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FREELANCING

How to hire someone if you’re self-employed in Spain

If you’re registered as self-employed in Spain and your business is doing well, you might start thinking about hiring employees to help you out. Here's everything you need to know about how to go about it.

Published: 23 January 2023 17:24 CET
How to hire someone if you’re self-employed in Spain
How to hire someone if you're self employed in Spain. Photo: Amy Hirschi / Unsplash

If you work for yourself you have the option to hire employees in a number of different ways, you could hire someone on a short-term basis, hire their services similar to the way in which a client would hire you or you can hire them as a full-time employee.

Step 1: If you want to hire someone either on a full-time or a contract basis, but not as another freelancer, and you haven’t hired employees before, the first step is to register as an ‘empresario’ with the tax office, as well as with Social Security.

Step 2: In order to register with Social Security you will need to complete Modelo or form TA-6 here, followed by Modelo TA.7 here. When you have completed the second form, you will be given a Contribution Account Code ‘Código Cuenta de Cotización’, a number that identifies you as an employer.

READ ALSO: Will you pay more under Spain’s new social security rates for self-employed?

Step 3: If you are ready to hire someone straight away and know who you want, then you can register your employee with Social Security too by completing Modelo TA. 2/S here. You will need their social security number, ID and account number.

If you’re giving someone their first job, you must also make sure they get their social security number before you can continue. This number lasts for a lifetime, so they will not need a new one if they have worked in Spain before.

Step 4: You have a period of 10 days in which to register the contract with the Public State Employment Service (SEPE).

You can carry out all these procedures electronically, using the Cret@ System. 

This link shows you all the possible types of contracts you can choose for your new employee, from temporary to permanent.

Remember, if there is any change to your employees’ contracts or you have to dismiss them for some reason, you must tell Social Security right away. You can do this by filling out forms TA.1 and TA.2/S here. 

After you have completed the steps above, you will officially have to start paying your employees’ social security contributions, as well as your own, and of course their salary too.

READ ALSO: Why you should be raising your rates if you’re self-employed in Spain

How much does it cost to hire a worker when you’re self-employed?

The cost of social security and your employee’s salary will depend both on the workers’ Agreement that corresponds to your industry, and on the type of contract you have chosen.

In the general, the cost of their social security contributions will be 30 percent of their base salary.

How many people can I hire?

There is a limit to the number of workers you can hire if you are self-employed. You are allowed to hire a maximum of 10 employees, depending on the type of activity you carry out.

For example, if you own a bakery, you are allowed to hire a maximum of six people, while if your business is in retail trade, you can only hire a maximum of five workers. 

Can I hire another autónomo?

As mentioned at the beginning of this article, it is possible to simply hire another self-employed worker too, meaning you won’t be responsible for their social security payments and you will hire them on a freelance basis. 

It means though that they can’t have a fixed work schedule and won’t have a set salary either. They will be in charge of paying their own social security contributions and will invoice you for the amounts they’re owed each month, depending on how much you agreed upon.  

Can I hire a family member or a partner?

According to article 1.1 of the Workers’ Statute, when a self-employed person hires a relative, they must do so as self-employed collaborators like above, except when it can be demonstrated that there is a professional employment relationship. In the second case, they will have to have a formal employment contract and you will have to pay their social security contributions.

In other words, if the family member lives with you and does not receive a fixed income, but shares the risks of the business, the hiring will be done as a self-employed collaborator. 

Can I hire another foreigner?

Yes, you are allowed to hire foreigners from both the EU or outside of the EU, providing they are properly registered in Spain and have the right to work here.  

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AMERICANS IN SPAIN

EXCLUSIVE: What the new Spain-US social security deal means for Americans

The Local speaks to the Spanish government and tax experts to understand what the new social security and pensions agreement between the United States and Spain means for American workers, digital nomads and pensioners in Spain.

Published: 15 May 2024 11:10 CEST
Updated: 19 May 2024 08:20 CEST
EXCLUSIVE: What the new Spain-US social security deal means for Americans

In early April, the United States and Spain announced a new social security and pension agreement.

