If you run a bar, restaurant, dive centre, car hire firm, shop or letting agency in Lanzarote and you employ Spanish staff, you are operating under one of the most employee-protective legal systems in Europe. Most foreign owners we meet only discover this when something has already gone wrong — usually a dismissal.
This page explains, in plain English, what Spanish employment law actually requires of you, what the real numbers are in 2026, and where foreign-owned businesses on the island most often get caught out.
The single most important thing to understand: there is no such thing as "at-will" employment in Spain, and there is no probationary get-out after the trial period ends. Every dismissal has a cost, a procedure and a deadline. Getting the paperwork wrong turns a €4,000 problem into a €20,000 one — and the employee has only 20 working days to challenge you, so you often find out very quickly.
Five things that surprise foreign employers most
- The collective agreement outranks the contractPay, hours, job categories, overtime supplements and holiday are set by the convenio colectivo for your sector and province — for most Lanzarote businesses that is the hospitality agreement for Las Palmas. It applies whether or not you have read it, and it sits above the national minimum wage. Paying the minimum wage is not the same as paying correctly.
- You must record every working daySince 2019 employers must keep a daily record of start and finish times for every employee, kept for four years and produced on the spot if an inspector asks. Rotas and timesheets signed in bulk at month end do not count. Failing to keep it is a serious offence, fined from €751 to €7,500.
- Seasonal does not mean temporaryIf your business closes in the low season, the correct contract is usually fijo-discontinuo — a permanent contract with recurring periods of activity — not a chain of temporary contracts renewed each spring. Rolling temporary contracts for genuinely seasonal work are one of the most commonly penalised practices on the island.
- Inspectors arrive unannouncedThe Labour Inspectorate reinforces its campaign in the Canary Islands each year, with inspectors brought in from other provinces and around a thousand workplace visits concentrated on hospitality, catering and retail. They do not make appointments.
- Self-employed contractors are often employees in lawPaying someone against monthly invoices does not make them self-employed. If you set their hours, they use your premises and equipment, and you are effectively their only client, the relationship is an employment one regardless of what either of you signed.
What dismissal actually costs in 2026
There are two routes, and the difference between them is large.
20 days' salary per year worked, capped at 12 months' pay. Requires a genuine and documented economic, technical, organisational or production reason, 15 days' notice, and the compensation paid at the same time as the letter.
33 days' salary per year worked, capped at 24 months' pay. This is what you pay if the reason is not proved or the procedure is defective — which is where most cases end up.
No compensation option at all. The employee must be reinstated with all unpaid salary, plus damages. Applies where a fundamental right is breached — pregnancy, sick leave in some cases, or retaliation.
Note what this means in practice: a defect in the letter or in the procedure does not reduce your bill, it increases it by more than half. The letter must state the specific facts and dates relied on, and you cannot add new reasons later in court.
The 2026 numbers you need: national minimum wage €1,221 per month across 14 payments (€17,094 a year) — but check your collective agreement, which will usually be higher. Serious offences are fined from €751 to €7,500; very serious ones, such as unrecorded and unpaid overtime, run to €187,515. Businesses with 50 or more employees must have a registered equality plan, with fines up to €225,018 for not having one.
Taking on your first employee
- Register as an employerYou need to be registered with the Social Security treasury and hold a contribution account code (CCC) before anyone starts.
- Register the employee before the first shiftThe registration must be filed the day before work begins at the latest. Late registration is one of the easiest breaches for an inspector to find and prove.
- Put the contract in writing and file itThe contract must be notified to the public employment service within ten days, using the correct contract type.
- Apply the collective agreementSalary, hours, categories and supplements all come from it. Underpaying against the agreement generates arrears claims going back a year.
- Start the time record on day oneNot when you get round to it.
- Health and safetyRisk assessment, documented training and health surveillance offered in writing.
- Issue a monthly payslipWith the legally required breakdown, and keep proof of payment.
If you are self-employed (autónomo)
Foreign residents working for themselves in Lanzarote — instructors, guides, tradespeople, consultants — face a separate set of rules.
- Social security contributions are based on your net earnings across 15 bands. In 2026 the 2025 table has been rolled over: from €205 a month at the bottom to €607 at the top if you choose the minimum base for your band. You can change band up to six times a year, and it is reconciled against your tax return.
- New registrations pay a reduced rate of €80 a month for the first twelve months, extendable for a further twelve if your net earnings stay below the minimum wage.
- The Canary Islands government runs a "cuota cero" grant that refunds those reduced contributions. The 2026 round is open until 15 October 2026 or until the €3.3 million budget runs out. You must be registered, and trading and tax-domiciled in the Canaries. A surprising number of people never claim it.
- If most of your income comes from a single client, look at whether you should be registered as an economically dependent contractor (TRADE) — from 75% of income it is a recognised status with its own written contract and rights.
How we work with English-speaking clients
We are a specialist employment law practice in Arrecife, acting for both employers and employees, and we know the Las Palmas employment tribunals and the collective agreements that apply on the island.
On language: we handle enquiries, correspondence, contracts and written advice in English. Court and tribunal proceedings in Spain are conducted in Spanish, and we will tell you clearly at the outset what that means for your case and when an interpreter is needed. We would rather set that expectation honestly than have you find out later.
Ongoing employment advice from €80 a month
Unlimited questions, contracts drafted and reviewed, dismissal letters, and representation before the Labour Inspectorate and the employment tribunals. Fixed monthly fee, scaled to the size of your business. First consultation free and without obligation.
Frequently asked questions
Can I dismiss someone during their trial period?
Yes, without compensation and without giving a reason, provided the trial period is validly agreed in writing and has not expired — typically two to six months depending on the role and the collective agreement. Once it ends, the ordinary dismissal rules and costs apply in full.
My employee has been off sick for months. Can I let them go?
Be very careful. Dismissing someone because they are on sick leave can be treated as discrimination on grounds of illness, which makes the dismissal void: reinstatement, back pay and damages, with no option to pay compensation instead. Take advice before you do anything.
Do I have to pay for overtime?
It must be recorded and either paid or compensated with time off, within an annual limit of 80 hours. Unrecorded and unpaid overtime is the single most common finding in hospitality inspections on the island, and it is treated as a very serious offence.
Someone invoices me every month. Am I at risk?
If you set their hours, they work with your equipment on your premises, they follow your instructions and you are effectively their only client, then yes. The Inspectorate can register them as your employee, claim up to four years of unpaid contributions with surcharges, and fine you between €3,750 and €12,000 per person.
What happens if an inspector turns up?
They will ask for the time records, contracts, payslips and health and safety documentation, usually on the spot. Deadlines start running from the first day and your initial response shapes the whole file, so call us before you reply in writing.
Legal basis and last reviewed: Spanish Workers' Statute (Estatuto de los Trabajadores), articles 1.1, 11, 16, 34.9, 41, 51, 52, 53 and 56; Law 20/2007 on self-employment; the consolidated Law on Infringements and Penalties in the Social Order; the hospitality collective agreement for Las Palmas; 2026 social security contribution tables; and the Canary Islands "cuota cero" call for 2026 (BOC no. 45, 6 March 2026). Page last reviewed 9 August 2026. This page is general information about Spanish law and is not advice on your particular situation.