The most common confusion when hiring for the first time

When someone thinks “I’ll pay them €1,500 a month”, they almost always mean the gross salary shown on the payslip. But that’s not the figure that will actually leave the company’s account each month: on top of the gross salary you have to add the employer’s social security contributions, which the employee never sees on any document.

The three figures that are not the same thing

  • Gross salary: what’s agreed in the contract and appears as the base amount on the payslip.
  • Net salary: what the employee actually receives in their account, after deducting their own social security contribution (the employee’s share) and personal income tax withholding from the gross figure.
  • Cost to the company: the gross salary plus the social security contributions the company pays for employing them (common contingencies, unemployment, the Wage Guarantee Fund, vocational training, and workplace accident insurance depending on the industry). This figure usually comes out between 30% and 33% above the gross salary, though the exact percentage depends on the type of contract and the industry — don’t treat it as fixed without checking the rates in force.

An example with round numbers

If you agree a gross salary of €1,500/month:

  • The employee pays a small share of that gross amount (a little over 6%) plus their income tax withholding — what’s left in their account is quite a bit less than €1,500.
  • The company, on top of paying that gross salary, adds its own contributions — so the real cost to you can run to around €1,950-2,000/month, not €1,500.

These percentages change every year (they’re reviewed in the State Budget and in social security contribution rules), so a real calculation should always use the rates in force at the time you hire, not a figure you saw a while back.

Why this matters before you price your service

If you sell services and calculate your margin without accounting for the real cost to the company of every person working for you (not just the gross salary you pay them), it’s easy to end up charging less than what it actually costs you to deliver that service. This links directly to how to price with a real margin, another article in this series.

Don’t estimate this by eye

Before deciding whether you can afford to hire, or raising a salary, we’ll run the real numbers with the current contribution rates and your specific case — not a general rule of thumb that may be months out of date. Write to us at contacto@asesoriamadal.es.

If this is your first hire, see also the guide to hiring your first employee as a self-employed person.