Hire Contractors in Spain

“Self-employment” refers to individuals who work for themselves as freelancers or contractors in Spain, rather than being employed by a company. 

In Spain, more than three million people are registered in this category across Iberian countries.

Among its various types, employers have more significant financial control over economically dependent self-employed workers or TRADE. 

It also comes at a lower cost than traditional employees. 

Thus, the platform is set for global companies to hire contractors in Spain to meet their business requirements. 

Here, you can utilize Agent of Record (AOR) solutions in the form of contractor management software to simplify hiring and managing processes. 

We have ensured this guide delivers the intricacies of hiring contractors in Spain, from the hiring process and challenges involved to the drawbacks of hiring directly and converting contractors into full-time employees in Spain.

How to Hire Contractors in Spain

The legal landscape allows you to hire contractors in Spain with minimum compliance. 

Here's a general overview of the process:

1. Set up a local business presence through any acceptable legal entity in Spain: sole trader, partnership, limited liability company, public limited company, new enterprise limited company, or corporation.
2. Ensure the degree of work control and economic dependence of the individual contractor in Spain to avoid misclassification penalties.
3. Draft a comprehensive agreement per contract laws in Spain that outlines the following: 

• Details about the project scope, payment terms, intellectual property rights, termination clauses, and dispute resolution mechanisms.
• Determine the payment method (hourly, project-based, or milestone-based).
• Establish clear invoicing procedures and payment terms.

4. Set up a payroll system for statutory social security deductions to cover work accidents and professional disease, especially for TRADE contractor types.  
5. Further, compliance with data protection regulations (GDPR) must be ensured if the contractor handles personal data.

Alternatively, new-age companies prefer hiring contractors globally through Agent of Record (AOR) services for convenience and flexibility. 

Hiring contractors through Skuad AOR

Skuad’s AOR services simplify international contractor management in Spain, from hiring to onboarding, payroll, and labor law compliance. 

• You can protect your business from the potential legal and financial risks of hiring contractors in Spain. 
• You can safeguard intellectual property rights when working with global contractors. 
• You can convert your loyal contractors to full-time employees, all without setting up a local entity. 

How to pay contractors in Spain

You can consider these options to pay contractors in Spain:

1. If you have a significant presence in Spain, set up a local payroll function. 
2. To make timely payments to your contractors in Spain, you can use direct bank transfers or digital wallets like PayPal and Wise. 
3. You can offer a variety of payment terms for your contractors:some text
   1. Prepayment: You pay upfront before work begins.
   2. Payment upon Delivery: You pay after the work or product is delivered.
   3. Line of Credit: You release funds to the contractor as needed within a credit limit.
   4. Net Terms (Net 10, Net 30, Net 60): You release payments within a specific timeframe.
   5. End of Month: You make payments for services rendered at the end of the month.
4. However, contractor laws in Spain require record-keeping and understanding of statutory benefits administration for economic-dependent contractors. 
5. Moreover, managing payroll becomes complex when employing multiple contractors in Spain. 
6. Thus, you need a specialized service like AOR to handle all aspects of contractor payroll, including taxes and benefits, providing a comprehensive solution.

Challenges of Hiring Contractors in Spain

The most prominent challenges of hiring contractors in Spain include:

1) Classification of independent contractors in Spain

The Spanish legal system recognizes various categories of self-employed workers, each with its own set of rights and obligations:

• Economically Dependent Self-Employed Workers (TRADE): Even though an independent contractor in Spain maintains a high degree of dependence on a single client. 
• Leased or seconded work: Unlike employees, independent contractors in Spain can hire their staff to fulfill a task for the client. Such subcontracting jobs may be subject to fewer protections under contractor laws in Spain, such as participation in union activities. 
• Other independent contractors: They are regular contractors in Spain, enjoying a higher degree of control over their work schedule and tax obligations. However, they are not entitled to statutory labor rights and protections. 

Such blurred lines between employment and self-employment and failing to recognize them while hiring contractors in Spain can lead to legal disputes, including penalties for misclassification.  