The first update to the bilateral agreement between the two countries since 1986 was announced by US Ambassador to Spain, Julissa Reynoso, and Spain’s Minister of Inclusion, Social Security, and Migration, Elma Saiz.

The official agreement is unpublished so The Local spoke with a representative from Spain’s Ministry of Inclusion, Social Security, and Migration as well as international tax experts to understand the agreement in more detail.

Key aspects of the agreement

The Ministry told The Local Spain that the agreement is a step towards, bolstering mobility between Spain and the United States by improving pension calculations and social security protections.

The agreement has to do with the accumulation of benefits and affects working Americans living in Spain. There are two main components; the first affects which system people pay into (Spanish or American) and the second maximises the amount people can collect from social security.
 
Regarding paying into social security, the new agreement extends the “posting period” from three years to five years, with the possibility of extending it to seven years.

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This is meaningful for US employees who are working in Spain and means that they can now pay into the US social security system, rather than the Spanish social security system for longer.

Whereas the employee contributions in Spain and the United States are similar, 6.4 percent in Spain and 6.2 percent in the United States, the rate that employers pay differs greatly. In the United States the employer pays 6.2 percent into social security, whereas in Spain they pay 31 percent.
 
Why does this matter? “Previously when Americans moved to Spain, US employers were cutting the amount that they paid in salary because the cost of employment went up so much”, Louis Williams, Co-Founder and CEO of Entre Trámites, told The Local Spain.

It’s also made employers hesitant to grant digital nomads an Employer of Record (EOR) which would allow American workers to be on a Spanish contract.

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In terms of collecting benefits, the representative from Spain’s Ministry of Inclusion, Social Security, and Migration says, “In the calculation of the Spanish pension there have been technical modifications that will benefit especially those people who developed their last working life in the United States, without this harming those who have worked in Spain immediately before requesting the benefit.”

In other words, under the new agreement, after calculating a person’s benefits under each country’s system, the recipient will be awarded the most beneficial of those two calculations.

Impacts for self-employed workers and digital nomads

According to the Ministry, “The agreement allows self-employed workers to temporarily move to the other State while maintaining their legislation, a possibility that was previously restricted only to employed workers.”
 
This has big implications for people who avoid moving to Spain because of the complicated social security contributions scheme, as they’ll now be able to continue paying US social security taxes (rather than Spanish) for up to seven years.
 
“The interesting thing is if this is extended to digital nomads because it would make the digital nomad visa more attractive,” says Williams.

“Why? Because if you’re posted by an employer (who can now avoid high Spanish social security taxes) you’re eligible for Beckham’s Law.” The law, which does not extend to autonomous works, can cap tax liabilities at 24 percent.
 
Being posted could make life much simpler, according to Elliott Locke, ACSI, co-founder of abroaden, a financial wellbeing and education start-up for people living abroad headquartered in Barcelona.

“The calculus is harder for freelancers given the different legal structures and methods for freelancing between the two countries. In many ways, if an American moves here to work remotely, it could be beneficial for them to have their US-based employer hire them on a local contract through an employer-of-record,” Locke told The Local.
 
In short, the new agreement could make it more attractive for U.S. companies to post employees in Spain, making them eligible for Beckham’s law and allowing autonomous workers to pay into the U.S. social security system, making it more beneficial and easier to be a digital nomad in Spain.

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Who benefits from the new agreement?
 
The people who will feel this new agreement the most are employers, digital nomads, retirees who have paid into both systems over the years, and finally, civil servants. “Spain has incorporated as possible beneficiaries of the Agreement those people who have contributed to the civil servant’s regime (passive class regime), who were excluded in the previous Agreement,” says the Ministry.
 
When can we expect the new agreement to come into force?

Don’t hold your breath; this is Spain after all, but we can expect the agreement to come into force within the next two years.

The deal has to pass through Congress before approval, which is likely why it has not yet been published. If things move quickly, people could expect to benefit within a year.

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