A foreign company can hire employees in Spain through three main routes: registering directly with the TGSS (Tesoreria General de la Seguridad Social) as a non-resident employer, using a third-party Employer of Record (EOR), or incorporating a Spanish legal entity. Regardless of which route you choose, Spanish employment law applies from the moment an employment relationship begins — including written contract obligations, social security contributions (approximately 30–32% of gross salary), and quarterly IRPF withholding via Modelo 111. The 2026 statutory minimum wage is €1,221 per month in 14 payments, per Real Decreto 126/2026. Failing to structure the hire correctly creates permanent establishment (PE) risk under OECD Model Tax Convention Art. 5, and treating an employee as a self-employed contractor can trigger fines of €6,251 to €187,515 under LISOS Art. 8.2.
What It Actually Means to Hire in Spain as a Foreign Company
Spanish labour law is territorial: it governs every employment relationship performed on Spanish soil, regardless of where the employer is incorporated. From the moment your employee starts work in Spain, the Estatuto de los Trabajadores (RDL 2/2015) applies in full — contracts, social security, working hours, leave, and dismissal.
The moment employment begins, your obligations begin too
The Estatuto de los Trabajadores defines an employment relationship through four criteria: the work is personal, it is remunerated, it is performed for the account of another, and it falls within that other party’s organisational direction. If all four are present, Spanish employment law applies regardless of what your contract calls the arrangement.
In practical terms, this means a written contract is required before the employee starts. The foreign company — or its designated EOR — must register with the TGSS to obtain a Código de Cuenta de Cotización (CCC) before the employee’s first working day. This registration is done electronically via the SEDESS portal. Non-resident companies without a Spanish office must also obtain a NIF (Número de Identificación Fiscal) from AEAT, designate a Spanish-domiciled representative, and specify a Spanish address for TGSS correspondence — which may be the employee’s own home address.
IRPF withholding begins from the first payslip. The employer files Modelo 111 quarterly with AEAT — within the first 20 calendar days after each quarter-end — and submits the annual summary via Modelo 190 by 31 January of the following year. Large companies with prior-year revenue above €6,010,121 file Modelo 111 monthly instead.
Spain’s Estatuto de los Trabajadores applies based on where the employee works, not where your company is registered. Employment obligations — contracts, social security, IRPF withholding — begin from Day 1 of the working relationship.
Source: RDL 2/2015, Art. 1 — Estatuto de los Trabajadores
The permanent establishment trap
Parallel to payroll compliance sits a separate and often overlooked tax risk: permanent establishment (PE). A PE arises when a foreign company has sufficient presence in Spain that Spanish tax authorities treat it as having a taxable base in the country — triggering Spanish corporate tax filing obligations.
Under OECD Model Tax Convention Art. 5, a PE can be created in two ways. The first is the fixed place of business test: a clearly identified physical location under the company’s control where core business activities are carried out on a continuous basis. The second is the dependent agent test: if an employee habitually concludes contracts on the company’s behalf, or negotiates all key terms, a PE arises regardless of whether any physical office exists.
A 2025 update to the OECD MC Commentary, published in November 2025, introduced an analytical framework for home office scenarios. The update establishes that a home office does not automatically create a PE — the decisive question is whether the company requires the employee to use the home for work and derives commercial benefit from that arrangement. An employee who chooses to work from home in Spain, without the company mandating or financing that setup, would generally not create a fixed-place PE. The dependent agent test, however, was not changed by the 2025 update — an employee with authority to conclude contracts triggers PE analysis regardless of location.
PE risk is separate from payroll compliance. A company can be fully registered with TGSS, running correct payroll, and still face corporate tax exposure in Spain if its employee’s activities meet the dependent agent threshold. Qualified tax advice from a Spanish asesor fiscal is essential before drawing conclusions for any specific structure.
PE risk and payroll compliance are separate questions. Your company can run a fully compliant Spanish payroll and still face corporate tax exposure if your employee habitually concludes contracts on your behalf. OECD MC Art. 5 applies regardless of EOR structure.
