Employer of Record in Spain: How to Hire Compliantly Without Setting Up a Legal Entity (2026 Guide)

An Employer of Record (EOR) is a third-party company that legally employs workers in Spain on behalf of a foreign business. The EOR — not the client company — signs the employment contract, registers with Spain's Tesorería General de la Seguridad Social (TGSS), withholds IRPF income tax under Ley 35/2006, and files Modelo 111 monthly or quarterly with AEAT. The client retains full operational control over the employee's day-to-day work. This structure allows international companies to hire Spanish-based employees within days, without incorporating a Sociedad Limitada, without permanent establishment registration, and without managing Spain's layered employment obligations directly. Employer social security contributions run to approximately 29.90% of the contribution base for indefinite contracts in 2026, with the maximum monthly base capped at €5,101.20 per the TGSS annual contribution order.

What Is an Employer of Record — and How Does It Work in Spain?

An Employer of Record (EOR) in Spain is a third-party company that legally employs workers on behalf of a foreign business, handling all employment contracts, payroll, social security contributions, and regulatory compliance under Spanish law. The client company retains operational control over the employee's work; the EOR holds all legal employer obligations. This three-party structure allows international companies to hire in Spain without incorporating a local entity.

Hiring talent in Spain without a local legal entity used to mean choosing between a complex Sociedad Limitada setup or taking the risk of engaging contractors who should legally be employees. The EOR model offers a third path — one increasingly common among US, UK, and European companies testing the Spanish market or building distributed teams.

The three-party structure

An EOR arrangement involves three parties: the EOR provider, the client company, and the employee. The EOR provider operates through its own Spanish-incorporated subsidiary — a Sociedad Limitada already registered with AEAT and TGSS. This subsidiary signs the employment contract directly with the employee. The client company then enters into a commercial service agreement with the EOR, but never becomes the employer of record under Spanish law.

The Estatuto de los Trabajadores (Real Decreto Legislativo 2/2015) defines the employer as the entity bound by the employment contract — that entity is the EOR's Spanish subsidiary, not the client. This distinction has material consequences: it is the EOR that carries employer obligations for payroll, social security contributions, statutory benefits, termination procedures, and labour inspections.

Source: Real Decreto Legislativo 2/2015, de 23 de octubre — Estatuto de los Trabajadores — Primary Spanish employment law framework. Governs employment contracts (Art. 8), employer definition (Art. 1), working hours (Art. 34), business succession with seniority preservation (Art. 44), and statutory severance for objective dismissal (Art. 53: 20 days/year) and unfair dismissal (Art. 56: 33 days/year, max 24 months).

What the EOR owns legally

Once the employment contract is signed, the EOR's Spanish entity assumes a defined set of legal responsibilities that cannot be contracted away. These include: registering the employee with TGSS under the correct Grupo de Cotización, calculating and remitting employer and employee social security contributions each month, withholding IRPF at the applicable rate, issuing the monthly nómina, maintaining the digital working time register (registro de jornada), and managing any disciplinary or dismissal procedure in conformity with the Estatuto de los Trabajadores.

What the client company retains

Operational control remains entirely with the client company. The client decides what work the employee does, sets performance targets, determines working schedule within legal limits, manages projects, and can end the commercial relationship with the EOR (subject to contractual notice). What the client does not hold is the formal employer-employee relationship — that belongs to the EOR.

This distinction matters when things go wrong. If a labour inspection (Inspección de Trabajo) questions employment conditions, the EOR responds, not the client. If the employee files a claim at the Juzgado de lo Social, the defendant is the EOR's Spanish entity. For companies wary of Spanish employment litigation risk, this separation is part of the commercial case for the EOR model.

EOR vs ETT vs PEO — the distinctions that matter

Employers evaluating EOR in Spain frequently encounter adjacent terms that create confusion. An Empresa de Trabajo Temporal (ETT), regulated under Ley 14/1994, is a temp agency licensed to supply workers to a client company (empresa usuaria) on a temporary basis through a contrato de puesta a disposición. ETTs require administrative authorisation from the labour authority, operate under strict sector restrictions, and are explicitly temporary by design.

