Few documents are as important as a payslip. In fact, as a salaried worker it serves as recognition of the work performed in the company and provides evidence of your (economic) value. However, a payslip is not just a printout with your salary. It includes many more sections that both the worker and the employer should be familiar with, and sometimes these are difficult to understand.
A little history
Over the years, money has gradually evolved. When people first started to trade, bartering, that is to say, exchanging one thing for another, was the most widespread form of payment. Tobacco, shells, gold, coins… and now bitcoins. There are many ways in which to make a payment, whether you are purchasing goods or rewarding work performed.
During the Roman Empire, soldiers and civil servants were paid with packets of salt, a very valuable product that was highly appreciated. Salt was used to season, avoid dehydration and preserve food; it was also used as an antiseptic and to stop bleeding. The packet of salt received that served as currency was referred to as a salarium, which led to the word salary as we know it today.
But is the salary the same as the payslip?
Difference between salary and payslip
Although the words salary and payslip are often used as synonyms, they are not the same. The payslip shows the worker’s salary, but also many more items such as bonuses, deductions, etc.
What is a payslip in Spain?
A payslip is the official document that shows the amount paid in money or in kind to the worker in return for their services to the company in which they are contracted. Or put another way, it is the value they receive at the end of the month for the work they have done.
Furthermore, the payslip also includes the payment on account of IRPF (Personal Income Tax) and the withholdings paid to Social Security.
Although in Spain the payslip is normally received at the end of the month, it is also possible to receive it every quarter, by hours or every week or fortnight.
What details should be found on a payslip?
The basic elements of a payslip are the following:
• Details of the company, the first item in the header. • The header will also contain the details of the worker receiving the pay. • The date on which the payslip is issued, i.e., the pay period. • Accruals or earnings. • Where applicable, deductions. • The sum to be received, i.e., the amount that the worker is paid. • Blocks for stamps and signatures
Details of the company
These details appear in the payslip header.
• The name of the company or corporate name. • The registered office, i.e., the address of the company. • The CIF (Tax ID no.). • The Social Security registration number.
Details of the worker
Immediately after this, we find the section with all the details of the worker.
• Full name of the worker. • DNI (Spanish National Identity Card) No. or NIE (Foreigner's Identification No.). • Length of service in the company. • Social Security number. • Professional category or group. • Contract type code.
Accruals or Earnings
This section provides a breakdown of each of the items for which the worker is paid. These are the accruals. This is where we find details of the worker’s daily hours, overtime, allowances…
The sum of all the earnings (in money or in kind) is what is known as the gross salary.
There can be two types of accruals or earnings:
In other words, the salary. The minimum sums are established by the collective agreements and the worker’s position in the company. However, the salary is normally agreed in the employment contract. It should be remembered that contributions are made to Social Security from salary earnings.
There are also other extra salary items that increase the salary. These extras received by the worker may be:
• Personal: account is taken of experience, length of service, training, the post… all this depends on your personal conditions. • Based on the type of post: these earnings take account of the particular characteristics of your post, such as the degree of danger, toxicity, night hours or shift work… • Productivity bonuses: remuneration on the basis of the amount or quality of the work performed. • Overtime: salary earnings for hours worked in addition to the working hours stipulated by the contract. • Special bonuses: these are the famous extra payments. Workers are entitled to two extra payments a year, one in the Christmas holidays and the other in the month established by the collective agreement (usually July). If they are distributed proportionately, that is to say, instead of receiving 14 payments, you are paid the corresponding part of these two extra payments every month over 12 months, it will be shown in this section. • Salary in kind: this is non-monetary payment received in the form of goods or services and it forms part of your salary. Examples are the use of a company car, insurance and restaurant vouchers, among other items.
These types of earnings are not subject to Social Security payments, nor are they liable for IRPF deductions. They are usually goods and/or services such as perks, indemnities or disbursements, and they can represent a maximum of 30% of the payslip total. Here are some examples:
• Allowances: a non-salary payment that includes living and accommodation expenses. However, only a part of these expenses is exempt from Social Security computation, not all of them. The maximum amount excluded from computation is the amount stipulated in the Personal Income Tax Law and Regulations. If the expenses are incurred in Spain, the maximum amount is set at €26.67/day with no overnight stay, and €53.34/day with an overnight stay. If they are incurred outside Spain, these amounts are €48.08/day with no overnight stay, and €91.35/day with an overnight stay. • Indemnities and disbursements: disbursements are expenses that workers have had to pay in advance in the course of their work. On the other hand, indemnities are not amounts that workers have had to pay in advance, but compensation for any adverse economic impact they have been subject to during their work for the company. • Transportation supplement: this compensates workers for their travel expenses from home to the workplace. • Travel expenses: these are expenses incurred when the worker travels from their workplace to another place of work in the course of their job. If public transport is used, the total supported by a receipt will be exempt from Social Security, but if the worker's own vehicle is used, only a maximum of €0.19/km will be exempt. Therefore, payment above €0.19/km will be computed for Social Security and will be liable for tax. • Outlays on material, etc. • Social Security benefits and compensation: these are payments received by the worker when they are off sick or partially unemployed. They are not liable for tax and are exempt from Social Security contributions. • Compensation for transfers, suspensions or redundancies: these are also exempt from Social Security contributions and IRPF withholdings.
Deductions are the opposite of accruals. In other words, these are items that are subtracted from the gross salary. And as a result, the net salary is obtained, which is the amount that the worker actually receives.
Basically, there are two types of deduction:
This is the percentage of income tax that the company withholds from the worker as an advance on the annual payment required. IRPF is a progressive tax, so the same percentage is not withheld from all workers; the sum varies according to their specific post, level of income and different demographic factors such as marital status and age. The minimum withholding is 2% and it can be adjusted. The average IRPF withholding in Spain is around 15%.
Contributions to Social Security
This is the part of the salary withheld for allocation to Social Security, in order to guarantee that the money is available should it be required in the future. Examples of such eventualities would be unemployment benefit, maternity/paternity leave, sick leave, training, etc.
To calculate this type of deduction, every year the government sets minimum and maximum amounts according to the contributory rate.
Once all the deductions have been subtracted, the net salary is obtained.
To calculate the minimum contribution to Social Security, the following percentages are applied, according to each category:
• Common contingencies are calculated as 4.7% of the salary, with no account taken of overtime. • Deductions for unemployment are equivalent to 1.55% in general contracts. • Professional training is 0.10%. • Here, only overtime due to force majeure will be taken into account, at a percentage of 4.7%.
Take home pay
The take home pay is the net salary, which is what actually goes into the worker’s pocket. It is calculated by subtracting the sum to be deducted from total accruals.
Block for stamps and signatures
At the bottom of the payslip there must also be a block in which the company, i.e., the payer, adds their signature and/or stamp. This has to be accompanied by the date on which the payslip is presented and a space for the worker to sign that it has been received, plus the date of receipt (in the event that the company keeps a copy). Optionally, the account number into which the money is to be paid may also appear.
Delegating, the simplest way to produce a payslip
Although you now have an understanding of the payslip and all the elements it must include, a mistake made when calculating a payslip can lead to undesirable situations. This is a highly sensitive area and the smallest error may result in legal procedures.
The best option is to delegate the preparation of payslips to professionals like Rosclar, since our experience, professionalism and personalised approach will save you a headache or two. At Rosclar we can help you manage the most valuable assets of your company, your employees.