How to hire in Spain

Helping Foreign Companies Choose the Most Efficient Hiring Model in Spain

Spain continues to attract foreign investment due to its strategic position in Europe, skilled workforce, and dynamic business ecosystem. However, navigating the employment framework can be challenging for international companies entering the Spanish market. Whether you're setting up a new operation or hiring your first employee locally, understanding the different hiring models available is crucial for efficiency and compliance. Let’s explore the key considerations.

Are there alternatives to direct employment?

Yes but not many., Foreign companies have some alternatives to direct employment in Spain. Common options include:

1. Temporary Employment Agencies (ETTs): In Spain, ETTs are the only entities legally authorized to hire employees and "assign" them to client companies to perform services under the client’s management and supervision. This is the lawful form of worker leasing or employee outsourcing because temporality jobs (not indefinite)
2. Independent contractors (autónomos): Companies can engage self-employed professionals (freelancers) for specific projects. This model is flexible and does not generate employer social security obligations, provided the freelancer operates independently and without subordination.
3. Outsourcing to service providers: Companies may fully outsource certain functions (e.g., IT, customer support) to Spanish service providers or consulting firms, which manage their own employees and service delivery independently.

⚠️ Important note: Unlike in other countries, the Employer of Record (EoR) / PEO model as commonly known internationally is not fully compatible with Spanish labor law, unless the provider is also a registered ETT. Otherwise, it could be deemed an illegal transfer of workers (cesión ilegal) under Article 43 of the Spanish Workers’ Statute being both companies responsable of all debts and be sanctioned for the employment authority.

Is it necessary to set up a local entity to hire an employee

EU Companies do not have to set up an entity necessarily to hire employees. As far as freedom of movement and capitals is an European principle any EU Company only needs to enroll their company into the Spanish Tax Ageny and Social Security Agency and provide them an address for notifications.

For non EU Companies find here in this link different options to set up your company in Spain.

Direct employment vs. independent contractor: what about costs?

• Direct employment in Spain comes with several mandatory costs, including:
  • Employer’s social security contributions (approx. 30%-33% on top of gross salary),
  • Severance costs in case of termination (for unfair dismissal, typically 33 days per year of service),
  • Paid vacation (30 calendar days per year),
  • Statutory benefits (such as sick leave, parental leave, etc.).

⚠️ Important note: It is important to note that there are quite a lot of activity sectorial collective agreements that makes payroll difficult in Spain since they make quite a lot of exceptions to the general law, improving conditions.

• Independent contractors (autónomos), on the other hand, are responsible for their own social security contributions (self-employment quota) and taxes. For companies, engaging an autónomo tends to be more cost-effective since there are:
  • No employer social security contributions,
  • No severance obligations,
  • More contractual flexibility.

However, misclassification risk exists. Spanish labor authorities may reclassify a contractor as an employee if certain indicators of subordination or economic dependence are present (e.g., exclusive work, fixed working hours, lack of autonomy). This could lead to penalties and back payments.

Contact our employment Lawyers for more detail and advice

In summary, Spain offers a variety of hiring models for foreign companies depending on their strategy and budget. Each option has cost, compliance, and flexibility implications that should be assessed carefully before making a decision.

How to hire internationally?

Use our amazing Aliant network to hire all arround the world:

How to hire in China?

https://aliantlaw.com/hiring-in-china-employment-contractors-legal-setup/ 

How to hire in Bulgaria?

https://aliantlaw.com/hiring-in-bulgaria-employment-laws-and-contractor-options/ 

How to hire in Argentina?

https://aliantlaw.com/hiring-in-argentina-a-guide-for-foreign-companies/