An EOR is not an ETT. EOR providers do not hold ETT authorisations — nor do they need them. The EOR employs workers on ordinary employment contracts (indefinido or fixed-term per business need) and the employment relationship is not characterised as a temporary placement. Companies using EOR for indefinite-contract employees are not engaged in any activity requiring ETT authorisation.

A PEO (Professional Employer Organisation) operates under a co-employment model common in the United States, where employer obligations are split between the PEO and the client company. This co-employment structure has no legal equivalent in Spain — Spanish law recognises a single employer on the contract. EOR is the correct term for the arrangement described in this guide.

Spain's Employment Law Obligations That the EOR Handles

Spain has one of the most employee-protective labour frameworks in the European Union. For international companies unaccustomed to it, the obligations range from the obvious (pay the salary) to the surprisingly specific (14-payment structures, sector-specific working time limits, digital timekeeping records kept for four years). The EOR absorbs all of these.

Employment contracts — types, language, and the 14-payment structure

All employment contracts in Spain are governed by the Estatuto de los Trabajadores. Contracts for employment lasting more than four weeks must be in writing per Art. 8. Best practice for international hires is a bilingual contract (Spanish and English), but the Spanish version prevails in any dispute.

The 14-payment salary structure surprises many foreign employers. Spanish employees typically receive 12 regular monthly payments plus two extra pagas — one in June (summer) and one in December (Christmas). The extra pagas are statutory minimums per most convenios colectivos, though parties may agree to distribute them pro-rata across the 12 monthly payments instead. From a social security perspective, the contribution base is always calculated on the monthly equivalent of the annual gross (annual gross divided by 12), regardless of whether the pagas are paid separately or absorbed.

Since the 2021 labour reform (Real Decreto-Ley 32/2021), the default contract type for ongoing roles is the indefinite contract (contrato indefinido). Fixed-term contracts are now restricted to specific objective causes with short maximum durations. EOR providers will almost always issue indefinite contracts for continuous roles.

Source: Real Decreto Legislativo 8/2015, de 30 de octubre — Ley General de la Seguridad Social (LGSS) — Establishes Spain's social security framework including employer registration obligations with TGSS, contribution base rules, Régimen General coverage, and employer/employee co-payment structure. Last materially updated by RD-ley 3/2026 (occupational contingency table and pension revalorisation).

Social security contributions — rates, bases, and registration

Every employer in Spain must register with the Tesorería General de la Seguridad Social (TGSS) and obtain a código de cuenta de cotización. Monthly contributions are calculated against the employee's base de cotización, which corresponds to gross monthly salary (pro-rated to include the extra pagas) subject to an annual floor and ceiling. For 2026, the minimum monthly contribution base is €1,381.20 and the maximum is €5,101.20.

For indefinite contracts under the General Regime, employer contributions break down as follows: 23.60% for common contingencies (healthcare, pensions, maternity/paternity), 5.50% for unemployment, 0.60% for vocational training, and 0.20% for FOGASA (the wage guarantee fund). This totals 29.90% of the contribution base in fixed components. An additional variable rate applies for occupational accident and disease contingencies — typically around 1.50% for office-based roles, varying by activity under the table introduced by RD-ley 3/2026. Employee contributions, withheld from salary, add approximately 6.50%.

IRPF withholding — Modelo 111 and Modelo 190

Income tax (IRPF) on employment income is collected at source under Ley 35/2006. The employer — in this case the EOR — withholds IRPF from each monthly salary payment at a rate calculated based on the employee's annual gross, personal circumstances, and the relevant autonomous community rates. This withholding is declared monthly (for grandes empresas) or quarterly (for standard companies) via Modelo 111 to AEAT, and summarised annually in Modelo 190, filed in January of the following year.

The EOR files both Modelos as the legal employer and retenedor. The client company has no direct AEAT filing obligation in respect of the employee — a significant administrative simplification compared to employing directly.

Convenios colectivos — the layer that overrides statute

Collective bargaining agreements (convenios colectivos) govern most employment relationships in Spain and are sector-specific. They set minimum salaries, working hours, leave entitlements, notice periods, and probation limits that can be more generous than the Estatuto de los Trabajadores but never less. EOR providers determine the applicable CBA before drafting the employment contract. Getting this wrong — applying the wrong CBA or none at all — is one of the most common compliance failures for companies hiring in Spain without local expertise.

