Expanding your business into Spain can be exciting, offering access to a large market, a skilled workforce, and a vibrant economy. However, navigating the complexities of Spanish labour laws, tax regulations, and employment practices can be challenging, especially for companies unfamiliar with the local landscape.
This is where an Employer of Record (EOR) can play a crucial role. By partnering with an EOR, businesses can reduce risks and simplify the hiring process, allowing them to focus on growth and operational success. This article will explore how an EOR can help streamline your expansion into Spain, mitigate risks, and facilitate a smooth hiring process.

Understanding the Employer of Record (EOR) model

An Employer of Record (EOR) is a third-party organisation that takes on the legal responsibilities of employing staff on behalf of another company. The EOR becomes the official employer for legal and tax purposes, while the client company maintains control over the employees’ day-to-day activities and work responsibilities.
This arrangement allows businesses to enter new markets without setting up a legal entity, handling payroll, managing tax compliance, or dealing directly with local employment laws.
In Spain, an EOR can manage the country’s labour regulations’ complexities, including specific requirements for employment contracts, social security contributions, and employee benefits.
The EOR assumes responsibility for these aspects, ensuring compliance with local laws and reducing the client company’s administrative burden.

Streamlining talent selection and employment setup with an EOR

When expanding into Spain, one of the key aspects of the hiring process is the selection of talent. The company retains full control over this crucial step, whether it involves choosing employees from their headquarters to relocate to Spain, hiring local Spanish talent to spearhead the launch of the new market, or bringing on board individuals who are neither Spanish nor from the company’s home country. This flexibility allows businesses to build the exact team they need to ensure success in the Spanish market.

Once the company has selected the desired talent, the Employer of Record (EOR) takes over the next critical phase: setting up the employment contract. This process includes drafting contracts that comply with Spanish labour laws and addressing specific needs, such as establishing working visas for non-EU employees. 

The EOR handles all the legal and administrative requirements, ensuring that both the company and the employees are fully compliant with local regulations. This seamless integration of selected talent into the Spanish market allows businesses to focus on their growth strategies while leaving the complexities of employment logistics to the EOR.

Benefits of using an EOR in Spain

1. Navigating complex labour laws

Spain has a well-defined labour market with specific laws governing employment contracts, working hours, minimum wages, and employee rights. These laws can vary depending on the type of contract, industry, and regional regulations.
An EOR has the expertise to navigate these complexities, ensuring your company complies with all relevant laws. This includes drafting compliant employment contracts, managing work permits, and understanding collective bargaining agreements, which are common in many Spanish industries.

2. Simplifying payroll and tax compliance

Managing payroll and tax compliance is one of the most significant challenges of operating in a foreign country. Spain has a progressive tax system, with varying rates based on income levels. Additionally, employers must make social security contributions covering healthcare, unemployment, and pension benefits.
An EOR handles all aspects of payroll, including calculating salaries, withholding taxes, and making the necessary contributions to social security. This ensures compliance with local laws and reduces the risk of errors that could result in penalties or fines.

3. Reducing employment risks

Hiring employees in a new market involves inherent risks, including potential legal disputes, misunderstandings of local laws, and the complexities of managing a diverse workforce. An EOR helps mitigate these risks by providing local expertise and handling all legal employment responsibilities.
This includes managing employment contracts, terminations, and any legal disputes that may arise. By assuming these responsibilities, the EOR reduces the risk of costly legal issues and provides peace of mind for the client company.

4. Faster market entry

Setting up a legal entity in Spain can be time-consuming and complex, involving registration with local authorities, obtaining permits, and navigating bureaucratic requirements. By partnering with an EOR, businesses can bypass these hurdles and enter the market more quickly.
The EOR already has the necessary infrastructure and legal framework, allowing for a swift and smooth transition. This speed is advantageous for companies looking to capitalise on market opportunities or quickly establish a presence in Spain.

5. Flexible workforce management

An EOR provides flexibility in workforce management, allowing companies to scale up or down based on their business needs.
Whether hiring full-time employees, contractors, or temporary staff, the EOR can manage the varying employment arrangements and ensure compliance with local laws. This flexibility is precious in industries with fluctuating demand or during project-based work, where the workforce size may need to adjust quickly.

The EOR hiring process in Spain

The hiring process with an EOR in Spain typically involves several key steps, each designed to ensure compliance with local regulations and smooth employee onboarding.

1. Needs assessment and consultation: The process begins with a consultation between the client company and the EOR to assess the specific needs and requirements for hiring in Spain. This includes discussing the type of roles to be filled, the number of employees, and the desired timeline.

2. Employment contract preparation: The EOR prepares employment contracts in compliance with Spanish labour laws. These contracts outline the terms and conditions of employment, including salary, benefits, working hours, and termination clauses. The EOR ensures that the contracts are legally sound and protect the interests of both the employer and the employee.

3. Payroll and benefits setup: The EOR sets up payroll systems to manage salary payments, tax withholdings, and social security contributions. They also administer employee benefits, such as health insurance and retirement plans, by Spanish regulations.

4. Employee onboarding: The EOR handles the onboarding process, which includes collecting necessary documentation, setting up work permits (if applicable), and providing training on company policies and local employment laws. This ensures that new hires are fully integrated and informed about their rights and responsibilities.

5. Ongoing management and support: The EOR provides ongoing support, including payroll processing, compliance monitoring, and HR support. They handle any issues that arise, such as contract amendments, employee disputes, or terminations, ensuring that the client company remains compliant with local laws.

6. Regular reporting and communication: The EOR reports on payroll, tax compliance, and other relevant metrics. They maintain open communication with the client company, addressing any concerns and providing updates on changes in local laws or regulations.

Start reducing risks & simplify hiring in Spain

Expanding into Spain offers significant business opportunities, but it also comes with challenges, particularly in navigating the country’s complex labour laws and compliance requirements. A specialised Employer of Record in Spain can be a valuable partner in this process, providing expertise, reducing risks, and simplifying the hiring process. 

If you’re considering expanding your business into Spain and want to reduce risks while simplifying the hiring process, don’t hesitate to contact the experts. Contact Spanish Employer of Record today to discuss how they can support your expansion and help you navigate the complexities of the Spanish market.