Your Guide to Employer of Record (EOR) in Spain

Expanding your team across borders can be complex but it doesn’t have to be. An Employer of Record (EOR) makes it possible to hire talent in new countries without setting up a local entity. In this FAQ, we explain how EOR services work, when to use them, and what to expect when hiring in Spain through an EOR like Parakar.

How EOR works: Key questions answered

1. What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of another company. The EOR handles all employment-related responsibilities, such as payroll, tax filings, benefits, and compliance with local labour laws, while the client company manages the employee’s daily tasks and performance.

2. When should a company consider using an EOR?

Companies typically use an EOR when:

• They want to hire in a country where they don’t have a legal entity.
• They need to onboard employees quickly and compliantly.
• They want to reduce the risks and complexities of local labour law compliance.
• They are hiring remote talent or testing new markets before setting up a branch.

3. What are the benefits of using an EOR?

Key benefits of using an EOR include:

• Local compliance: Ensures all employment practices meet local legal requirements.
• Speed: Onboard employees faster without needing to set up a local entity.
• Reduced admin burden: The EOR takes care of payroll, contracts, benefits, and tax filings.
• Lower risk: Avoid penalties and legal issues by staying compliant in each country.

4. What is the difference between an EOR and a staffing agency / PEO / payroll provider?

• EOR: Legally employs workers on your behalf and assumes full legal responsibility.
• Staffing agency: Typically recruits and provides temporary workers, often for short-term roles.
• PEO (Professional Employer Organization): Co-employs workers alongside your business, usually within the same country.
• Payroll provider: Manages payroll processing but does not employ workers or ensure compliance.

5. Who is the legal employer when using an EOR?

The EOR provider is the legal employer on record. This means the EOR is responsible for employment contracts, taxes, and compliance. However, the client company directs the employee’s daily work and integrates them into their team and culture.

6. Is the employee on the clients payroll or the EOR’s payroll?

The employee is on the EOR’s payroll. The EOR takes care of salary payments, tax withholdings, social security contributions, and other statutory requirements. The client company pays the EOR, who then manages the employment on their behalf.

7. Can we hire both local nationals and foreign employees through EOR?

Yes, you can hire both local and foreign employees through an EOR. However, hiring foreign nationals may depend on local immigration laws and whether the EOR can sponsor work visas in that country. It’s important to confirm visa eligibility and processing timelines with the EOR.

Hiring in Spain through an EOR

1. Can a foreign company hire employees in Spain without setting up a legal entity?

Yes! Hiring in Spain without a legal entity is possible thanks to companies like Parakar, and increasingly common, this is why the Employer of Record (EOR) model exists. As a local HR partner and employment specialist, we support international companies in managing employment contracts, compliance, payroll, and HR processes in Spain.

EOR services are particularly useful for companies exploring the Spanish market, scaling remote teams, or hiring employees quickly and compliantly.

2. What type of employment contracts do you offer under EOR in Spain?

We provide indefinite (permanent) employment contracts as the standard for all hires in Spain. This is not only the most common and stable contract type under Spanish labour law, but also a legal necessity in most cases.

Since recent labour reforms, fixed-term contracts are strictly limited and heavily regulated. They may only be used under exceptional and clearly justified circumstances, such as covering temporary absences or specific short-term projects. In practice, these conditions are difficult to meet, and misclassification of a fixed-term contract can lead to legal and financial consequences for the employer.

For that reason, and to ensure full compliance, we exclusively issue permanent contracts through our EOR solution in Spain.

All employment contracts are drafted in Spanish, as required by law. To facilitate transparency and ease of understanding for international clients and employees, we also provide a side-by-side English version. This bilingual approach helps align expectations across all stakeholders and ensures clarity throughout the employment relationship.

For probation period, up to 6 month Probation period can be stablished and is alays strongly recommended.

3. What are the standard working hours and overtime rules in Spain?

The general legal framework in Spain sets the standard full-time work schedule at 40 hours per week, typically distributed across five working days. However, the specific terms regarding working time, rest periods, and overtime compensation often depend on the applicable collective bargaining agreement (CBA).

In our case, we follow the provisions outlined in the Consultoría y Estudios de Mercado CBA, which is commonly applied in knowledge-based and consulting-related roles. Under this agreement:

• Standard working hours are set at 1,800 hours per year, which is generally interpreted as 40 hours per week unless a different distribution is agreed.
• Flexible work arrangements may be allowed, provided the annual hour total is respected.
• Daily and weekly rest periods are also defined, including a minimum rest of 12 hours between working days and 36 consecutive hours per week.

Regarding overtime:

• Spanish law limits overtime to 80 hours per year, unless compensated by time off.
• All overtime must be voluntary, properly recorded, and either paid or compensated with additional rest, depending on the agreement with the employee and the provisions of the CBA.
• Some roles may be classified as “trusted positions” (puestos de confianza), which may not be eligible for standard overtime rules; this is assessed on a case-by-case basis.

As your EOR partner, we ensure that all employment conditions, including working hours, overtime, and rest periods, are fully aligned with both Spanish legislation and the applicable CBA, providing legal certainty and operational transparency.

4. What is the minimum wage in Spain?

The Statutory Minimum Wage (SMI) in Spain for 2025 is set at €1,184 gross per month in 14 payments, which amounts to an annual gross salary of €16,576. This represents an increase of €50 per month compared to 2024, equivalent to a 4.4% annual increase, according to the Spanish Ministry of Labour.