Working time, digital timekeeping, and the current regulatory context

Spain's maximum legal working week is 40 hours on an average annual basis, per Article 34 of the Estatuto de los Trabajadores. A government bill to reduce this to 37.5 hours without salary reduction was rejected by Congress in September 2025 and is not currently in force. Many sector convenios colectivos already set shorter working weeks — approximately 79.7% of CBA-covered workers in Spain are already contracted to between 37.5 and 39.5 hours per week. The legal floor for all employment contracts remains 40 hours absent a more favourable CBA provision.

Mandatory digital timekeeping is advancing separately via Real Decreto. Current regulations require employers to maintain a daily record of hours worked, accessible to employees, their representatives, and the Inspección de Trabajo. EOR providers handle timekeeping compliance as part of their service.

EOR vs. Your Own Spanish Entity: Which Route Is Right?

The case for or against setting up a Sociedad Limitada in Spain is not purely a legal question — it is a business question. The EOR model is a fast and compliant way to test a market or build a small distributed team. It is not the right structure for every stage of a company's Spain strategy.

What setting up a Sociedad Limitada actually requires

Incorporating a Sociedad Limitada (SL) requires a notarial deed, registration in the Mercantile Registry, tax registration with AEAT, and registration with TGSS as an employer. The process takes two to four months on average. Beyond incorporation costs, the ongoing obligations include appointing a gestoría or in-house payroll function, maintaining Spanish accounting records, filing quarterly IVA and corporate tax obligations, and managing all employer-side labour law compliance directly.

For a company that intends to hire one or two people in Spain while validating a market, this overhead is difficult to justify. Incorporation costs alone typically run from €2,000 to €10,000. Ongoing annual compliance with a gestoría adds several thousand euros per year before accounting for internal HR time.

When EOR makes more sense

EOR is structurally well-suited to three situations: speed-to-hire (the EOR can typically onboard an employee within one to two weeks, against several months for entity setup), low-certainty market entry (testing Spain with one to five employees before committing to permanent infrastructure), and regulatory complexity that would require specialist local expertise to manage in-house.

EOR service fees typically run from $199 to $800 per employee per month depending on the provider, scope of services, and whether benefits administration is included. This replaces the fixed costs of a gestoría and the compliance risk of managing Spanish employment law without local expertise.

When entity setup makes more sense

At roughly 15 to 20 employees or above, the per-employee EOR fee starts to exceed the amortised cost of running a Spanish SL with a full-service gestoría. At this scale, direct entity control also becomes operationally significant: the company wants to control IP ownership directly, build a local benefits programme, and have its own employer brand presence in the Spanish labour market.

Companies that are already operating an EOR arrangement can transition to a Spanish entity when these thresholds are reached. The employment contracts transfer to the new entity with full continuity of terms and seniority under Article 44 of the Estatuto de los Trabajadores (subrogación empresarial) — the employee's accrued rights are not reset.

A point often understated in EOR comparisons: using an EOR addresses employment law compliance. It does not automatically resolve whether the foreign parent company has a permanent establishment (PE) in Spain for corporate tax purposes. That analysis depends on the employee's functional role and the degree of authority they exercise in Spain — governed by Spain's bilateral tax treaties and the OECD Model Tax Convention, not by the employment contract structure.

How the EOR Hiring Process Works in Spain — Step by Step

The mechanics of EOR hiring in Spain follow a predictable sequence. Each step corresponds to a specific legal obligation, and the EOR handles the majority of the administrative and compliance work once the commercial relationship is established.

Pre-engagement — selecting the EOR and structuring the arrangement

Before committing, a client company should confirm that the EOR operates through a 100%-owned Spanish subsidiary — rather than through a network of intermediaries — as this determines whether the EOR can genuinely hold the employment relationship and assume direct regulatory liability with TGSS and AEAT.

The commercial agreement sets out the service scope (payroll, benefits administration, termination support), the fee structure, and data processing arrangements under GDPR. Employee personal data will be processed by the EOR's Spanish entity; the client and the EOR are typically joint data controllers or the client acts as controller with the EOR as processor.

