Spain

While Spain offers a strong and diverse talent pool, companies must be mindful that only certain hiring models are legally compliant under Spanish labour law.

1. Establishing a Spanish legal entity
   Setting up a Spanish legal entity, such as a “Sociedad Limitada” (SL) or “Sociedad Anónima” (SA), is the most compliant option for a long-term presence in Spain. This involves registering with the Mercantile Registry, obtaining a tax identification number (NIF), and registering with social security. A Spanish legal entity is subject to corporate income tax and other relevant taxes. This is the best option for companies planning significant, ongoing business activities in Spain with multiple employees.
2. Establishing a non-permanent establishment
   A non-permanent establishment allows a foreign company to operate in Spain for tax and social security purposes without forming a full legal entity. This involves registering with the Spanish tax authorities and social security. Generally, a non-permanent establishment isn’t subject to corporate income tax in Spain unless the employee has the authority to enter into contracts or conduct core business activities. This option might be more suitable for companies testing the Spanish market or with a limited number of employees without significant decision-making power.
3. Engaging independent contractors
   If you need specialised, project-based work and the individual operates with significant autonomy and control over how they perform the work, engaging an independent contractor might be suitable. However, proper worker classification is crucial. Misclassifying an employee as an independent contractor is a serious offence in Spain and can result in significant penalties. Ensure the working relationship truly reflects an independent contractor arrangement.

Generally, the process of registering a company in Spain can take several weeks, depending on the complexity of the company structure, approvals from different authorities, and the completeness of filings.

However, the difficult part comes after the initial setup. Once a company is registered in Spain, it must comply with extensive ongoing obligations: registering employees with the Social Security Treasury (TGSS), making mandatory employer and employee contributions, providing statutory benefits such as paid annual leave, parental leave and sick pay, applying and adhering to the relevant collective bargaining agreement (CBA), deducting and remitting income tax (IRPF), and maintaining statutory records and filings. Employers must also keep pace with evolving regulations, regional variations in taxation and employment law, and the strict procedural requirements around dismissals and terminations, all of which add significant administrative burden.

Yes, you can employ people as independent contractors (autónomos) in Spain, but only where the relationship genuinely reflects contractor status.

Independent contractors must:

• Register as autónomos with the Spanish tax and social security authorities.
• Invoice for their services and pay their own income tax and social security contributions.
• Work in a way that reflects genuine independence, such as controlling their own schedule, methods of work, and tools.

If the above is not the case, the safe and compliant route is establishing a local entity (or registering an EU entity) and hiring employees directly.

If an independent contractor is treated like an employee (receiving regular pay, working set hours under your supervision, using your equipment, or being integrated into your organisation), Spanish authorities may reclassify them as an employee. Reclassification brings serious consequences, including liability for back pay of wages and benefits, retroactive social security contributions, fines ranging from €3,126 to over €10,000 per worker, and, in extreme cases, even potential criminal charges.

Read more on why hiring remote people as independent contractors is a bad idea.

When you hire employees in Spain, you take on a wide range of obligations as an employer. HR compliance means ensuring that your company’s policies, contracts, and practices align with Spanish labour law and the applicable collective bargaining agreement (CBA).

In Spain, compliance covers areas such as maximum working hours and overtime limits, timely payment of wages, mandatory social security contributions to the Tesorería General de la Seguridad Social (TGSS), and proper withholding of income tax (IRPF). It also includes providing statutory benefits like paid annual leave, public holidays, sick leave, and maternity and paternity leave, as well as upholding workplace health and safety standards and equality and anti-discrimination rules. Employers must issue written contracts, maintain statutory records, and follow strict legal procedures for dismissals and terminations.

These laws are designed to protect employees and guarantee their rights to fair pay, social protection, and job security. For employers, proper compliance minimises risks such as fines, liability for back pay and social security contributions, reinstatement orders in cases of null dismissal, and reputational damage from disputes with employees or labour authorities.

In short, HR compliance in Spain not only protects employees but also safeguards businesses from costly liabilities and legal risk.

As with every other country, there are certain costs associated with employing a worker in Spain that come on top of the gross salary you are offering. Employers are responsible for a range of statutory contributions and benefits in addition to wages.