Source: OECD Model Tax Convention, Art. 5 (2025 Update)
Your Three Options for Hiring in Spain
Three routes exist for a foreign company to hire legally in Spain. The right choice depends on how many people you plan to hire, how long you intend to operate in the country, and how much ongoing compliance you are prepared to manage directly.
Route A — Register as a non-resident employer (direct employment)
The most direct path is to remain the legal employer yourself while registering with Spanish authorities as a non-resident employer. The company obtains a NIF from AEAT, a CCC from TGSS, and then runs Spanish payroll directly — managing the employment contract, social security contributions, IRPF withholding, and any applicable collective bargaining agreement (CBA).
This route keeps the legal employer relationship clean and avoids the added cost of an EOR intermediary. The compliance burden, however, sits entirely with the foreign company. For a first hire, this means building payroll infrastructure, understanding Spain’s CBA agreement hierarchy, and staying current with annual changes to social security rates, the SMI, and any regulatory reforms. It is well-suited to companies that plan to build a sustained Spanish team and are prepared to invest in proper payroll administration from the outset.
Route B — Employer of Record (EOR)
An EOR structure places a Spanish entity — the EOR provider — as the legal employer on record. The EOR handles the employment contract, CCC registration, payroll, SS contributions, and IRPF filings. The client company directs the employee’s day-to-day work but assumes no formal employer liability for compliance purposes.
It is worth noting that Spanish labour law does not formally recognise the EOR model as a distinct legal category. Spanish courts and the Labour Inspectorate evaluate arrangements on their substantive reality, not their contractual label. The Estatuto de los Trabajadores (Art. 43) prohibits the illegal assignment of workers — cesión ilegal — which occurs when the company directing the work is different from the company bearing employer responsibility. Reputable EOR providers structure their contracts to argue that the EOR retains sufficient employer substance (not merely administrative cover), but this remains an area where legal risk cannot be reduced to zero.
For most international companies at the stage of their first one to three Spanish hires, EOR remains the commercially dominant model for speed and simplicity. Select an EOR that owns its own Spanish entity and holds its own CCC — not one that sub-contracts to a third party.
Route C — Incorporate a Spanish entity
Establishing a Sociedad Limitada (S.L.) makes the Spanish company itself the legal employer. The minimum share capital is €3,000, fully subscribed at incorporation. The process involves a notarial deed, registration at the Registro Mercantil, and registration for tax and social security. The full process typically takes three to eight weeks for a company incorporating from abroad.
The S.L. pays Spanish corporate tax at 25% (23% on the first €300,000 of taxable income for qualifying SMEs). Employer social security contributions run at approximately 30–32% of gross salary. Entity setup makes economic sense when you plan to hire five or more employees over a sustained period, when your operations in Spain extend beyond employment to include commercial activity or client contracts, or when Spanish clients or partners require a local legal entity.
| EOR | Direct NRP Registration | Own Entity (S.L.) | |
|---|---|---|---|
| Setup time | 5–15 business days | 4–8 weeks | 3–8 weeks |
| Upfront cost | Low (service agreement only) | Medium (NIF + CCC registration; representative) | Higher (notary + Registro Mercantil; €3,000 min capital) |
| Ongoing cost | Salary + SS + EOR fee (€200–€800/mo) | Salary + SS + payroll admin | Salary + SS + accounting + CIT filings |
| Legal employer | EOR provider | Foreign company | Spanish S.L. |
| PE risk mitigation | Reduces dependent-agent risk; does not eliminate fixed-place risk | No mitigation — foreign company remains exposed | PE typically absorbed by Spanish entity |
| Scalability | Cost-effective for 1–4 hires; expensive at scale | Efficient at scale once set up | Most efficient at 5+ hires long-term |
| Best for | First hire; market testing; short horizon (under 18 months) | Long-term hires; established market; cost discipline | 5+ employees; commercial operations; long-term commitment |
Step-by-Step: Hiring Your First Employee in Spain via EOR
For companies choosing the EOR route, the process is more predictable than it may initially appear. Most reputable providers can have an employee on payroll within two weeks of a signed service agreement. The steps below reflect the standard flow.