Employee registration and salary structure design

Before the employment contract is issued, the EOR confirms the applicable convenio colectivo, determines the correct Grupo de Cotización for social security purposes, and verifies the employee's NIE (Número de Identificación de Extranjero) or NIF. Without a valid NIE/NIF, neither TGSS registration nor IRPF withholding is possible.

Key salary structure decisions include whether the two extra pagas are paid as separate June/December payments or absorbed into 12 equal monthly payments (prorrateo), whether any variable components are included, and the gross annual figure that will serve as the contribution base.

Contract drafting and signature

The EOR issues a Spanish-law compliant employment contract citing the applicable convenio colectivo. The contract must be in Spanish; bilingual versions are standard practice for international hires but the Spanish text governs any dispute. The contract must state the salary, working hours, job title, place of work, and applicable CBA.

Payroll cycle and ongoing obligations

Payroll runs monthly. The EOR processes the nómina, withholds employee IRPF and social security contributions, remits employer contributions to TGSS, and transfers net salary to the employee. Monthly timekeeping records are generated in conformity with Spain's digital register requirements.

Offboarding — notice periods and severance

For objective dismissal (Art. 53 ET), the employer must pay 20 days' salary per year of service, capped at 12 monthly payments. For unfair dismissal (Art. 56 ET), the compensation rises to 33 days per year of service worked, capped at 24 monthly payments, for contracts entered from 12 February 2012 onwards. The EOR manages the dismissal process; costs are ultimately the client company's commercial liability.

Key Scenarios: When Companies Use an EOR to Hire in Spain

The EOR model serves different business needs at different stages of market entry. Understanding which scenario fits your company's profile is as important as understanding how the mechanism works.

US, UK, or EU company testing the Spanish market with 1-3 employees

The most common EOR use case is a company with no existing presence in Spain that wants to hire one to three people — often a country manager, a sales lead, or a technical hire — to build initial market traction before committing to entity setup. The EOR model eliminates four to six months of incorporation delay and the ongoing fixed overhead of a gestoría and local legal team.

If the Spanish hire does not work out, the EOR manages the termination process. The client company avoids being named in Spanish labour tribunal proceedings directly and avoids the administrative complexity of dissolving a Spanish entity set up in haste.

Remote-first company employing distributed Spanish-based talent

Technology companies, professional services firms, and globally distributed businesses frequently use EOR to legally employ workers who have independently chosen to base themselves in Spain. The EOR provides the legal employment structure that allows the company to pay the employee in compliance with Spanish law rather than misclassifying them as a contractor.

If a worker in Spain is treated as an independent contractor but their working conditions meet the criteria for employment under the Estatuto de los Trabajadores (exclusivity, direction and control, integration into the company), the Inspección de Trabajo can reclassify the relationship. This carries retroactive social security contribution liabilities, penalties, and potential criminal exposure for the employer.

Beckham Law recipient hired through an EOR

A foreign executive or specialist who qualifies for Spain's Beckham Law (Art. 93 of Ley 35/2006, as expanded by Ley 28/2022) can be employed through an EOR. The EOR withholds IRPF at the flat 24% rate applicable under the régimen especial rather than the standard progressive scale, from the point at which the Dirección General de Tributos grants the employee's application.

For a detailed treatment of the Beckham Law and EOR interaction, see the companion article on the Beckham Law and EOR structures in Spain.

Company already using EOR and evaluating the transition to own entity

Companies that started with an EOR often reach a decision point between 15 and 30 employees. The per-employee EOR fee that was economically rational at five employees becomes a material overhead at twenty-five. The comparison shifts: a Spanish SL with a gestoría running payroll typically costs less per employee in recurring overheads, and the company gains direct control over employment contracts, benefits design, and IP provisions.

The transition is operationally feasible. The employment contracts novate from the EOR's entity to the new SL under the subrogación empresarial rules of Art. 44 ET — no break in the employee's seniority or continuity of employment rights.

When the EOR does NOT fully protect the parent company — permanent establishment risk

An EOR handles employment law compliance — it makes the EOR's Spanish subsidiary the employer of record, not the foreign client company. It does not resolve the permanent establishment (PE) question for the foreign parent company under corporate tax law.

