Employer of record, contractor or staying employed: which fits you?

Terms used

• IRPF — The IRPF is Spain's personal income tax, withheld from employees' pay by the employer.
• TGSS — The TGSS is Spain's social security treasury, which registers workers and collects contributions.
• RETA — RETA is the social security scheme for self-employed people in Spain.
• Autónomo — An autónomo is a self-employed person registered with the tax authority and RETA.

Key rules

• Employer of record: An employer of record makes you a regular Spanish employee, with Spanish contract rules, payroll and social security handled for you.
• Contractor: Becoming a contractor means giving up employee protections and paying your own contributions, taxes and equipment.
• Single client: Having one foreign client is not illegal, but it raises the risk of being reclassified as an employee.
• Right to work: You need the right to work in Spain before you can register as a contractor.

The short answer

Staying employed, using an employer of record or becoming a contractor differ in cost, protection and legal risk. Employment through an employer of record keeps you fully protected as an employee. Contractor status is cheapest for the client but gives you the least protection and carries the most legal risk. The comparison below puts the three side by side.

Option 1: Stay employed by the foreign company

Your contract stays as it is, but Spanish tax and social security questions still apply once you live here. Get a written payroll plan from the employer before you move, saying who runs payroll, who withholds income tax and whose social security you pay into. The process below walks you through it.

Some employers will not do this, because it can create tax obligations for them in Spain. If yours approves the move but cannot give a plan, the next two options are the usual fixes.

Option 2: Employer of record

An employer of record (EOR) is a company with a Spanish entity that becomes your legal employer. You sign a Spanish employment contract with it. It runs payroll, withholds IRPF, registers you and pays your contributions with the TGSS. Your foreign company directs your day-to-day work and pays the EOR a fee on top of your employment cost.

• Protection: You are a normal Spanish employee. Collective agreements and statutory rules apply, including 14 payments, 30 days of holiday and the severance rules.
• Cost to you: Usually nothing directly. The client pays the fee, so the cost shows up in whether the company is willing to hire you this way.
• Cost to the client: Providers publish flat monthly fees per employee, usually from a few hundred euros a month. Some charge a percentage of salary instead, and some add charges for onboarding, benefits or termination. Ask several providers for current figures.
• Legal risk: Low for you. The EOR carries the employer's compliance duties.

Before agreeing, confirm the provider's Spanish entity will sign the contract and pay social security itself.

Option 3: Contractor (autónomo)

You invoice the foreign company as a self-employed person. You need the right to work in Spain first. Then you register as self-employed with the tax authority, choosing an activity code, and in RETA, the self-employed social security scheme, before you start.

• Invoices and tax: Invoices must follow Spanish rules. Services to a business in another EU country are generally not subject to Spanish VAT and are reported in a special register. Services to clients outside the EU are generally outside VAT. You file quarterly income tax and VAT returns, plus an annual return. Ask a tax adviser how VAT works for your client.
• Contributions: You pay your own, based on income bands. The amounts are reset each year.
• Protection you lose: Dismissal protection, the minimum wage, working-time limits, paid holiday and public holidays, collective-agreement pay, employer-paid social security, sick pay from the employer and the wage guarantee fund. Unemployment benefit is replaced by a narrower cessation-of-activity benefit, which you get only if you opted in.
• Costs you carry: Your own filings, VAT handling and equipment.

The legal risk with contractors

Spanish courts and the labour inspectorate treat you as an employee if the client directs your work, sets your hours, supplies your tools or folds you into its team. Having a single foreign client is not illegal, but it is a warning sign.

If at least 75% of your income comes from one client, a special regime for economically dependent contractors applies. It requires a written contract and gives you some extra protections.

If the relationship is reclassified as employment, the client can face back contributions and fines. Serious social security fines can run from the low thousands of euros to tens of thousands per worker. A contractor setup that only exists to avoid employer costs is the riskiest choice for both of you.

Which fits you

• You want to keep your job and the employer will set up payroll properly: stay employed.
• The employer will not set up payroll in Spain but wants to keep you: ask for an employer of record.
• You are genuinely independent, with several clients or your own methods and hours: contractor.