How to Hire Your First Employee in Spain via EOR: 8 Steps
Define the role and check the applicable CBA
Before approaching an EOR, confirm the job title, responsibilities, and salary. Spain’s collective bargaining agreement (CBA / convenio colectivo) hierarchy means most roles are covered by a sector-level agreement that sets minimum pay, working hours, notice periods, and severance above the statutory floor. Your EOR should identify the applicable CBA — do not assume the statutory minimum wage (€1,221/month in 14 payments as of 2026) is the only floor that applies.
Select an EOR with its own Spanish entity
Verify that the EOR you choose owns its own Spanish entity and holds its own Código de Cuenta de Cotización (CCC) issued directly by the TGSS — not sub-contracted to a third-party gestoría. This is the key differentiator between a genuine EOR operation and a shell arrangement that increases legal risk.
Agree on contract terms and sign the service agreement
The EOR will draft an employment contract governed by Spanish law. Standard contract type for permanent hires is the contrato indefinido (open-ended). Fixed-term contracts (Art. 15 ET) are only valid for specific legal grounds — cover for temporary capacity or a defined project — and are subject to increased scrutiny since the 2022 labour reform. Agree the probationary period (typically 3–6 months depending on the CBA) and any non-compete provisions upfront.
EOR registers the employee with TGSS
The EOR submits the employee’s alta (registration) to TGSS via the Sistema RED electronic platform. If the employee has not previously worked in Spain, the TGSS assigns a Número de Afiliación a la Seguridad Social (NAF). The employer CCC already held by the EOR is associated with the new employee from the start date.
Payroll is set up and run monthly
The EOR processes a monthly payroll run in euros. Each month’s gross salary is subject to employer SS contributions (approximately 30–32% on top) and employee SS withholding (approximately 6.5%). IRPF withholding depends on the employee’s personal circumstances. Standard companies file Modelo 111 quarterly; large companies (prior-year revenue above €6,010,121) file monthly.
Statutory benefits and leave are managed by the EOR
Spanish employees are entitled to a minimum of 22 working days of paid annual leave per year under Art. 38 of the Estatuto de los Trabajadores, plus national and regional public holidays. Sick leave for the first 15 days is at employer cost; from day 16 onward, the INSS covers the benefit. Time tracking records are mandatory and must be maintained for inspection.
You direct the work — the EOR manages compliance
Day-to-day task assignment, performance management, and work instructions remain entirely with you. Do not co-sign employment documents, issue payslips, or communicate anything that could be read as you acting as the employer — this undermines the EOR’s legal employer position and increases Art. 43 ET cesión ilegal risk.
Review at 12–18 months
At this horizon, evaluate whether your headcount and commitment to Spain justify establishing your own S.L. Most EOR providers offer entity setup services and can assist with the transfer of employment contracts from the EOR to your new Spanish company.
Spain requires a minimum of 22 working days of paid annual leave per year (Art. 38 ET), plus national and regional public holidays. Your sector CBA may grant more. Factor this into your total employment cost modelling before making an offer.
Source: Estatuto de los Trabajadores (RDL 2/2015), Art. 38
Frequently Asked Questions
How ApexTax Helps Foreign Companies Navigate Spain Hiring
ApexTax works as a Cross-Border Relocation Strategist and Single Point of Contact for international companies entering the Spanish market. Where the hiring question is concerned, that means mapping the right structure for your situation — EOR for a first hire, direct non-resident registration for a long-term team, or S.L. setup for full market commitment — and connecting you with the verified Spanish professionals who execute the work.
In practice, our engagement on a Spain hiring mandate typically includes a structural assessment (which route fits your headcount, timeline, and PE risk tolerance), identification and introduction of a pre-vetted EOR provider or employment law firm depending on the route chosen, and coordination of the onboarding process between your team and the execution professionals. We do not act as the employer, file social security registrations, process payroll, or provide formal legal or employment law advice — those functions are delivered by independent qualified Spanish gestorías, employment lawyers, and EOR providers that we coordinate on your behalf.
If you are weighing your options for a first hire in Spain and want a structured view of the costs, risks, and timelines before committing to a structure, a strategy call is the right starting point.