How to hire employees in Spain through an employer of record (EOR) [2024]

Hiring in Spain? Expanding your global workforce is exciting, but it can be complicated. Foreign employers might hire Spanish contractors, which is a simpler process than onboarding employees. However, if you’re looking to officially expand your workforce and hire full-time employees, your business will either need to establish a legal entity or hire through an EOR.

Registering a legal entity can take weeks and requires in-person registration, opening a Spanish bank account, document verification, and more. Once established, operating an entity requires knowledge of complex Spanish employment laws and tax systems. Mistakes may incur fines, legal action, or delays in your ability to onboard your new employee.

Alternatively, you can use an “employer of record” (EOR), which handles Spanish payroll, tax, and compliance considerations. It also speeds up the hiring process dramatically.

Learn more about What is an Employer of Record (EOR)?

Here’s a step-by-step guide for hiring through an EOR in Spain.

Step by step: How to hire through an employer of record in Spain

Step #1: Decide between a Spanish EOR and a legal entity

Should you hire Spanish employees through an employer of record service or set up your own entity? This depends on your company’s resources, size, and plans to scale.

• Legal entity in Spain. Setting up a legal entity from scratch requires registration with local authorities (including the Spanish Tax Agency and National Social Security Institute), applying for an NIF tax ID code, opening a local bank account, verifying your documentation with a notary public, and consulting with local experts to ensure compliance with tax and labor laws, among other tasks.
• Spanish EOR services. An EOR is a third-party service that operates as an employer on a company’s behalf—meaning you don’t need to set up your own entity. As well as allowing you to hire full-time Spanish employees, EORs handle all the legal requirements for complying with Spanish laws for payroll, contracts, and benefits—which can get complicated in a country known for collective bargaining agreements (CBAs). Employer of record services also include calculating and withholding taxes, onboarding and managing employees, and running payroll.

Step #2: How to choose the best EOR for your business

Before you choose a platform, you should consider the services you will need, and how much you plan to grow your global hiring presence.

• Is the EOR active in the countries in which you need to hire? The first, and perhaps most obvious consideration when choosing an EOR for global expansion.
• Does the EOR own its own entities in the countries it services? If the EOR does not own the entities, it means they are partnering with a local or third-party provider.
• How does the EOR protect your sensitive and confidential information? It is vital that your EOR has the appropriate data protections in place, as well as secure technology that eliminates potential disclosures of private information.
• Does the EOR offer automated solutions? You may want to look for an EOR that automates the busy work like onboarding and benefits enrollment and other common HR services and IT tasks.
• What is the EOR’s support model? It’s essential that your EOR has support staff that are both easy to contact and experts in the regulations of the countries in which you are hiring.

Get the full checklist in our guide: What is an EOR?

Step #3: How to hire and onboard your Spanish employees

Once you’ve picked an EOR that works for your needs in Spain, you can begin the onboarding process by collecting the following information from your new employees:

• Name (matching the account where you’ll deposit their pay)
• Date of birth and date of hire
• Contact information, including their mailing address in Spain
• Social Security number (NAF)
• Bank account information
• Amount to be paid in euros

Next, send out an employment agreement that outlines key working conditions. An EOR can automatically localize and distribute employment agreements. Keep in mind that employment agreements are legally required in Spain due to the country's strict labor laws.

Having an EOR draft the agreement will be particularly helpful in Spain, which is known for its strong worker protections. Spanish labor laws are outlined by the European Union, The Spanish Constitution, and the Workers’ Statute (Estatuto de los Trabajadores). Spain regulates jobs by professional categories, with laws around working hours, salaries, and vacation days for each profession. Your contract will need to adhere to these requirements. Collective bargaining is also incredibly common in Spain and may impact your employment terms. CBAs may be made at the workplace, company, industry, regional, or national level.

Through your EOR, every Spanish hire will have a legally compliant contract offering statutory requirements for probationary periods, working hours, minimum wage, benefits, and termination policies like severance pay and notice periods.

Example: If you hire two hourly employees in Spain who live in different regions, they may have different terms for working hours, overtime payments, or holiday bonus dates.