Key employer costs include:

• Common contingencies: 23.60% of gross salary, covering sickness, maternity, disability, retirement and death.
• Unemployment insurance: 5.50% for permanent contracts (6.70% for temporary contracts).
• FOGASA (Wage Guarantee Fund): 0.20% to protect workers in case of employer insolvency.
• Training fund: 0.60% to support professional development.
• Intergenerational Equity Mechanism (MEI): 0.67% to strengthen the pensions system.
• Occupational accident/illness insurance: 0.90–8.50%, depending on sector risk level (CNAE code).
• Solidarity quota: 0.92% – 1.17% applied to salaries above the maximum contribution base (€4,909.50/month in 2025).

On top of these contributions, employers must also withhold employee social security contributions (approx. 6.48% of gross salary) and income tax (IRPF, 19–47% depending on income, region and personal circumstances) and remit them to the authorities.

In short, the true cost of employment in Spain extends significantly beyond the employee’s gross salary and varies depending on contract type, industry sector, and the employee’s income level.

No, hiring through an Employer of Record (EOR) is not a legally viable option in Spain. Spanish labour law requires that the entity directing and supervising the employee’s work (the Real Employer) must also be the entity responsible for employment administration, such as payroll, social security, and benefits (the Formal Employer). Splitting these roles, as happens under an EOR model, is considered illegal labour leasing (cesión ilegal de trabajadores).

This means that if a company uses an EOR in Spain, both the EOR and the client company can be held jointly liable for the employee’s rights and entitlements.

Consequences can include:

• Fines of up to €225,000 for illegal assignment of workers
• Back payment of wages, benefits, and social security contributions
• Joint liability for severance, unfair dismissal compensation, and workplace accidents
• In extreme cases, even potential criminal liability

Some providers still market EOR services in Spain, often under the guise of consultancy or outsourcing, but if the client directs the day-to-day work, the arrangement is not compliant. To employ compliantly, companies must either establish a local legal entity (or register an EU entity), set up a non-permanent establishment, or engage genuine independent contractors.

Boundless supports companies in Spain by helping them either register their foreign entity as an employer or set up their own Spanish entity to hire directly. In Spain, we do not offer employment through an Employer of Record.

When employing people in Spain, companies take on a broad set of legal responsibilities designed to protect employees and ensure compliance with labour law. Employers must provide a written employment contract that sets out the job role, salary, working hours, and termination conditions, while also applying the relevant collective bargaining agreement (CBA), which often goes beyond statutory minimums.

They are required to register with the Tesorería General de la Seguridad Social (TGSS) and handle payroll correctly, which includes paying employer social security contributions of about 32.5% of gross salary, withholding employee contributions of roughly 6.5%, and deducting and remitting income tax (IRPF).

Beyond pay and contracts, employers must also:

• Comply with statutory rules on working time (40 hours per week, 9 hours per day maximum), overtime (80 hours per year), and leave entitlements such as annual leave, public holidays, sick leave, and parental leave.
• Ensure workplace health and safety through risk assessments, training, and, where necessary, health surveillance.
• Uphold equality and anti-discrimination standards, and protect employee data in line with GDPR.

Finally, when ending employment, companies must follow strict dismissal procedures: written notice, valid grounds, and, where appropriate, severance payments. Unfair dismissals can result in compensation or reinstatement, while null dismissals (for example, discriminatory ones) require immediate reinstatement with back pay.

When employing in Spain, both the company and the employee are responsible for taxes and contributions. As the employer, you must register with the Tesorería General de la Seguridad Social (TGSS) and ensure correct calculation and remittance each month.

Employer contributions amount to around 32.5% of gross salary and include:

• Common contingencies (23.60%) covering sickness, maternity, disability, retirement, and death
• Unemployment insurance (5.50% permanent / 6.70% temporary)
• FOGASA (0.20%): Wage Guarantee Fund
• Training fund (0.60%)
• Intergenerational Equity Mechanism (MEI) (0.67%), which supports pensions
• Occupational accident and illness insurance (0.90–8.50%), depending on industry risk level
• Solidarity quota (0.92 / 1.00 / 1.17%), which applies to salaries above the maximum monthly base (€4,909.50 in 2025).

Employee contributions total about 6.48% of gross salary, withheld from pay by the employer:

• Common contingencies (4.70%)
• Unemployment insurance (1.55% permanent / 1.60% temporary)
• Training (0.10%)
• MEI (0.13%)
• Solidarity quota: same rates as the employer, for high salaries above the contribution ceiling.

On top of social security, employees also pay income tax (IRPF). This is a progressive tax, with combined state and regional rates ranging from 19% to 47%, depending on income level, region of residence, and personal/family circumstances. Employers are responsible for applying monthly IRPF withholdings based on these factors.