Use the checklist below before you choose.

Work models and payroll choices compared

Describe your work in three parts (who pays you, from which country, under what contract), then compare the four payroll set-ups and see which fits each adult in your household. Includes what to do while your work situation is still unknown.

Describe your work model in one sentence

A work model has three parts: who pays you, which country that payer is in, and what form the contract takes. Fill in this sentence for each adult in your household:

"Payer: ________ (foreign employer, Spanish subsidiary, employer of record, or client or clients). Country of payer: ________ (Spain, another EU/EEA state, or a non-EU country). Contract form: ________ (employment contract under foreign or Spanish law, employer-of-record employment contract, or invoicing as an autónomo)."

Three examples of a finished statement:

• Employed by a German company, paid in Germany, on a German employment contract, with an A1.
• Employed through a Spanish employer of record, paid in Spain, on a Spanish employment contract.
• Self-employed in Spain, invoicing a client in the US, as an autónomo.

The country of payer matters because it affects social security coordination and tax withholding.

How the payroll models compare

The model you land on decides who runs payroll and who files.

Which model fits which situation

Each adult is registered and taxed on their own status, so one household can mix models.

• Employee of a foreign firm, working remotely from Spain. A non-EU national usually needs the digital nomad visa or a similar residence permit. It allows remote work for foreign companies, with a limit on income from Spanish clients. The permit is handled by UGE-CE. You must be covered by Spanish social security, unless an A1 or a treaty arrangement applies. You become Spanish tax resident after more than 183 days, and you may be able to choose the Beckham regime if you qualify.
• Freelancer or autónomo. Register with the tax office and with RETA. Contributions follow income bands. Quarterly VAT and income tax returns apply. Non-EU nationals need a self-employment or entrepreneur visa or permit. Freelancers who work mostly for foreign clients can also use the digital nomad route.
• Local employee with a Spanish contract. Your employer registers you with social security and withholds tax through payroll. Non-EU nationals need an employer-sponsored work authorisation, or a highly qualified or shortage-occupation route.
• Not working. EU citizens register as residents and need enough money and health cover. Non-EU nationals can use the non-lucrative visa, which bars any work, and need private health insurance and enough funds.

When each adult works differently

Partners and children often get residence linked to the main applicant. Work rights depend on the permit: digital nomad and highly qualified family permits generally allow work. Each adult needs their own NIE, tax registration and social security number. Check each person's permit for work rights before anyone starts a job.

While your work situation is still unknown

Hold the big, hard-to-undo steps until the visa or permit route is fixed. Do not resign from your home job, sell property or sign a long Spanish lease. Do not work in Spain on a tourist stay or a non-work visa: unauthorised work can bring fines and harm later permit applications. A non-EU national cannot normally switch from a tourist stay to a residence permit inside Spain.

Safe steps meanwhile:

1. Research the route options: digital nomad, employment, self-employment, non-lucrative, EU registration.
2. Gather documents such as apostilled certificates, translations, a criminal record check, proof of funds and health insurance. These typically take weeks.
3. Take a short-term rental or a flexible lease with a diplomatic clause.
4. Open a bank account. Get an NIE only if you need it for a specific purpose.
5. Keep tourist stays within 90 days in any 180. Keep any remote work for a foreign employer clear of Spanish tax residency (183 days) until your status is settled.
6. Keep your home-country health cover.

Moving early risks a refused or slow visa, no work rights, no established residence, double taxation or social security gaps, and an employer with no Spanish entity or no willingness to sponsor.