PE analysis in Spain follows Article 5 of the OECD Model Tax Convention, interpreted through Spain's bilateral tax treaties and DGT doctrine. The November 2025 update to the OECD Commentary on Article 5 introduced a 50% working-time safe harbour: if an employee works from a Spanish domicile for less than 50% of their total working time in any 12-month period, that location is generally not considered a fixed place of business of the foreign employer. A commercial reason test applies above that threshold.

However, the November 2025 update explicitly did not change the dependent agent test — the second limb of the PE analysis. If an employee in Spain habitually exercises authority to negotiate or conclude contracts on behalf of the foreign company, the dependent agent PE test can be triggered regardless of EOR structure, regardless of the 50% threshold. A back-office software developer working remotely in Madrid carries very different PE exposure to a country sales director who closes contracts with Spanish clients.

An EOR handles employment compliance. It does not eliminate permanent establishment risk if your employee is signing contracts or acting as a dependent agent on your behalf in Spain.

— ApexTax — EOR and Hiring in Spain Guide

The Spanish Dirección General de Tributos addressed this in Consulta Vinculante V0066-22 (18 January 2022), which analysed PE risk for a UK company whose employee remained in Spain after COVID-related restrictions ended. The DGT concluded that post-pandemic, the analysis is case-by-case based on permanence, commercial purpose, and whether the employer controls the location. The November 2025 OECD update provides a clearer quantitative framework — but the fundamental analysis of employee authority remains unchanged.

The Real Cost of Hiring in Spain Through an EOR

Understanding employer cost in Spain requires distinguishing between three layers: the gross salary the employee earns, the mandatory employer-side social security contributions layered on top, and the EOR's service fee for managing the compliance infrastructure.

Employer cost breakdown for 2026

On every euro of gross salary up to €5,101.20 per month (the 2026 maximum contribution base), the employer pays 29.90% in fixed social security contributions (23.60% common contingencies, 5.50% unemployment, 0.60% vocational training, 0.20% FOGASA) plus a variable professional contingency rate typically around 1.50% for office-based roles. Salaries above the monthly cap do not attract additional fixed-component SS contributions on the excess, though a progressive solidarity contribution applies on the portion above the cap under rules introduced in 2025.

The statutory minimum wage for 2026 is €1,221 per month in 14 payments (€17,094 per year), established by Real Decreto 126/2026. This sets the floor — no employment contract can pay below this regardless of convenio or individual agreement.

Source: Real Decreto 126/2026, de 18 de febrero — Salario Mínimo Interprofesional 2026 — Fixes Spain's statutory minimum wage for 2026 at €1,221 per month (14 payments = €17,094/year), effective retroactively from 1 January 2026. Represents a 3.1% increase from 2025. Sets the floor for employment contracts and social security contribution bases.

Worked example at €40,000 gross annual salary

The contribution base for this example is €3,333/month — below the 2026 ceiling of €5,101.20, so no solidarity contribution applies. Professional contingency variable (~1.50% for office roles) adds approximately €600/year.

Source: Orden de cotización Seguridad Social 2026 / Real Decreto Legislativo 8/2015 (LGSS) — Establishes 2026 employer SS contribution rates for the General Regime: 29.90% (indefinite contracts) comprising 23.60% common contingencies, 5.50% unemployment, 0.60% vocational training, and 0.20% FOGASA. Maximum monthly contribution base: €5,101.20. Minimum base: €1,381.20. Rates update annually.

EOR service fee market range

EOR providers publish pricing in USD as the market standard. The range in 2026 runs from approximately $199 per employee per month for lower-cost providers to $699-$800 per month for full-service enterprise platforms. Spain-focused smaller providers may price in EUR and below these ranges; the market is not fully commoditised. Pricing should be compared on a total-cost basis including benefits administration, termination support, and compliance coverage — not monthly fee alone.

Hidden costs of the DIY alternative

Incorporation costs typically run €2,000 to €10,000. Ongoing gestoría fees for payroll, TGSS filing, and AEAT compliance run €300 to €800 per month depending on headcount and complexity. Mismanaging Spanish employment law carries LISOS penalties for compliance failures, retroactive SS contribution liabilities for contractor misclassification, and labour tribunal costs for procedural dismissal errors.

