Employer of Record in Spain 2026 — how to hire Spanish employees without setting up a company

The Employer of Record (EOR) has quietly become the default solution for foreign companies making their first hire in Spain. A UK fintech wanting a sales director in Madrid, a US software company adding a developer in Barcelona, a German manufacturer hiring a technical consultant in Bilbao — all of them face the same problem: they need a Spanish employee, compliantly hired, within weeks. They do not (yet) want to incorporate a Spanish company.

That is exactly the gap the EOR fills. And in 2025-2026, with remote work making cross-border hiring routine and Spain’s talent pool increasingly attractive to international employers, the volume of EOR arrangements in Spain has grown substantially.

This guide explains how EOR works under Spanish law, the compliance obligations it must satisfy, when it makes more sense than incorporating a Sociedad Limitada, and the one critical risk — permanent establishment — that every EOR structure in Spain must address explicitly.

What is an Employer of Record and how does it work in Spain?

An Employer of Record is a contractual structure, not a specific Spanish legal category. No Spanish statute uses the term “Employer of Record” — what exists are the underlying legal mechanisms: the employment contract, Social Security registration, the rules on employee secondment, and the regulatory framework for inter-company service provision.

The EOR operates through a three-party structure:

1. The client company (the foreign company): directs the employee’s work, sets performance expectations, and pays the EOR provider for its services.
2. The EOR provider (an established Spanish entity): is the formal employer in all legal respects. Signs the employment contract with the employee, registers them with Social Security, runs monthly payroll, withholds income tax, and bears all legal obligations of an employer under Spanish law.
3. The employee: works for and under the direction of the client company, but their legal employer is the EOR provider.

The relationship between the client company and the EOR provider is governed by a services agreement that specifies: (a) the employee’s employment conditions (salary, job title, applicable collective agreement); (b) the EOR management fee; (c) intellectual property ownership of work produced by the employee; (d) confidentiality obligations; and (e) the procedure for terminating both the services agreement and the underlying employment contract.

What the EOR is not

An EOR is not a temporary employment agency (ETT) — a regulated category under Spanish Law 14/1994 with specific restrictions on when and for how long workers can be placed. ETTs can only supply temporary workers in defined circumstances; EOR providers operate under a different legal model and are not subject to ETT restrictions.

An EOR is also not an illegal labour intermediary under Article 43 of the Estatuto de los Trabajadores, provided the EOR provider has genuine business activity beyond the mere supply of labour and the arrangement is properly documented. A well-structured EOR that is transparent about its three-party nature and compliant with all employment obligations is entirely lawful under Spanish law.

The Spanish legal framework: Estatuto de los Trabajadores and Social Security

There is no EOR-specific legislation in Spain. The EOR provider operates under the same legal framework as any Spanish employer.

Estatuto de los Trabajadores (Royal Legislative Decree 2/2015)

The Estatuto de los Trabajadores (BOE-A-2015-11430) is the foundational statute of Spanish employment law. It governs:

• Employment contracts: form, types (indefinite, fixed-term, part-time, training), and the circumstances in which each type may be used.
• Probationary period: typically 2 months for most workers, 6 months for technical and managerial staff, subject to collective agreement.
• Maximum working week: 40 hours of effective work averaged over the calendar year, with daily rest minimums and overtime rules.
• Annual leave: minimum 30 calendar days per year, typically extended by sector collective agreements.
• Minimum salary: the higher of the Salario Mínimo Interprofesional (SMI) and the sector collective agreement minimum for the relevant job grade.
• Bonuses (pagas extraordinarias): minimum two per year (typically summer and Christmas), with amount determined by collective agreement.
• Dismissal procedures: disciplinary, objective, and collective redundancy procedures with specific notice requirements, documentation standards, and severance calculations.

Every EOR employment contract in Spain must comply with all of these provisions — without exception.

Social Security contributions (Ley General de la Seguridad Social)

The LGSS (Royal Legislative Decree 8/2015) governs mandatory Social Security contributions. For 2026, employer contributions approximate the following (verify exact rates against current TGSS contribution order before quoting):

• Common contingencies (sickness, maternity, disability, retirement): ~23.60% of gross salary
• Unemployment (indefinite contract): ~5.50%
• Wages Guarantee Fund (FOGASA): ~0.20%
• Vocational Training: ~0.60%
• Intergenerational Equity Mechanism (MEI): ~0.58%
• Workplace accidents and occupational disease: variable by sector code

The total employer contribution approximates 33-34% of gross salary for most professional categories in 2026. This means that for every EUR 1,000 of monthly gross salary, the employer bears approximately EUR 330-340 in additional Social Security costs.

