During my ten-year tenure as a COO, finding a compliant way to employ my distributed team members was something that quite literally kept me awake at night. So in 2018, I decided to take the plunge into tackling this international employment challenge and started work on figuring out a solution that would enable companies to quickly & easily employ people cross-border. From day one, I had always said that, in building Boundless, I wanted to build a full, robust, compliance solution. That emphasis on compliance remains a steadfast value of Boundless to this day, and always will be.
It’s with that guiding principle in mind that Boundless is saying no to Spain. We are saying no to launching in Spain despite it being one of our most requested countries. And we are saying no following two tireless years of endeavouring - and repeatedly failing - to find a path to operating compliantly in the country.
In this piece, I want to tell you a little bit about how that decision came to be.
To understand why Spain is a country we cannot currently support, it’s worth understanding how we operate in other countries. Most typically, we register as an Employer of Record, an organisation whose responsibility is to act as the local legal employer on behalf of customers.
As an Employer of Record, Boundless takes on all local employment responsibilities, ensuring everyone is compliantly employed in their country of residence. We act as the legal employer, run payroll, administer benefits, and file local taxes. Employees receive job protection, mandatory benefits and the employment rights they are owed and desire. It’s a far simpler, more cost-effective way to employ people abroad than setting up a legal entity.
Boundless owns corporate & employment infrastructure in each of the countries where we operate, and we assume much of the legal risk of employing people. This corporate infrastructure is what enables us to act as the employer on our customers behalf. We take great time and care to ensure we develop expertise in each of these countries, so that we can offer comprehensive HR advisory support to our customers, and be there when they need us most. This empowers our customers to offer the best employment experience to their people.
In some countries, the Employer of Record model is not aligned with local employment legislation, which may restrict outsourcing of employment. In these cases, we revert to alternatives - in some countries we’re licensed to operate through a country-specific model, in others, we operate as a temp agency or use some kind of similar locally-compliant employment models. Examples include Portage Salarial in France, AUG licence in Germany and the temp agency model in Poland. Many of these models can come with restrictions on the length of the employment agreement.
Despite challenges in a number of countries, we have never previously hesitated to face these hindrances head on. That is as long as our chosen solution was 100% compliant and we were in a position to provide the best possible service to our customers, as well as ensure a great experience to employees.
For countries with restrictive regulations, we have always been very open with our customers about any limitations thrown up by legislation. And, because we believe in the integrity of truly being a compliant Employer of Record, we have never tried to ‘work around’ any limitations by opting for non-compliant solutions such as building a network of companies that take turns in being the employer of the employee, or offering faux staffing agency employment.
Following thorough due diligence, our understanding is that Employer of Record and Professional Employer Organisation are models which are not permitted under Spanish employment law. We understand that there is a clear prohibition on outsourcing the responsibility of employment to a 3rd party under Spanish law. As a result, operating as an EOR/PEO in Spain would expose all parties to compliance risk with the Spanish authorities.
There are other providers that claim to be set up as EOR/PEOs in Spain. While we can only speculate on the justification for doing that, we would never be able to justify an operating model that in our view is clearly non-compliant, even if that means disappointing customers that would ideally like us to support them in that country.
A temp agency model was something that could have worked in Spain up until March 2022. However, at that point, we understand that a pivotal legislative change made it heavily restricted and therefore no longer viable. Our understanding is that the legislation expressly states that employment contracts through a temp agency cannot exceed 6 months, and stipulates that temp agency contracts can only be used where there is strong evidence that the need for the hire is indeed temporary. In some cases, there may be a way to extend that by another 6 months, but it is not guaranteed. As our customers are typically looking to employ a temporary worker for longer than 6 months, this solution is usually not viable. And, on top of this, trying to present the employee as a temporary worker when they are not is clearly non-compliant.
An alternative employment model that other international employment companies have opted for is that of a service provider. A service provider is a type of consultancy company that sources employees back to clients. If done the right way, the service provider should be managing the relationship with the employee and assigning them to specific projects with their customers. If, however, the service provider doesn’t manage the employee and their workload and is merely pretending to do so, this then poses a huge compliance risk to all parties.
Our legal counsel and Spanish attorneys are continuing to analyse the situation, and should the current legislation change in favour of an Employer of Record arrangement, then we would love to move forward with supporting customers with Spanish workers. However, there is no certainty that any such changes will happen.
In cases where we do not support a country that a company is interested in, we sometimes suggest another provider that could help in the short term. But, given legislative restrictions in Spain, we simply cannot be confident that anyone is currently providing a compliant employment solution, and therefore can’t in good conscience recommend that people move forward with alternative providers for Spain.
To be fully compliant in Spain, you will need to have a local entity and employ your team directly. If you have an EU entity, you may not need to set up a subsidiary in Spain, but you will need your EU entity to register as an employer in Spain, and you’ll need to find a way to run local payroll. You will also need to ensure that you meet all of your obligations as an employer in Spain, and provide your employees with all of their statutory entitlements. It would be best to speak to a Spanish or International law firm to assist in registering as an employer in Spain, creating a Spanish employment agreement and sourcing Spanish payroll & HR providers.
We have our own entity set up in Spain in order to employ Boundless staff that reside in Spain, so I can offer recommendations on law firms we have used. We are also working on offering Spanish payroll as a stand-alone service and will soon be able to help in at least that part of the puzzle. Drop me a line at deecoakley@boundlesshq.com and I will be happy to offer my assistance.
Unlike other tough decisions I have had to make as a CEO and Founder, saying no to Spain, in the end, was actually not tough. I have always said that if what we're selling is a compliance product, then what we're doing needs to be compliant. It’s as simple as that. This brings a refreshing binary outlook to saying yes and no, as it’s clear what the right thing to do is, without any shades to cast a doubt. While, at Boundless, we have always operated with the guiding principle to always be compliant, this is not always the view taken by others in the industry. So, as you make your own employment decisions, do consider how much of a priority compliance really is for you.
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