Getting a written payroll plan and a safe contract change

• Confirm your residence or work status and your own health cover plan: before you start

• Send the employer a request message with your dates, location in Spain, role and duties, whether you sign contracts or deal with clients in Spain, and your nationality and status: as soon as the move is planned, asking for an answer by a set date

• Ask the employer to name in writing who runs payroll, who files and pays income tax withholding, and whose social-security cover applies: in the same request

• Collect the documents: the written approval and payroll plan from HR, legal or payroll, plus proof of cover (an A1 certificate from the home social security office, or confirmation of Spanish affiliation): before you sign anything

• Ask HR, legal or payroll to confirm whether the company accepts a permanent establishment risk (a taxable business presence in Spain) and to put contract changes in writing: before you sign

• Choose the contract change: an addendum keeps the foreign employer and foreign law, but you pay Spanish income tax and need A1 or treaty cover or Spanish affiliation; a transfer to a Spanish entity gives a Spanish contract, payroll and labour law; an employer of record becomes your legal Spanish employer and runs payroll while the foreign firm directs the work; a leave agreement suspends the job with no pay or social-security accrual: at the decision point

• Check before signing that you have the written plan, proof of cover, clear status, health cover, an understanding of Spanish tax residence and any expat tax regime, and clauses on termination, return rights, governing law and costs. Get independent tax advice: before you sign

• If the employer approves but cannot or will not give a plan, propose an employer of record, move to a genuine contractor arrangement as an autónomo (self-employed), or delay your start: if no plan is offered

• If the employer refuses all of these, do not start work in Spain without Spanish affiliation: unpaid contributions, unfiled tax and loss of cover can follow. Contractor status also carries a risk if the work is really employment: if the employer refuses

• Postpone your start and keep asking until a plan exists; get advice on any period already worked in Spain: if you have missed the start date or the normal route is closed

Checklist

• Ask several employer-of-record providers for their current monthly fee per employee, plus onboarding, benefits and termination charges.

• Confirm the provider has a Spanish entity that will sign a Spanish employment contract, run payroll and pay social security contributions for you.

• Check that you have the right to work in Spain before choosing the contractor route.

• Set up invoices that meet Spanish rules and ask a tax adviser how to handle VAT for your foreign client.

• Check whether the client directs your hours, supplies your tools or treats you as part of its team, and change the arrangement if it does.

• Work out how much of your income comes from one client, and get a written contract if it reaches 75%.

What to watch out for

• Contractor treated as an employee: If the client directs your work, sets your hours, supplies tools or folds you into its organisation, inspectors can reclassify you as an employee. The client then faces back contributions and fines, which for serious social security infractions run from the low thousands of euros to tens of thousands per worker. Keep control of your own hours, tools and methods, invoice for results, and use an employer of record if the client wants to direct your work.

• A single foreign client is a red flag: Having one client is not illegal, but it signals dependence. At 75% or more of your income from one client, you fall under the economically dependent regime. Sign a written contract and register that status, or add other clients.

• Lost employee protections: As a contractor you lose dismissal protection, minimum wage, working-time limits, paid leave of at least 30 calendar days, employer-paid contributions and sick pay, and the wage guarantee fund. Unemployment cover exists only if you opted in to the narrower cessation-of-activity benefit. Price these losses into your rate and opt in to the cessation-of-activity benefit if you can, or stay employed or use an employer of record.

Frequently asked questions

How much does an employer of record cost in Spain?

Expect a flat monthly fee per employee, usually from a few hundred euros per month, though some providers charge a percentage of salary instead. Onboarding, benefits and termination can cost extra. Fees vary with contract length and headcount, so compare several providers' pricing pages.

Is having only one foreign client illegal for a contractor in Spain?

No, a single foreign client is not illegal in itself, but it raises the risk of being treated as an employee. If at least 75% of your income comes from one client, the economically dependent regime applies, which needs a written contract and registered status.

What must I register before invoicing a foreign company as a contractor?

You must have the right to work in Spain, register as self-employed with the tax authority and join RETA, the self-employed social security scheme, before you start. Services to a business in another EU country are generally not charged Spanish VAT, but they are reported on a separate listing.

Do I get unemployment benefit if I become a contractor?

Only if you opted in to the cessation-of-activity benefit (cese de actividad), which is narrower than employee unemployment benefit. You also lose dismissal protection, paid leave and the wage guarantee fund, so weigh that before leaving employment.