An Employer of Record (EOR) is a company that becomes the legal employer of record for your team in a foreign country — handling payroll, employment contracts, and statutory compliance — while the client company retains day-to-day operational direction. In Spain, there are three ways to establish the legal basis to hire: using an EOR, constituting a Sociedad Limitada (SL), or registering a branch (sucursal).
What Is an EOR — and What Is a Spanish Legal Entity?
How an EOR works in Spain
The EOR holds the formal employment relationship with your Spanish-based workers, files payroll taxes, pays employer social security contributions to the Tesorería General de la Seguridad Social (TGSS), and ensures the employment contract complies with Spain's Estatuto de los Trabajadores. Your business retains day-to-day direction — setting objectives, managing output, running performance reviews — but the EOR is the employer of record in the eyes of Spanish law.
The EOR model is particularly common for companies that want to hire in Spain quickly, without the time and cost of constituting a Spanish legal entity.
One structural requirement is frequently misunderstood: in Spain, the EOR must be a genuine employer with a real Spanish legal entity, proper organisational structure, and active employer responsibilities. Arrangements that simply redirect workers to a client company without the EOR exercising genuine employer functions risk classification as cesión ilegal de trabajadores — prohibited labour assignment under Art. 43 of the Estatuto de los Trabajadores.
In Spain, an EOR must be a genuine employer with its own organisational structure. If the client exercises all employer functions, the arrangement risks reclassification as cesión ilegal under ET Art. 43 — exposing both parties to joint liability and criminal penalties.
Source: Real Decreto Legislativo 2/2015, Estatuto de los Trabajadores, Art. 43
Spanish entity options: SL, SA, and sucursal
There are three main ways for a foreign company to establish a legal presence in Spain for employment purposes.
The Sociedad Limitada (SL) is the standard choice for foreign companies hiring a team in Spain. It is Spain's equivalent of a private limited company, constitutable with minimum capital of just €1 since Ley 18/2022, de 28 de septiembre (Ley Crea y Crece, Art. 1, modifying Art. 4 of the Ley de Sociedades de Capital). Companies with capital below €3,000 must allocate at least 20% of annual profits to a legal reserve until the combined capital and reserves reach €3,000, and shareholders bear solidarity liability up to that amount if the company is wound up with insufficient assets.
The Sociedad Anónima (SA) requires minimum capital of €60,000 and is typically reserved for larger enterprises or those planning to list shares publicly. Most international companies hiring a team of five to twenty employees in Spain have no reason to use this structure.
The sucursal (branch office) is an extension of the foreign parent company, with no separate legal personality. The parent bears full liability for the branch's obligations. Branches are occasionally used in regulated sectors, but they rarely represent the most practical structure for companies primarily seeking to hire employees.
Side-by-Side: EOR vs SL vs Sucursal in Spain
The three routes are not simply different speeds of the same journey — they represent different levels of commitment, cost structure, and legal exposure. Here is how they compare across the factors that matter most when a foreign company is deciding how to hire in Spain.
| Factor | EOR | SL (Sociedad Limitada) | Sucursal (Branch Office) |
|---|---|---|---|
| Setup time | 2–5 business days | 2–4 weeks (standard) / 48h–10 days (CIRCE with standard statutes) | 3–6 weeks (Registro Mercantil filing) |
| Setup cost | €0 capital; EOR monthly fee above salary and social security | €1–€3,000 capital + €600–€3,000 constitution costs | No capital requirement; notarial and registration costs approximately €1,500–€3,000 |
| Ongoing admin | Minimal — EOR manages payroll, TGSS, and employment law compliance | Full Spanish accounting, Impuesto sobre Sociedades filing (Modelo 200), quarterly IVA and IRPF returns | Full IS filing; parent company bears all liability; transfer pricing documentation typically required |
| Permanent Establishment risk | Reduced when properly structured; dependent-agent PE possible if employee signs contracts on behalf of the foreign company | Eliminated for employment purposes; own IS liability on Spanish profits | Creates PE by definition in most cases; parent company subject to IS on attributed profits |
| Scalability | High per-head cost; optimal for 1–4 employees | Cost-efficient from 3–5+ employees; full operational control | Limited — rarely the right choice for ongoing headcount growth |
| Legal control | Client directs work; EOR is employer of record | Full employer control | Full control; parent company fully liable for all obligations |
| Best for | Market testing; 1–3 employees; speed to hire | 3+ employees; long-term Spain presence; commercial activity | Rare — regulated sector requirements or specific project structures |
The sucursal is worth noting specifically: because a branch has no separate legal personality, the parent company is fully exposed to Spanish labour law, tax authority claims, and creditor actions. For companies planning to hire employees on an ongoing basis, this exposure makes the SL — or an EOR — the more practical structure in almost every case.
The Real Numbers: What Each Option Costs
Understanding the cost difference between EOR and SL requires looking at both one-off setup costs and the ongoing per-employee and compliance overhead.
EOR cost structure
When you use an EOR to hire in Spain, the EOR pays all mandatory employer-side costs — employer social security contributions, any applicable employment law obligations, statutory benefits — and passes them through to you plus a service margin.
Spanish employer social security contributions under the Régimen General in 2026, per Orden PJC/297/2026, de 30 de marzo, break down as follows: 23,60% of the cotisation base for contingencias comunes (employer portion), plus 5,50% for unemployment (indefinite contracts), 0,75% for the Mecanismo de Equidad Intergeneracional, 0,20% for FOGASA, and 0,60% for vocational training. That amounts to approximately 30,65% before AT/EP (accidentes de trabajo y enfermedades profesionales), which varies by CNAE sector but typically adds 1,5–2,5% for office-based professional activities. The total employer cost is typically 30–33% above the gross salary, depending on sector classification.