When you use an EOR, it will generate separate, compliant employment agreements to account for these differences.

Step #4: Run payroll

Want a complete guide to global payroll? Read our post about running international payroll for employees in Spain.

Once you’ve collected a new hire’s information and both parties have signed the employment agreement, the EOR will pay your Spanish employees in euros, while withholding legally required taxes from salaries. This includes contributions to:

• Income tax
• Social security

Other costs that employers must assume include:

• Occupational accident insurance
• Wage Guarantee Fund contributions
• Vocational training
• Unemployment insurance

Frequently asked questions about hiring through an EOR in Spain

How much does an EOR cost?

EORs typically use one of two pricing structures:

• Fixed monthly fee per employee
• Percentage of payroll plus applicable taxes

Both methods can also come with various administrative fees, onboarding charges, and other costs for supplemental features.

Keep in mind that you don’t need to use an EOR for your entire workforce. If you want to segment its use, you’ll only be charged for the employees you employ through the EOR.

What is the difference between an EOR and PEO?

A professional employer organization (PEO) co-employs a company’s workforce and provides administrative and human resources services like paying employees, handling compliance, and filing payroll taxes. The company and PEO are jointly responsible for the workforce. A PEO does not, however, allow you to hire in other countries where you haven’t set up a local entity.

An EOR, on the other hand, is the sole and legal employer of the portion of your workforce you use it for, assuming all the associated liabilities. An EOR allows companies to work with employees in other countries without setting up a legal entity.

Does an EOR protect your sensitive and confidential information?

This is a crucial issue, as data protection is a right under the Spanish Constitution. Additionally, the European Union’s General Data Protection Regulation (GDPR) extends to employees. This law requires consent for data collection and limits how sensitive HR data is handled and processed.

While outsourcing your payroll management to an EOR can spare you time and compliance risk, sharing your data with companies who use third-party vendors leaves you exposed to data breaches from manual uploads.

You should seek out EORs that prioritize data protection, including:

• Compliance with industry-standard privacy regulations in different countries
• Secure infrastructure with around-the-clock maintenance
• Carefully vetted personnel

You can also establish a data processing agreement (DPA) with a payroll service that mandates sound privacy practices and provides legal protection.

Does an EOR help with Spanish tax filings?

Yes, an EOR can automatically calculate and file taxes in Spain. This includes a tax declaration every month or each quarter, which outlines the amount you’ve paid your Spanish full-time employees and how much you’ve withheld from their paychecks. Employees who are residents of Spain require a 111 Form, whereas non-resident employees require a 216 Form.

Spain has a progressive tax rate, and there may also be variations in tax rates depending on the region. The EOR will calculate those rates and withhold the correct amounts from pay.

What are the mandatory benefits for Spanish employees?

Spain’s social security program (sistema de seguridad social, or INSS) has one of the highest pension rates in the world—employers typically contribute around 30% of their employee’s salary, with a ceiling of just over EUR 3,500 per month. (Note: Employers may owe more for high-risk industries.) However, though the rates are high, social security provides many benefits for which, in other countries, employers would normally take responsibility. This includes basic healthcare, disability, retirement, family allowances, unemployment allowances, death benefits, sick leave, and parental leave (including maternity leave and paternity leave).

Businesses are also responsible for the following employee benefits:

• Vacation entitlements: Spanish employees are owed 30 calendar days of vacation each year.
• Holidays: Spanish employees get 14 days of paid public holidays, including local and national holidays.

Per collective bargaining, additional benefits may be owed. These additional benefits commonly include workers’ compensation, additional leave, and more.

For more information on mandatory employee benefits in Spain, read our complete guide.

Are there any special considerations for running payroll for employees in Spain?

Yes. Spanish employees can receive 13th and 14th-month salaries. The 13th and 14th payments typically function as a Christmas holiday bonus and a summer bonus (often paid in July). These payments can be handled as follows:

• Pay the bonuses as part of the 12 monthly salary payments.
• Pay the bonuses in full before the respective holidays.

Whichever payment schedule you choose, be sure to outline it in your employment agreement.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.