2) Leased or seconded employees

• Employers might be tempted to use leased employees instead of hiring contractors to avoid the complexities associated with managing independent workers. 
• This can limit the availability of skilled contractors, making it more difficult for companies to find and hire contractors in Spain.
• Additionally, it can increase administrative burdens and costs associated with managing contractors in Spain.

3) ‘False freelancer’ policy in Spain

• The contractor laws in Spain passed a new "false freelancing" policy to determine the degree of control employers have over independent contractors to protect workers’ rights and ensure fair competition.
• Employers must understand the legal framework and carefully assess the worker status for payroll obligations and benefits administration.
• Otherwise, you could face penalties and reputational damage.

Therefore, global companies expanding in Spain choose contractor management software like Skuad to overcome hiring challenges. 

Using Skuad AOR solutions, you can classify and onboard contractors, automate contractor payments, and compliantly manage contractual requirements.

Hiring Contractors Directly vs Hiring Contractors via Skuad

Here’s an impact comparison table between directly hiring contractors and hiring contractors via Skuad. Further, you can utilize this checklist to significantly reduce the risks of hiring contractors in Spain. 

Cost of Hiring Contractors in Spain

The minimum wage in Spain for employees is €1,134.00 per month. 

You can utilize it as a benchmark to set contractor fees. However, the fees must increase based on contractor experience, skill set, industry, and project complexity.

Other miscellaneous costs of hiring contractors include contract negotiation, drafting, and communication and collaboration tools.

How to Convert a Contractor into an Employee in Spain

There are two primary ways to convert your independent contractor in Spain to a full-time employee, similar to the IRS obligations (for the US companies only): 

1. Establishing a legal entity

• Choose a suitable legal structure and complete the necessary registration process.
• If the contractor in Spain is a foreign national, you must sponsor their employee visa to obtain a suitable work permit followed by a residence permit.
• Draft a new comprehensive employment contract outlining terms and conditions, salary, benefits, and termination procedures. Moreover, it signifies a high degree of control over the work schedule. 
• Register the employees with the Spanish social security system and comply with tax obligations.

2. Utilizing an Employer of Record (EOR)

• Partnering with an EOR specializing in Spain employment laws is the easiest way to handle contractor-to-employee status conversion. 
• The EOR will handle the onboarding process, including contracts, payroll, and benefits. 

Hire Contractors in Spain with Skuad

Skuad offers a ready-built platform for contractor management in over 160 countries, including Spain. You are not required to set up local business entities to hire contractors in Spain. 

As your Agent of Record (AOR), Skuad can help you hire, pay, and manage contractors in Spain. It handles contractor onboarding, payroll, IP protection, record-keeping, contract management, and tax compliance so that you can focus on your core competencies.

Skuad ensures adherence to local labor laws, reducing the risk of misclassification and other legal issues. 

Request a demo and explore how you can mitigate risks associated with employing global contractors.

FAQs

1) Can I hire an independent contractor in Spain?

Yes, you can hire an independent contractor in Spain. You can do so in two ways. First, contractors should be hired directly by establishing a legal entity in Spain. Second, simply partner with an AOR provider like Skuad to automate hiring, onboarding, paying, and managing. 

2) How do I pay an independent contractor in Spain?

You can pay independent contractors in Spain online via direct bank transfer or digital wallets like PayPal and Wise. Moreover, handling multiple contractors in Spain with a global payroll solution like Skuad helps you in record-keeping and compliance. 

3) How does Skuad help hire, pay, and manage independent contractors in Spain?

Skuad is an AOR (agent of record) solution that handles contractor onboarding, payments, IP protection, record-keeping, contract management, and tax compliance. You can start hiring contractors in Spain without setting up a local entity. 

4) How do I employ someone in Spain?

You can employ someone in Spain or convert contractors to employees in two ways. First, establish your business entity in Spain, draft an employment contract, and register your employees for social security and tax compliance. Second, you can avoid the administrative burden by partnering with an Employer of Record (EOR) solution to hire someone and manage compliance in Spain for you. 

5) What are the contractor taxes in Spain?

Contractors in Spain are self-employed individuals and subject to progressive personal income tax ranging between 19%- 47% on the gross income.