What Is an Employer of Record?
An employer of record (EOR) is an entity that assumes the status of legal employer of a worker before the authorities of a given country, managing the employment contract, social security registration, payroll, tax withholding and compliance with local employment law. At the same time, the worker carries out their functions for a different client company, typically located in another country.
In the context of international relocations to Spain, the EOR allows a foreign company — with no subsidiary or any other corporate presence in the country — to employ a worker under Spanish employment law and comply with all the obligations that entails, without incorporating a Spanish entity.
The EOR’s Role in a Beckham Law Relocation
When a foreign company wishes to relocate one of its employees to Spain and enable them to access the special impatriate regime (Beckham Law), it faces a prior structural decision: how to arrange the employment relationship in Spain?
The main options are:
- Spanish subsidiary (SL): the company incorporates an entity in Spain. Maximum control, but time and cost of incorporation.
- EOR: the company engages an EOR provider who employs the worker in Spain. More agile, no structural investment.
- Non-established employer registered with the TGSS: the foreign company registers directly as an employer with Spanish Social Security. Possible, but administratively complex for companies without a local presence.
The EOR is the most agile solution when the company does not plan a permanent deployment in Spain, or when it wants to accelerate the relocation process without waiting for the timelines of subsidiary incorporation.
From the perspective of the international remote worker, the EOR provides a valid employment contract under Spanish law, registration with Spanish Social Security and the protection of Spanish employment legislation — all while maintaining the functional relationship with the foreign company. This facilitates the Beckham regime application via Form Modelo 149 within the six-month window from social security registration.
Social Security: The EOR as Solution to the Non-Established Employer Problem
One of the most complex aspects of relocating an employee to Spain is the social security contribution obligation. EU Regulation 883/2004 establishes that the worker contributes where they physically perform their activity: if they work from Spain, they contribute in Spain.
For the foreign company, this creates a practical challenge: how to fulfil Spanish employer social security contribution obligations without having a Spanish entity? The alternatives are to register as a non-established employer with the TGSS (with the attendant administrative complexity) or to engage an EOR that manages those obligations as the formal employer.
The EOR, in this context, assumes the role of formal employer for all employment and social security purposes in Spain: it is the employer of record with the TGSS, issues the payroll, withholds income tax (or IRNR during the Beckham period) and complies with Spanish employment law.
The EOR and the Permanent Establishment Risk
One of the advantages commonly attributed to the EOR is that it reduces the risk of the foreign company creating a permanent establishment in Spain. To the extent that the EOR acts as an independent employer, the worker’s presence in Spain is not directly attributed to the foreign company as a fixed place of business.
However, this protection is neither automatic nor absolute. If the employee acts in Spain with authority to conclude contracts on behalf of the foreign company, or if the economic reality shows that the foreign company effectively directs and controls operations in Spain, the AEAT may conclude that a dependent agent PE exists, regardless of the EOR structure. The analysis must be conducted on the actual facts, not just on the contractual arrangements.
Limitations of the EOR Model
The EOR is a flexible tool, but it has limits:
- Not suitable for large-scale, permanent presences. If the company is going to have numerous employees in Spain for many years, a subsidiary is usually more cost-efficient and affords greater control.
- Does not eliminate all PE risks. As noted above, the risk depends on the employee’s actual functions.
- Does not replace individual tax advice. Beckham Law eligibility depends on the specific circumstances of the worker and how the structure is documented.
- Less employment flexibility. The EOR manages the contract under Spanish employment law, which includes collective bargaining obligations, grounds for dismissal and termination costs inherent to the Spanish legal system.
How BMC Can Help
An EOR is one piece of a broader structure that includes analysis of Beckham Law eligibility, social security implications, permanent establishment risk and planning for the post-year-six cliff when the regime ends and the individual moves to the general IRPF regime. Our international remote work and intracompany transfer teams co-ordinate each relocation from the design phase through to ongoing management, working alongside the client’s preferred EOR providers or recommending the most suitable ones for the specific operation.