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A Complete Guide for U.K. Companies Employing Staff in Spain

By October 27, 2022No Comments
Woman working on her laptop at a cafe in Spain

Spain is a prudent growth location for international business. The country’s long-standing trade partnerships with European, Middle Eastern, South American, and North African markets provide several benefits for business expansion into Spain, including reciprocal protection and promotion of foreign investments, avoidance of double taxation, and relaxed business regulations.

However, complex labour laws make Spanish expansion challenging for many U.K. businesses. Read this comprehensive guide to dig deeper into the logistics of a U.K. company employing staff in Spain.

Can a U.K. Company Employ Someone in Spain?

In short, yes. While there are some limiting factors which are attributed to Brexit, it’s still possible for a U.K. company to employ staff in Spain.

How Does Brexit Affect Employment in Spain?

Brexit changed how U.K. companies hire Spanish citizens. Now that the U.K. has separated from the European Union (EU), U.K. companies must have a sponsor license to hire Spanish workers.

Once a U.K. company obtains a sponsor license, they can recruit Spanish employees through the Skilled Worker route. Under this scheme, the employee must:

  • Have a job offer from a Home Office licensed sponsor
  • Speak English at the required level
  • Have a job offer that is at the required skill level of RQF3 or above
  • Be paid at least £25,600 or the ‘going rate’ for the job offer—whichever is higher

This documentation process is time-consuming and requires legal expertise. Fortunately, if the Spanish citizen plans to reside and work remotely from Spain, the U.K. company does not need to acquire a sponsor license or follow the Skilled Worker immigration requirements.

How to Employ Staff in Spain

When a British company chooses to hire staff in Spain, they can set up a Spanish entity, partner with an employer of record, or hire Spanish contractors.

3 Options for hiring in Spain for a UK company: Establish an entity, partner with an employer of record, engage contractors

Set Up a Spanish Entity

If a British company wants to create headquarters in Madrid and employ a team of Spanish citizens, it must set up a legal entity. Setting up a permanent base in Spain is the most complex way to hire employees in Spain, but it could make sense for a company that envisions long-term growth in the country.

To set up a business entity in Spain, U.K. companies must take the following steps:

  • Obtain a foreigner’s tax identification number (NIE) for all resident and non-resident foreigners with financial affairs in Spain
  • Register the company name with the Mercantile Registry (Registro Mercantil Central or RMC)
  • Obtain a company tax identification number (CIF)
  • Open a Spanish business bank account
  • Sign the deed of incorporation
  • Register the company
  • Register for social security

Due to the complex nature of navigating entity establishment procedures, U.K. companies will spend significant time and money if they choose to set up an entity in Spain.

Partner With an Employer of Record

A more straightforward approach to employing staff in Spain is partnering with an employer of record (EoR). An EoR eliminates the need to establish a legal entity and streamlines the hiring process for U.K. companies that employ Spanish citizens.

For example, if a British marketing agency wants to hire a Spanish content marketer, an employer of record takes care of onboarding, payroll, and benefits. An EoR solution is a great choice for U.K. companies that want to hire quickly and seamlessly in Spain.

Read about how an employer of record works.

Engage Spanish Contractors

Sometimes companies may choose to hire contractors rather than full-time employees. However, U.K. companies that want to engage Spanish short-term or contract workers face misclassification challenges.

Misclassification occurs when a company hires a worker as a contractor while local officials legally classify them as an employee. U.K. companies that misclassify Spanish employees face legal consequences and fines.

Paying contractors also presents a challenge for many U.K. companies that expand into Spain. British payroll companies may not provide international payment capabilities, so it’s important to have a contractor payment solution in place.

Learn more about how to pay international contractors.

Employment Law in Spain: How Spanish Labour Laws Differ From the U.K.

Spanish labour law varies significantly from the U.K. Below is a look at some of the most important differences between Spanish and U.K. employment law.

Comparing employment laws in Spain vs labour laws in the UK

Onboarding and Probation Periods

In Spain, companies must provide employees with a written statement of employment particulars explaining work responsibilities when an employment contract’s duration is more than four weeks. This document includes information such as the employer’s and employee’s names, job title and description, start date, salary, and work expectations.

In the U.K., companies must provide all employees with a written statement outlining job responsibilities regardless of employment duration.

Spanish labour law does not require a probation period, but it is common for Spanish companies to enforce it. However, Spanish employment law sets a maximum of six months for employers who choose to set probation periods.

British labour law also does not require a probation period, but like Spanish companies, U.K. companies commonly enforce it. Probation periods in the U.K. typically last between three and six months, and employees may not receive all contractual benefits during that time.

Holiday and Sick Leave

Spanish employment law states that employees are entitled to a minimum of 30 days’ paid leave per year in addition to public holidays. Spanish employers are required to pay the first three days of sick leave for an employee. By the fourth day, employers are eligible to receive payment from the social security system.

Spanish employees are covered by temporary disability benefits for loss of income due to sickness or injuries. Employees can claim this benefit for 365 days, which can be extended by another 180 days.

It’s standard for U.K. workers to receive 5.6 weeks of paid holiday each year. The U.K. Government Holiday Entitlement Guide states that employees who work a five-day week must receive at least 28 days’ paid annual leave each year.

Along with paid holiday leave, U.K. employees are eligible for Statutory Sick Pay (SSP) if they are classified as an employee, earn at least an average of £123 per week, and have been ill for at least four consecutive days.

Parental Leave

In Spain, employees are eligible for 16 weeks’ maternity leave at full pay, funded by social security. The mother is required to take at least six of the 16 weeks immediately after childbirth, and the remaining 10 can be organised by the mother’s discretion until the child is a year old.

Partners also receive 16 weeks of fully paid leave for the birth or adoption of a child, funded by social security.

U.K. employees are eligible for 52 total weeks of maternity leave and can receive Statutory Maternity Pay (SMP) for up to 39 weeks. Mothers receive 90% of their average weekly earnings before tax for the first six weeks and £156.66 or 90% of their average weekly earnings, whichever is lower, for the next 33 weeks.

Paternity leave in the U.K. allows fathers to take one to two weeks of paid leave after childbirth with 90% of their pay.

Termination and Notice Periods

Spanish employers must provide 15 days of notice before terminating an employee. Employees could also receive compensation at the end of their contract, depending on the type of contract, reason for contract termination, and employment length.

U.K. employers must give employees between one and 12 weeks’ notice before termination depending on the worker’s accumulated time of service. For example, employers must give one week’s notice for employees with one month to two years of service. For each additional year of service, employers must give another week’s notice up to a maximum of 12 weeks.

The Compliant Way to Employ Staff in Spain

When it comes time to hire Spanish employees, it is vital that U.K. companies follow the complex yet strict Spanish labour laws. Fortunately, you don’t have to go at it alone.

Velocity Global’s Employer of Record (EoR) makes employing staff in Spain far more streamlined than the traditional method of setting up a legal entity. Our EoR solution compliantly handles onboarding, payroll, and benefits so you can focus on managing and growing your team.

For U.K. companies that are interested in hiring contractors in Spain, our Contractor Payments solution makes it easy to accurately and compliantly pay talent in just a few clicks.

Hire top talent in Spain with ease by partnering with Velocity Global. Connect with our team today.