With its booming tech ecosystem and favorable laws, Spain has emerged as a top hiring destination for companies looking for international talent. If you need a flexible and cost-effective way to expand your workforce fast, you might consider hiring international contractors, and Spain is a great place to tap into a deep well of experienced and well-educated talent.
However, if you plan to hire international independent contractors, you have to understand the strict classification laws to avoid legal and financial penalties and damage to your company’s reputation. Here’s what you need to know before hiring independent contractors in Spain.
How Spain defines independent contractors
Under Spanish law, an independent contractor, or self autonomo, is self-employed as a freelancer. This means they have complete control over their work. They can:
- Choose to work for several companies
- Accept or decline work as they see fit
- Set their own working hours
- Work for a specific period or on a project basis
Financially speaking, an independent contractor in Spain can set their own rates. In exchange, they’re responsible for their own business expenses, taxes, and social security contributions.
With more people becoming self-employed, the line between hiring employees in Spain vs. engaging independent contractors is increasingly blurred. Spain doesn’t have a specific law outlining what constitutes an employment contract and typically assumes that all workers are employees. Independent contractors need to demonstrate their status as such through an agreement that details how their relationship with an organization falls outside of traditional employment parameters.
Spain’s criteria for independent contractors
When engaging contractors in Spain, organizations must evaluate the relationship in the five key areas below.
1. Dependence
Independent contractors work on their own timetables and are not subject to the company’s disciplinary policies and procedures. Their relationship with your company, both contractually and financially, is through their business, and they are partners rather than subordinates.
2. Alienation
If workers don’t retain ownership of their work or are exempt from any type of economic risk associated with completing their work, they are likely employees. Essentially, if a business incorporates an individual’s work into their business while assuming the labor costs and all economic risks of the work, then that person is an employee.
3. Relationship
An individual who cannot be easily replaced or who brings a specific skill set that is vital to the daily operations of the business will likely be an employee. Independent contractors provide services that can easily be exchanged for those from another company or individual.
4. Payment
Independent contractors receive payment on a contract basis. Their pay is strictly tied to their work, whether they agree to work hourly or per project. Anyone who gets a salary from a company is most likely an employee.
5. Exclusivity and assiduity
Independent contractors can work for multiple companies at once and choose to accept or decline projects. Because they have complete control over their work, they assume the risk of a profit or loss on any project. In contrast, employees work exclusively for a single company for an extended period, earning a consistent salary without concern for profits or losses.
Because there is a considerable gray area within these criteria, it’s very easy to make mistakes when engaging independent contractors in Spain. To prevent misclassification and avoid potential pitfalls, consider working with a global employment partner in Spain that has expertise in navigating Spanish laws and regulations.
Spain’s “false freelancer” policy
Like many other countries, including the United States, Spain is cracking down on employers who attempt to skirt regulations and cut expenses by engaging independent contractors rather than full-time employees. You must stay abreast of ever-changing regulations regarding employee classification since non-compliance can come with significant consequences, even if your company isn’t based in Spain.
Companies run afoul of the law when they bring people on board as independent contractors, but treat them like full-time employees, a classification otherwise known as false autonomo, or false freelancers. As of 2022, any company that hires someone as a freelancer but gives them the responsibilities of a full-time employee or otherwise puts restrictions on their activities—such as requiring set work hours or requiring that they accept work—faces stiff penalties.
Under Article 311 of the Criminal Code, employers can face hefty fines of up to 10,000 euros and six years in prison if they incorrectly classify employees. You might also be liable to pay the employee severance for back vacation, sick leave, holiday time, benefits, and overtime. The government may also collect employment taxes for the individual, going back to their first day of work.
Ultimately, because even inadvertent mistakes can devastate your company, you need a solution like a global employment service that understands the rules and will ensure that everyone working for your organization is classified correctly.
Other requirements for hiring contractors in Spain
Correctly classifying remote independent contractors in Spain is only the beginning of compliance with the local labor laws. Companies also need to adhere to a set of additional requirements, including:
- Issuing formal contractor agreements that specifically outline the nature of the work, fees, and timetable for project completion
- Paying contractors without taking any deductions
- Filing a Modelo 111 form quarterly and a Modelo 130 form annually to report a freelancer’s earnings
- Adhering to the statutes of the 2007 Independent Contractor’s Law (Estatuto del Trabajo Autónomo), which requires paid vacation time and has specific termination rules for some freelancers
- Paying contractors in accordance with Spanish law, meaning no more than 60 days after an invoice is submitted
- Agreeing to pay late payment interest and a 40 euro fee for any late payment
Economically dependent self-employed individuals
Some independent contractors in Spain are considered economically dependent self-employed workers, also known as TRADE or TAED. These individuals earn 75% or more of their income from a single client.
Although this is a legal arrangement, you must follow strict guidelines. The contractor must work separately from employees, maintain control over where, when, and how they work, and set their own rates. Individuals in this category qualify for additional benefits and protections.
Paying contractors in Spain
Because independent contractors are not on your company’s payroll, you don’t have to withhold taxes or pay social security benefits for them. That burden falls on the contractors themselves.
However, you are responsible for paying your independent contractors the agreed-upon rate once they submit an invoice or complete the project. You have options for doing this, including direct deposit, online payment, and payroll services.
Direct deposit is a convenient way to pay freelancers. Still, you must carefully separate their payments from other employees so you don’t inadvertently take deductions from their pay. Contractors may also be reluctant to provide their bank information to clients.
An online payment portal like PayPal or Wise can also get money to independent contractors quickly, but these services can come with substantial costs in international transfer fees and currency exchange rates.
Using a global employment platform to handle payroll is one of the simplest ways to pay international contractors. These services can pay workers in their local currency without exorbitant fees or other costs. It’s also easier to pay multiple contracts at once.
Use Oyster to hire contractors in Spain
Hiring and managing contractors in Spain and around the globe can mean navigating complex international laws and mountains of HR paperwork. Make it easy and avoid costly mistakes by partnering with Oyster. As a category-leading global employment platform, Oyster eliminates the stress of engaging, onboarding, paying, and managing independent contractors so you can focus on your business. Learn more about how Oyster can help you hire independent contractors and manage a global workforce.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
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