Common Mistakes Companies Make When Hiring Through an EOR in Spain

Most compliance problems with EOR hiring in Spain stem from assumptions — about how familiar employment structures translate to the Spanish context, and about what the EOR relationship does and does not cover.

Not identifying the applicable convenio colectivo before contracting

Every employment contract in Spain must identify the applicable CBA. Sector CBAs override statutory minimums on salary, working hours, vacation entitlement, notice periods, and probation duration. Applying the wrong CBA, or none at all, exposes both the EOR and the client to retroactive compliance adjustments and employee claims. A reputable EOR provider will confirm the applicable CBA before the contract is issued.

Treating EOR as a permanent establishment shield

An EOR addresses the employment law compliance question — it does not resolve the corporate tax PE question. Companies with employees in Spain conducting core commercial activities (negotiating with clients, concluding contracts, managing key supplier relationships) may trigger dependent agent PE exposure under Spain's bilateral tax treaties, regardless of EOR structure. This requires separate analysis.

Misclassifying workers as contractors instead of employees

The Inspección de Trabajo applies a substance-over-form analysis. If a worker is nominally a self-employed freelancer (autónomo) but works exclusively for one company under its direction, integrated into its organisational structure, the relationship will be reclassified as employment. Retroactive liabilities include back-payment of employer and employee SS contributions, IRPF regularisation, and LISOS penalties.

Failing to budget for the 14-payment salary structure

Foreign companies often budget based on the gross monthly salary agreed with the candidate, then discover that 14 payments per year — not 12 — is the statutory norm. On a €40,000 annual gross, the monthly cash flow impact of the June and December extra pagas needs to be anticipated or contractually managed through pro-rata absorption.

Not planning for redundancy provisions

Statutory severance in Spain is non-negotiable at the individual level. At 20 days per year for objective redundancy, a three-year employee earning €50,000 gross carries an indemnification liability of approximately €8,219 before legal costs. Budget for this from day one.

After the EOR: Transitioning to Your Own Spanish Entity

The decision to move from EOR to direct employment through a Spanish SL is a natural inflection point in a company's growth. Handled correctly, it is straightforward. Handled carelessly, it is disruptive.

Signals it is time to incorporate

The principal signals that EOR is no longer the optimal structure: headcount has grown beyond 15 to 20 employees and per-employee EOR fees now exceed the amortised cost of a self-operated Spanish entity; the company wants direct control over IP ownership provisions; the company is building a local brand and employer identity in Spain; or the PE risk analysis has concluded that a deliberate Spanish taxable presence (through an SL) is preferable to operating through an EOR while PE questions remain unresolved.

Steps in the transition

The transition involves several parallel workstreams: incorporating the SL (two to four months), registering as employer with TGSS, engaging a gestoría for ongoing payroll and compliance, and planning the novation of employment contracts from the EOR's entity to the new SL.

Under Article 44 of the Estatuto de los Trabajadores (subrogación empresarial), when an employment relationship transfers from one employer to another, all existing rights and conditions are preserved — salary, seniority, CBA entitlements, and accrued holiday. The EOR cannot reset these, and the new entity should not attempt to do so.

Employment continuity rules

The employee must be notified in writing in advance of the transfer. The Inspección de Trabajo monitors this process. A labour lawyer should review the transfer documentation before it is signed.

How ApexTax Helps You Choose the Right EOR for Spain

ApexTax works as a Tax Strategy Consultancy and Cross-Border Relocation Strategist for internationally mobile professionals and international companies entering the Spanish market. For companies evaluating EOR in Spain, ApexTax acts as a Single Point of Contact: mapping the client's headcount profile and hiring timeline against the relevant legal obligations, identifying the applicable convenio colectivo, assessing the PE risk posture of the intended roles, and coordinating access to vetted EOR providers that match the client's operational and compliance requirements.

ApexTax does not act as an EOR, does not employ workers, does not sign employment contracts, and does not file payroll declarations with TGSS or AEAT. Implementation of employment contracts and payroll obligations is delivered by the EOR provider — an independent qualified operator selected and coordinated by ApexTax. Where formal Spanish employment law advice is needed, ApexTax coordinates qualified Spanish labour lawyers from its professional network.