On top of this, the EOR adds a service margin. Based on publicly available EOR provider benchmarks, management fees in Spain typically range from €400 to €900 per employee per month, above the total employment cost. Actual fees vary significantly by provider, headcount volume, and service scope — treat this as a market reference, not a fixed price.
The EOR fee is not a tax arbitrage. The EOR pays the same Spanish employer social security (approx. 30–33% on gross salary) that a Spanish SL would pay. The savings come from avoiding entity setup and compliance overhead, not from a lighter payroll burden.
Source: Orden PJC/297/2026, de 30 de marzo, Régimen General cotización 2026
Last verified: Jun 2026
SL constitution costs
The one-off cost of constituting a Spanish SL consists of several components. The mandatory first step is a certification of denomination from the Registro Mercantil Central (approximately €17–20). Notarial fees for the escritura pública — the constitution deed — typically run €150–300 for a standard single-shareholder SL; via CIRCE with standard pre-approved statutes, aranceles are substantially reduced (approximately €60 notarial + €40 Registro Mercantil). Registro Mercantil inscription fees follow a similar range (€150–300 standard route). Optional gestoría fees for full project management of the process add approximately €300–500 if used.
In total, constitution typically costs between €600 and €3,000 depending on route complexity, number of shareholders, and whether bespoke statutes are required — excluding share capital, which can be as low as €1.
How to Constitute an SL in Spain (Standard Route)
Reserve the company name
Apply to the Registro Mercantil Central for a certificación de denominación social. Cost: approximately €17–20. Turnaround: 24–48 hours. This certificate is required before notarial signing.
Open a corporate bank account and deposit capital
Open a bank account in the name of the SL in constitution and deposit the share capital. Minimum €1 under Ley 18/2022, though €3,000 is recommended for operational credibility. The bank issues a certificate confirming the deposit, which the notary requires.
Execute the escritura pública ante notario
The founding shareholders sign the articles of association (estatutos sociales) before a notary. Standard route: €150–300. Via CIRCE with standard-form statutes: approximately €60. Both routes now support telemática constitution with digital signature.
Inscribe in the Registro Mercantil
File the notarised deed with the Registro Mercantil of the province corresponding to the SL's registered address. Standard route: €150–300; approximately €40 via CIRCE. The SL acquires full legal personality upon inscription. Timeline: 1–5 business days after filing.
Register with AEAT and TGSS
Obtain the provisional NIF and file the alta censal (Modelo 036) with the Agencia Tributaria. Register as an employer with the Tesorería General de la Seguridad Social (TGSS) before taking on your first employee. Obtain the NIF definitivo once the SL is inscribed.
Annual ongoing costs for an SL are the more significant consideration. A Spanish gestoría or accounting firm handling quarterly and annual filings typically costs €80–110 per month (around €1,000–1,300/year). Depositing the cuentas anuales in the Registro Mercantil costs approximately €40/year. The Impuesto sobre Sociedades (IS) applies to profits: the general rate is 25% per Art. 29 of Ley 27/2014 del IS. Entities with an INCN of between €1M and €10M (empresas de reducida dimensión) pay 23% in 2026 under Disposición Transitoria 44ª LIS, introduced by Ley 7/2024. Newly created companies with a positive base imponible pay 15% in their first two profitable periods.
At what headcount does the SL become more cost-efficient?
At one to two employees, the EOR is almost always the more cost-effective option in Year 1. The EOR's monthly management fees, while real, are typically outweighed by the combined one-off constitution cost and ongoing compliance overhead of an SL — neither of which can be amortised across a very small team.
At three to five employees, the calculation shifts. EOR management fees at that headcount begin to approach or exceed the SL's fixed annual compliance costs. The break-even point is not universal — it depends on the specific EOR provider's pricing, the salary levels involved, and how lean the SL's accounting structure is. But this range is the threshold most often cited in international HR practice as the point where entity ownership starts to make financial sense.
Beyond five employees, a Spanish SL is almost invariably more cost-efficient. It also becomes strategically preferable: at scale, the indirect costs of EOR dependency — limited control over HR processes, difficulty with custom contract terms, reliance on a third party for payroll continuity — become more relevant than the efficiency argument alone.
This is not a legal or regulatory threshold — there is no Spanish rule requiring an entity above a given headcount. It is a financial and risk-management decision point.
How ApexTax Helps
ApexTax works as a Cross-Border Relocation Strategist and Single Point of Contact for international companies evaluating how to build a compliant team in Spain.
Where we add value is in the strategic assessment that comes before committing to either route. That means mapping your headcount horizon and activity profile against the real cost of each structure, identifying whether your planned roles create Permanent Establishment exposure regardless of the EOR wrapper, and determining the right moment — if the Spanish operation grows — to transition from an EOR to an own entity.
Once the right structure is confirmed, ApexTax coordinates with verified Spanish gestorías, labour law firms, and EOR providers depending on the recommended route. The actual incorporation of a Spanish SL, registration with TGSS, and employment law compliance are delivered by independent qualified Spanish professionals selected and coordinated by ApexTax. We do not constitute entities, represent clients before AEAT, file Modelo 200, or act as an EOR ourselves.
An EOR buys speed and optionality. A Spanish SL buys control and efficiency at scale. The threshold is usually three to five employees — and whether Spain is a test or a commitment.
— ApexTax analysis