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Insights Employer of Record in Spain

Employer of Record in Spain

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​​​​​​​​​​​​​​​​​​​​published on 26 April 2024 | reading time approx​. 4 minutes

 

The challenges of recent years have modernised and permanently changed the work environment. "Work from anywhere" opens up new opportunities for companies to employ staff, but this often requires compliance with complex labour, tax and social security regulations. Employers of Record offer solutions, but these can also entail risks and should therefore be carefully examined in advance.

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​Is the concept of EoR known in your country? Is the concept of EoR regulated by law in your country?

While the Employer of Record (EoR) has been used in other countries for some time, this concept only became more widely known in Spain after the pandemic. 
  
In the meantime, the possibility of employing staff in other countries without having to set up a company in these countries or register the company as a non-resident company is also offered in Spain by various com­panies whose services include, in particular, the hiring of employees, their registration with social security, payroll accounting and the payment of social security contributions. 
  
The EoR concept in Spain is currently being used in particular by foreign companies that are interested in hiring employees in Spain due to the shortage of skilled workers in their own countries. This applies in particular to the IT, technology, management consultancy, financial services, etc. sectors, where the functions of the em­ployee in question can be carried out remotely abroad, often from a home office, and a presence in the country of origin of the employer company is not required, or only to a limited extent. 
  
However, it should be noted that the concept of the EoR is not regulated by law in Spain. ​
    

​Special features of the activity within the framework of the EoR concept or temporary employment

As the concept of the EoR is not regulated by law in Spain, before using the services of an EoR, it is particularly important to carefully check whether there is a risk of an unlawful labour leasing of employees through this type of employment. An unlawful labour leasing of workers is assumed to occur when the actual employer is replaced by a formal employer who hires the workers solely for the purpose of hiring them out to the other company. Spanish law expressly stipulates that the assignment of employees to a hiring company is only per­mitted by authorized companies that have the corresponding administrative authorization, are entered in the so-called register of temporary employment agencies and meet other criteria, in particular with regard to their organization and economic guarantees.
  
If, on the other hand, the labour leasing of employees is not permitted because it has been carried out by a company without the aforementioned license, this leads to joint liability of the hiring company and the recipient company for the obligations under employment and social security law. In addition, sanctions in the form of fines may be imposed. The employees affected by the unauthorized hiring-out of workers are entitled to be offered a permanent employment contract with one of the two companies involved, at their discretion.
  
It should also be noted that even if the temporary employment is carried out by an authorized company, the legal provisions must be complied with when employing the temporary worker. The Spanish Supreme Court has ruled that the legal consequences and possible sanctions of an unauthorized temporary employment agency also apply if the temporary employment is carried out by an authorized temporary employment agency but the employment regulations are not complied with. This applies in particular to fixed-term employment, as the current legal regulations only permit the conclusion of a fixed-term contract if this is justified for certain production-related reasons or to replace an employee who is temporarily absent; in all other cases, only per​­manent employment is permitted. It is also a violation of the law if the normal and permanent activities of a company are carried out through the successive employment of temporary workers or if the normal organization of the company is to be covered by such temporary workers.​
  

​​​What are the special tax features of the EoR concept in your country?​

From a tax law perspective, it should be noted that the risk of establishing a permanent establishment in Spain cannot be ruled out on the basis of the EoR concept. As with the direct hiring of the employee(s) in Spain by the foreign company, it is always necessary to examine the risk of establishing a permanent establishment, taking into account the definitions established by the OECD and the international and national regulations. 
  
The double taxation treaty between Spain and Germany does not contain any special regulations on temporary employment.
  

​​How do you anticipate the concept of EoR evolving in your country from your perspective?​

In light of the above, the employment of employees through an EoR in Spain is therefore only an alternative to their direct hiring by the foreign company after registering as a non-resident company in Spain or to their employment through a Spanish subsidiary if the EoR has the necessary license to provide temporary workers and all labour law regulations are complied with when employing the leased employee. As described above, the tax consequences with regard to the risk of establishing a permanent establishment must always be examined beforehand.​

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