Collective bargaining agreements (convenios colectivos)

Spain’s collective bargaining system is one of the most sector-layered in Europe. Sector collective agreements (convenios colectivos sectoriales) set minimum salaries by job grade, overtime rates, additional leave, and specific termination conditions that often exceed the Estatuto de los Trabajadores minimums.

The applicable collective agreement is determined by the economic activity code (CNAE) of the employing entity and the geographical scope of the agreement (national, regional, or provincial). For EOR arrangements, the critical — and frequently misunderstood — point is that the applicable agreement tracks the nature of the employee’s work for the client company, not the EOR provider’s own sector. BMC identifies the correct collective agreement as the first step in any EOR engagement.

EOR versus incorporating a Spanish SL: the full comparison

The decision between EOR and direct incorporation is driven by a combination of speed, headcount, duration of Spanish operations, and commercial complexity. Here is how the two options compare across the factors that matter most:

EOR is the right choice when:

• You are hiring 1 person to validate whether Spain is a viable market.
• Your timeline is weeks, not months.
• You have fewer than 8-10 employees planned and the SL overhead is not justified.
• You genuinely haven’t decided whether Spain will be a permanent market for you.
• The employee’s role is clearly an auxiliary or preparatory function that does not create PE.

A Spanish SL is the right choice when:

• You plan to hire more than 8-10 employees in Spain.
• You need to issue Spanish VAT invoices to Spanish clients systematically.
• The employee will be signing contracts or making commercial commitments on behalf of the company.
• You want to grant equity or share options in a Spanish entity.
• Spain is already a confirmed, permanent market for the business.

Permanent establishment: the risk every EOR structure must address

Permanent establishment (PE) is the concept that causes the most costly surprises for foreign companies using EOR in Spain. It is a tax concept, not an employment concept — and the EOR structure does not affect it.

Under Article 13 of Spain’s Non-Resident Income Tax Law (LIRNR) and the corresponding articles of Spain’s double tax treaties (modelled on the OECD Model Convention), PE is created when a foreign company has a fixed place of business in Spain through which it wholly or partially carries on its business. The most relevant triggers for EOR arrangements are:

Agency PE: If the employee has and habitually exercises authority to conclude contracts in the name of the foreign company (signing proposals, accepting orders, committing the company to commercial terms), this creates an agency PE — even if the employee works from home on an EOR contract.

Fixed place of business PE: If the employee works from a dedicated office, showroom or facility in Spain that is at the disposal of the foreign company (even if leased in the EOR provider’s name), this may constitute a fixed place of business PE.

What does NOT create PE: Employees performing auxiliary or preparatory activities — market research, gathering information, technical support, software development, account management without contracting authority — generally do not create PE. The line requires careful analysis case by case.

The consequences of unmanaged PE are severe: the Spanish tax authorities (AEAT) can demand non-resident income tax (IRNR) on profits attributable to the Spanish PE, plus penalties and compound interest. In some cases, the statute of limitations for tax claims can extend to four years, creating significant retroactive exposure.

BMC conducts a PE risk assessment as the first step in any EOR engagement. In most cases, the solution is a contractual restriction on the employee’s authority (no power to sign contracts on behalf of the foreign company) combined with clear documentation of the employee’s role as auxiliary or preparatory.

Step-by-step: hiring an employee in Spain via EOR

Step 1: PE risk and structure analysis

Define clearly: what will the employee do, what decisions will they make, will they sign any documents on behalf of the company, and will they have a dedicated physical space in Spain? BMC maps these facts against the PE tests and recommends whether EOR is safe or whether PE needs to be actively managed through contractual restriction and role definition.

Step 2: Identify the applicable collective agreement and employment cost

The collective agreement determines the minimum gross salary for the employee’s job grade and function. BMC identifies the correct agreement, calculates the minimum salary for the role, models the total employment cost (gross salary + 33-34% Social Security contributions), and provides a comparative cost model against a Spanish SL scenario.

