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Employer of Record in Spain: How to Hire Workers in Spain

By September 13, 2022March 24th, 2023No Comments
Spanish flag in foreground flying high over a bustling city in Spain.

Spain proves to be a desirable location to engage remote talent and grow your business. Spain’s economy is among the largest in the world, and its major economy-driving industries include manufacturing, agriculture, and energy. Plus, its information and communications technology (ICT) sector is one of the fastest-growing industries.

If you’re looking to hire workers in Spain, there are several methods to do so while legally following Spain’s employment laws and payroll regulations.

Use this guide to learn how to compliantly hire workers in Spain by either setting up an entity, partnering with an employer of record in Spain, or engaging contractors.

Can I Employ Someone Who Lives in Spain?

Yes, you can hire someone who lives in Spain. While it is possible to hire workers in Spain from another country, the local employment laws may vary significantly from the country where your business is located. It’s important to understand the employment differences and compliance risks while targeting Spanish talent.

How to Hire Employees in Spain

There are various methods for hiring employees in Spain from other countries. The two primary options are partnering with an employer of record in Spain and setting up a legal entity.

The route your business takes depends on various factors such as time, cost, the number of employees you wish to hire, and your long-term expansion goals.

2 ways to hire employees in Spain: Partner with an employer of record and establish a legal entity

Partner With an Employer of Record in Spain

If you’re looking to test out the Spanish market or set up your workforce quickly, you can partner with an employer of record (EoR) in Spain.

An employer of record in Spain is a legal entity that hires, pays, and manages your global workforce. An employer of record in Spain has in-depth knowledge of the country’s employment laws and regulations, and compliantly hires and onboards your supported employees in Spain. An EoR handles compliance, risk mitigation, hiring, onboarding, and payroll while you retain complete oversight and daily management of your team.

Learn more: What Is an Employer of Record?

Set Up a Legal Entity in Spain

If you prefer to hire your Spanish workforce directly, want to hire a large number of employees, or plan to develop a long-term presence in the country, you should establish an entity in Spain.

Setting up an entity in Spain allows you to create a local branch, hire employees, and run payroll for them. Entity establishment gives your company full autonomy to hire talent directly and handle employment logistics internally.

However, entity establishment is a complex and time-consuming process that requires a team with extensive bandwidth, capital investment, and in-country knowledge of Spain’s legal, corporate, and payroll regulations. If you want to mitigate the complicated and expensive entity establishment process, partnering with an EoR in Spain is a better fit.

An Alternative to an Employer of Record in Spain or Entity Set Up

While entity establishment and EoR partnership are common practices to compliantly hire and pay employees in Spain, they might not serve your specific short-term needs. Here is a more flexible alternative:

Hire and Pay Spanish Contractors

Engaging a contractor in Spain gives you the ability to target talent with specialized skills for short-term projects or sporadic services. An international contractor allows for more flexibility and costs savings that would otherwise be directed toward training, administration, and payroll. Paying contractors is typically less complex and risky in comparison to employing and paying full-time employees.

Learn more: Should You Hire a Contractor or Employee?

Key Considerations Before Hiring Workers in Spain

Each country has its own employment regulations, so you must consider both the tax laws of your company’s country and the tax laws of Spain into account. There are several compliance risks that should be carefully considered before hiring workers or engaging contractors in Spain.

Misclassification Laws

Misclassifying a Spanish contractor is a potential risk. If a contractor claims that they are treated as an employee and are entitled to employee benefits, your company could face fines, penalties, legal issues, and employee entitlement back pay. Many businesses choose to work with a contractor management partner who can help avoid misclassification with compliant contracts, accurate reporting, and correct payroll.

Unfamiliar Employment Laws

Spain’s employment laws may be unfamiliar to companies based in another country. Some employee entitlements and benefits include a minimum of 30 days of calendar leave, 14 public holidays a year, and 16 weeks of maternity leave, which can be extended by two weeks for each child from the second birth.

Both employers and employees are required to give 15 days’ notice to terminate an employment contract. There is no at-will termination in Spain, and an employer must have clear reason and proof before terminating an employee.

Read more information on Spain’s employment laws.

Payroll Contributions

The required payroll contributions in Spain may differ from other countries, and failure to calculate payroll contributions correctly leads to fines and payroll reruns.

In Spain, the employer is responsible for the employee’s social security deductions. Social security covers healthcare, pension, and other benefits, and the employer typically pays 23.6% on top of the gross salary.

Permanent Establishment

Permanent establishment occurs when a company has a fixed location in another country, including Spain, and generates revenue. Having a permanent establishment in Spain means that you are liable to local corporate taxes, and failure to comply with those obligations leads to several legal issues including unpaid taxes, interest, penalties, and employer liabilities.

Confidently Hire With an Employer of Record in Spain

When done compliantly, hiring talent in Spain is a beneficial step toward your business’s global expansion goals. Working with an experienced and knowledgeable partner helps you overcome the challenges of hiring and paying employees in a foreign country.

Velocity Global’s full suite of solutions allows you to easily, quickly, and compliantly manage your global workforce. Our Global Employer of Record (EoR) solution manages all risk mitigation, payroll, and compliance to help you hire and pay your Spanish employees with ease.

By partnering with an employer of record in Spain, you can focus your time on managing your team and growing your business, while we handle the rest. For businesses with entity establishment plans, our Multi-Country Payroll solution streamlines payroll on one platform so you can pay your distributed team, no matter where they are located.

Connect with us today to learn how our solutions help you simplify hiring and paying workers in Spain.

Employer of Record in Spain: FAQs

What Is a Spanish Employer of Record?

An employer of record (EoR) in Spain is an entity that serves as the legal employer of your Spanish employees. An EoR in Spain assumes all employment responsibilities on your behalf by handling onboarding, payroll, benefits administration, taxes, and compliance so you can hire talent in Spain without the stress of navigating complex employment laws.

How Does an Employer of Record in Spain Work?

An employer of record (EoR) in Spain allows international companies to quickly and compliantly hire and pay Spanish talent without the burden of establishing a local entity in the country or navigating Spain’s complex employment laws.

An EoR in Spain serves as the legal employer of your supported talent while you keep control of all day-to-day tasks, like work schedules, management duties, compensation, and role responsibilities.

Can an Employer of Record Run Payroll in Spain?

Yes, an employer of record runs payroll on your behalf, including taxes, employer contributions, exchange rates, on-time delivery, and compliance with Spain’s payroll regulations. An employer of record consolidates global payroll streams and services into one platform and enables employers to pay their supported talent in Spain and other international markets accurately and on time.