Ríos Espinosa has become a reference in labor, tax, and accounting advisory. With offices in Sabinillas, Estepona, Sotogrande, and Seville, we provide comprehensive services to companies and freelancers, ensuring correct payroll management and compliance with all legal regulations.

Thanks to our team of experts, including lawyers, economists, and social graduates, we offer a personalized and updated approach so that each client can focus on growing their business while we handle administrative management.

Discover how our Corporate Labor Advisory service can help you optimize your payroll processes and ensure efficient and error-free management.

Conclusion

Payroll management is not only a legal obligation but also a strategic task that directly impacts labor relations and the financial health of companies. Trusting professionals like Ríos Espinosa ensures not only regulatory compliance but also peace of mind, knowing your company is in the best hands. Contact us and discover how we can help you optimize your payroll management.