Compliance with labor obligations is not only a legal requirement, but it is also essential for the proper functioning of any limited company. Why? Because only by complying with legal and tax requirements can fines or penalties be avoided. Want to learn more about it? Keep reading, and we will explain it to you.
Classification of a Limited Company’s Labor Obligations
To understand what a limited company’s labor obligations are, one must first know that these can be divided into several categories.
Obligations to Social Security
Company and Employee Registration
To operate legally, a limited company must register with Social Security and obtain the Contribution Account Code (CCC). This procedure is carried out at the General Treasury of Social Security (TGSS).
When hiring staff, the company must register each worker with Social Security before they start working. This procedure can be done in two ways: through the RED System or the Social Security virtual office using the registration form.
Payment of Contributions and Social Security Insurance
All employers are required to pay their employees’ Social Security contributions monthly. This includes both the deductions from employees’ salaries and the employer’s contributions.
Obligations to Employees
Hiring and Employment Conditions
Every limited company must formalize employment contracts in accordance with current regulations, informing employees of their rights and obligations.
Payroll and Remuneration
Each month, the company must generate payrolls and include salary components, deductions, and social contributions.
Workplace Safety and Health
Companies must ensure a safe working environment by complying with the Occupational Risk Prevention Law.
Tax and Accounting Obligations
Taxes to Be Paid by the Company and Employees
- Corporate Tax
- Employee Income Tax (IRPF)
- VAT if the activity requires it
Necessary Accounting Records in a Limited Company
Keeping updated accounting books is mandatory, such as the Journal Book, Inventory and Annual Accounts Book, and the Issued and Received Invoices Register.
Frequency and Deadlines for Compliance
The fulfillment of a limited company’s tax and labor obligations follows specific deadlines, allowing for order and control, and must always be respected to avoid penalties. The taxes that must be declared quarterly and annually on established dates are:
- Income Tax (IRPF)
- Corporate Tax (IS)
- VAT
On the other hand, the deadlines for employee management are:
- Social Security registrations: Must be processed before the worker starts their activity to avoid penalties.
- Average workforce report: Allows for evaluating the evolution of contracted personnel and must be generated periodically.
It is essential, and we emphasize essential, to correctly manage these processes and ensure receipt of the registration resolution, which confirms the employee’s affiliation.
Steps for Correct Employee Registration in a Limited Company
As with all company management tasks, registering a worker involves a highly specific process. Here’s how it works:
Formalization of the Employment Contract
Before the employee begins their activity, the company must:
- Select the most suitable contract type according to the employment relationship (permanent, temporary, training, internship, etc.).
- Establish working conditions, including schedule, salary, professional category, and duties.
- Register the contract with the Public State Employment Service (SEPE) within the stipulated time to ensure legal backing.
Employee Registration with Social Security
Once the contract is signed, the company must process the worker’s Social Security registration through the options mentioned earlier in this post. This process is mandatory and must be completed before the employee starts their duties. Registration guarantees benefits such as healthcare, retirement, and unemployment coverage.
Compliance with Tax and Accounting Obligations
Clearly, registering an employee entails tax and accounting responsibilities that must be properly managed:
- Apply income tax (IRPF) withholding on the employee’s payroll and declare it to the Tax Agency.
- Include the employee in the active workforce report.
- Keep accounting books and Social Security records up to date.
Legal and Practical Aspects of Labor Obligations Compliance
It has become clear that, for a limited company to effectively fulfill its labor obligations, understanding all aspects related to hiring, payroll management, and work time tracking is fundamental. That’s why we explain them here:
Formalization and Key Elements of the Employment Contract
- Employee and employer details that identify both parties.
- Type and duration of the contract, specifying whether it is permanent, temporary, training-based, among other modalities.
- Working conditions, detailing schedule, hours, and salary.
- Rights and obligations of both parties, including clauses on termination and notice periods.
Efficient Payroll Management and Payment Compliance
Salary payments must be made in accordance with current regulations, considering:
- Accurate calculation of gross and net salary, reflecting deductions such as contributions and tax withholdings.
- Withholding of income tax (IRPF) and its declaration to the Tax Agency.
- Timely delivery of payroll to employees, complying with the legally required format.
- Proper accounting record of salary payments to ensure tax compliance.
Work Time Tracking and Control
Since the 2019 labor reform, companies are required to maintain detailed records of employees’ working hours. To achieve this, it is necessary to:
- Record worked hours, including breaks and overtime.
- Keep records for at least four years in case of inspections.
- Ensure compliance with regulations on rest periods and maximum permitted working hours.
Conclusions
In conclusion, complying with labor obligations in a limited company is essential to prevent penalties and ensure a legal and safe work environment. Each of the points and aspects mentioned in this post is equally relevant and essential for the proper functioning of the business. Ultimately, the effective management of these obligations protects both the worker and the organization.