If distributed over 12 monthly payments, as we do at Parakar, the monthly equivalent of the SMI is €1,381.33 gross.

However, in practice, most employees hired under our EOR model in Spain are covered by a sector-specific collective bargaining agreement (CBA). In our case, we commonly apply the Consultoría y Estudios de Mercado CBA, which establishes higher minimum salary levels than the legal SMI, depending on the employee’s job category and salary group.

For example:

• Administrative or technical support roles fall under different salary brackets than consultants, analysts, or management roles.
• The CBA defines minimum annual salaries typically based on 14 payments, but at Parakar, we always apply a 12-month proration to simplify payroll and provide consistency in monthly income.

As part of our EOR service, we ensure:

• Proper classification of each employee’s job category in accordance with the CBA.
• Full compliance with the applicable minimum salary requirements, which take precedence over the statutory SMI when higher.
• Transparent presentation of all salary components in the employment contract.

5. How is paid time off (PTO) handled under EOR in Spain?

Employees in Spain are entitled to a generous set of leave benefits, many of which are protected by law and reinforced by CBAs.

CBA minimum paid annual leave is 23 working days per year, not including weekends or public holidays. Spain also observes 14 public holidays annually, a combination of national, regional, and local holidays.

Sick leave is covered by the Social Security system, with employer obligations depending on the length of the leave. The employer typically covers part or all of the salary during the initial days of absence, with public coverage kicking in thereafter. The duration and compensation rates are regulated by law and vary depending on the cause of the illness and the applicable CBA.

Other statutory leaves include maternity and paternity leave, marriage leave, bereavement leave, and care leave for family emergencies. We manage all types of leave in compliance with legal requirements, ensuring correct payroll calculations and documentation.

6. What are the rules around termination and notice periods in Spain?

Employment termination in Spain must follow strict legal procedures. Improper dismissals can result in high compensation costs and legal consequences, so this is an area where expert local support is essential.

Notice periods per CBA at Parakar is generally 15 working days unless a different term is agreed in the employment contract.

Our EOR service includes full support for compliant offboarding, including documentation, settlement calculations, and risk mitigation.

7. Can you hire contractors or freelancers through EOR in Spain?

No, Parakar as Employer of Record can only hire individuals as formal employees, not as independent contractors. Spanish labour authorities are strict when it comes to misclassification and using contractors to perform work that resembles employee tasks can trigger audits, fines, and forced reclassification to employee status “falso autónomo” etc.

If your business requires engaging freelancers, we can advise on best practices and potential alternatives. However, contractor engagement falls outside the scope of standard EOR services.

8. Are there any country-specific compliance requirements for onboarding?

Yes. Onboarding in Spain involves several administrative and legal steps, all of which we manage as part of the EOR service. These include:

• Registration with the Spanish Social Security system (The EE’s should have they SS number, otherwise Parakar can obtain this number on their behalf.
• Employee’s should have valid documentation, and be legally residing/entitled to reside in Spain national identification (DNI/NIE & TIE / Passport with valid work /residency permit), Spanish bank details etc.
• Spanish employment contract duly signed before the start date.
• Enrollment in mandatory accident insurance and other applicable social contributions (Parakar takes care of it).
• Time tracking is mandatory in Spain (Employees should on a monthly basis share their timesheets signed to Parakar informing about working hours, absences, vacation days etc.).
• Background check is not mandatory and should always be accepted by the employee signing an autorithation.
• Medical exams are offered on the onboarding and we coordinate those where applicable.

9. How long does onboarding typically take via EOR in Spain?

Onboarding generally takes about two weeks from the moment all necessary information and documentation are submitted. However, for foreign employees relocating to Spain, the process may take longer due to immigration and registration requirements (for immigration cases we recommend to consider a minimum period of 2 months when a work permit application is required).

10. Are there limitations on what roles or industries can be hired via EOR in Spain?

Under Parakar, most professional office services such as administrative roles (jobs related under “Consultancy & market research” CBA) can be legally hired.

 Certain restrictions apply to specific industries. For example:

• Regulated professions such as doctors, collegiate lawyers, engineers / architects signing projects, pilots etc.
• Public sector roles or jobs involving direct government contracts are excluded from EOR solutions.
• Any industry /machinery job related where special working conditions that must be followed ( such as EPI’s, contact with chemichal substances, visiting factories etc).

* We assess each role individually and confirm eligibility and compliance before issuing contracts.

11. Can you support local benefits?
Yes. We can help implement supplementary benefits such as private health insurance, with the company SANITAS. We also offer car lease options.

12. Is remote work allowance (RWA) mandatory in Spain?

Yes, the teleworking regulations in Spain stablish that remote worker’s expenses such as electricity. Internet etc need to be covered by the employer. At Parakar we generally stablish EUR 50 gross per month as RWA. Also the employer needs to provide the workers with the required elements to perform their work, such as laptop, keyboard etc.

Need EOR support in Spain?

Whether you’re looking to hire your first employee in Spain or expand an existing team, Parakar is here to help. As your local Employer of Record, we take care of contracts, payroll, compliance, and HR, so you can focus on growing your business.

Get in touch with us to learn how we can support your hiring goals in Spain.