Step 3: Draft and sign the EOR services agreement and employment contract

The EOR services agreement is signed between the client company and the EOR provider, documenting the employee’s conditions, the IP and confidentiality framework, and the termination procedure. The employment contract is signed between the EOR provider and the employee, in the legally required form and language (Spanish, with an English translation provided to the employee as a courtesy document).

Step 4: Social Security registration — before day one

The employee must be registered with the TGSS no later than the day before their first day of work. BMC completes this registration in advance of the start date, using the EOR provider’s Employer Account Code (Código de Cuenta de Cotización — CCC).

Step 5: First payroll and IRPF configuration

The first month is the most documentation-intensive. The employee must submit Form 145 (personal tax circumstances declaration) to enable correct IRPF withholding. BMC configures the payroll, verifies the collective agreement pay grade, processes the first nómina, and provides the client company with the total monthly invoice (employment cost + EOR fee).

Step 6: Ongoing management and compliance

Monthly payroll, quarterly IRPF returns, annual Social Security reconciliation, collective agreement salary updates, sick leave management, occupational health documentation. BMC manages all of this and provides the client company with a monthly summary of employment costs and any incidences.

Common mistakes foreign companies make when hiring in Spain

1. Misclassifying employees as self-employed contractors. The Spanish Labour Inspectorate uses objective tests — economic dependence, integration into the client’s organisation, use of client’s tools and systems, exclusive or near-exclusive client relationship — to identify false self-employment. The consequences of reclassification (retroactive Social Security contributions, penalties, and a deemed employment termination claim) are consistently more expensive than compliant employment from day one.

2. Not applying the correct collective agreement. Paying only the SMI (Salario Mínimo Interprofesional) when the sector collective agreement sets a minimum salary 40-60% higher for the relevant job grade is a frequent and costly error. Retroactive salary claims can cover up to one year before the claim date plus interest.

3. Terminating employment without following the correct legal procedure. Sending an email saying “we no longer need your services” is not a valid dismissal in Spain. A procedurally defective dismissal is automatically classified as unfair, triggering the maximum severance payment (33-45 days per year of service depending on period) plus salarios de tramitación (salary during the proceedings period).

4. Assuming the EOR eliminates PE risk. As detailed above, PE is a tax question that exists regardless of the employment structure.

5. Late Social Security registration. Registering the employee on their second or third day of work (or waiting until the payroll is processed) is a sanctionable infringement that also creates complications if a workplace accident occurs before registration.

6. Not managing the transition to a Spanish SL properly. When a company moves from EOR to its own Spanish SL, the employment contracts should be transferred under Article 44 ET (business succession), not terminated and re-offered. Incorrect handling creates an unjustified severance liability.

How BMC delivers EOR services in Spain

BMC has 19 years of experience advising foreign companies — British, American, German, French, Dutch, and Nordic — on their entry into the Spanish market. Our EOR service covers:

Structuring:

• PE risk assessment before any hire is made.
• Collective agreement identification and total employment cost modelling.
• EOR services agreement and employment contract design.

Activation:

• Social Security registration before day one.
• First payroll configuration with IRPF calculation.
• Occupational health (PRL) compliance setup.

Ongoing management:

• Monthly payroll and payslip delivery (bilingual if needed).
• IRPF and Social Security filings.
• Collective agreement salary review monitoring.
• Sick leave, maternity/paternity leave, and workplace accident management.

Termination and transition:

• Dismissal procedure advice and risk assessment.
• Article 44 business succession management for EOR-to-SL transitions.
• Final settlement calculation and documentation.

For an initial assessment of your EOR requirements in Spain, contact BMC’s employment law team.

Legal references:

• Estatuto de los Trabajadores (RDL 2/2015) — Spanish Employment Act
• Ley General de la Seguridad Social (RDL 8/2015) — Social Security Act
• LIRNR (RDL 5/2004) — Non-Resident Income Tax (PE framework)
• Ley de Prevención de Riesgos Laborales (L 31/1995) — Occupational Health and Safety

Related guides:

• EOR en España — guía en español (ES)
• Incorporating a Spanish SL: complete guide 2026
• Permanent establishment in Spain: tax risk for foreign companies
• Spain as a location for European headquarters: tax and legal considerations