Employee vs. Contractor: How to Classify Workers in Spain (Quiz included) [2024]
If you plan to hire workers based in Spain, the first step is to classify them correctly. Fail to do so and you could face fines and penalties.
In 2022, a Spanish delivery app called Glovo was fined €79 million for misclassifying 10,614 workers. Though the company classified them as self-employed contractors (autónomos) in Barcelona and Valencia, the Department of Labor determined that, per Spanish law, these couriers were actually in an employment relationship with Glovo. Then the company was fined another €57 million in 2023 for misclassifying more than 7,800 couriers in Madrid.
Misclassification is also damaging for workers, as it cheats employees out of benefits and protections they're entitled to under Spanish law, such as minimum wage, vacation pay, and paid holidays. The company’s reputation could also suffer as a result.
If you’re hiring employees or contractors, this guide will teach you how to classify your workers correctly, per Spanish labor and employment laws. Plus, we reveal the tools and services that can help keep you compliant.
Classifying workers in Spain
Spain has specific rules to determine what workers are employees versus contractors. Classify workers correctly to keep your operations smooth and avoid fines (more on those below).
What is an employee in Spain?
Spanish employees are defined as individuals who work for their employer in return for wages or other remuneration. They are also dependent on their employer for work. Spanish courts consider that an employment relationship exists if a worker is subject to the organizational and managerial oversight of the company.
Employees are also entitled to certain protections and mandatory employee benefits. Spain regulates jobs by professional categories, with different laws around compensation, working hours, and vacation types. Collective bargaining agreements (CBA) may also be made at the workplace, company, industry, regional, or national levels. Regardless, statutory employee benefits include:
- Pension and social security contributions. Spain’s robust social security program (sistema de seguridad social) has one of the highest pension rates in the world but includes many benefits for which, in other countries, employers would normally take responsibility. This includes sick leave, disability, retirement, death benefits, and parental leave (including maternity and paternity leave).
- Vacation entitlements. Full-time workers are owed 30 calendar days of vacation, but this may vary depending on the collective bargaining agreement in place.
- Statutory holidays. Full-time employees must get 14 days of public, paid holidays.
What is a contractor in Spain?
A contractor is an individual who provides a service to an organization without becoming an employee. They are often obtained for a specific project or a set amount of time.
Independent contractors are also known as self-employed individuals, consultants, or freelancers. They pay their income tax and provide for their own benefits.
Spain has a few different types of contractors (more on those below).
Worker classification overview: Employees vs contractors in Spain
If a misclassification case goes to the Spanish Courts, they will look at both the written contract agreement as well as how the arrangement works in practice. Here are some of their considerations:
Spain has some of the most strict employee protections in the world, bolstered by the fact that collective agreements are incredibly common. In Spain, the term “falso autónomo” refers to “fake freelancers”—those who are technically contractors, but are employees in practice. The country has cracked down on those who have employed falso autónomo.
Contractors
Employees
High level of worker control. Contractors organize their activity freely and autonomously. They’re not subject to orders regarding how they render their services. The company can’t control their working time or holidays. The company only sets goals or projects.
Direction from the employer. Employees are subject to more control from their employer, who can provide guidance on how to perform the work and set specific hours of work.
Not a part of the organizational chart. Independent contractors don’t have a manager or work alongside employees of the company. They should work on their own premises.
Highly integrated. Employees are typically integrated into the employer's organization and may work at the employer's premises.
Equipment and tools owned by the worker. The worker also shouldn’t be compensated for the use of their tools.
Equipment and tools typically provided by the company. The company may also reimburse them for this cost.
Paid for goals met or work achieved. Contractors should not be paid hourly or per a fixed monthly fee.
Paid a consistent salary or wage, regardless of work completed.
No entitlement to benefits. Contractors are also responsible for paying their own taxes. They also should not have company emails. The company does not have to provide them with professional training.
Entitled to benefits. Employees are entitled to minimum wage, overtime pay, vacation pay, maternity leave/paternity leave, and other benefits.
No disciplinary action. The company can’t discipline contractors and can only terminate the agreement for breach of contract.
Can receive disciplinary action for workplace violations.
Time-bound engagement. Contractors are typically engaged for a specific project or period of time. The longer the duration of the contract, the greater the risk of misclassification.
Indefinite engagement. Employees are generally hired for an indefinite period of time.
Non-exclusive services. Contractors cannot be contractually bound to a single company or have post-contractual restrictions.
Exclusive services. Employees can be contractually bound to provide services to just one company.
Tests to classify workers in Spain
There are five tests that classify workers under the Worker’s Statute (Estatuto de los Trabajadores). Remember that the Spanish courts and tax authorities will examine all aspects of your working relationship, which includes both contract agreements and your work in practice. No single test should be considered conclusive for classifying a worker.
Dependence
In case law, dependence is the most decisive factor in determining employment relationships. This isn’t necessarily about having a subordinate relationship, but about whether the work is conducted within the organization and at the direction of their employer.
How much control do you have over your worker? Whereas employees are subject to direction about their working hours, working days, and even place of work, contractors must be allowed to organize their work autonomously.
Is your worker subject to workplace rules and regulations? Contractors are not subject to disciplinary action, whereas employees are subject to codes of conduct and other rules.
Assiduity and exclusivity
Are your workers allowed to have other clients? Contractors cannot be contractually bound to a single company or have post-contractual restrictions, whereas employees may be bound to exclusivity. Even if you do not prohibit your contractor from working with other organizations, issues may arise if you are their sole source of income.
How closely do you manage your worker? If you manage your contractor, they could be considered misclassified employees. Contractors should not work alongside or subordinately to your employees.
Alienation
Alienation refers to a few different aspects:
- Who the work belongs to
- Who assumes labor costs
- Whether the work product will be incorporated into the employer’s assets
- The economic results and who is taking on economic risk
- Whether the work product goes to market directly or must be filtered through the employer or business
Some related questions include, but are not limited to:
Is your worker exempt from economic risk? Contractors are only paid for completed work; they also take on their own labor costs and economic risk. Workers, meanwhile, aren’t exposed to economic risk and are paid a salary/wage, regardless of what they produce.
Does your worker have their own equipment and tools? Contractors provide their own tools, whereas companies typically provide employees with tools.
Personal nature of relationship
Employee-employer relationships are considered personal—employers hire employees because of their specific skills, experience, and identity.
Was your worker hired for a special skill? Can that skill not be easily replaced? If a contractor has a very specific skill set that is integral to the business, they may be considered an employee.
Payment
Does your worker receive a set wage or salary? Employees receive wages/salaries, whereas contractors are paid per project or other goals.
Types of contractors in Spain
Spain only has several classifications for contractors:
- Independent contractors (also known as self-employed workers, consultants, or freelancers)
- Self-employed entrepreneurs
- Dependent contractors
Learn about each type in more detail below.
Independent contractor
Independent contractors or freelancers (profesional autónomo) are individuals who take on projects by contract in exchange for remuneration but aren’t under any employment contracts.
Self-employed entrepreneur
A self-employed entrepreneur (empresario individual) essentially operates a one-person business under which the contractor administers their own work. Instead of providing their services as an individual, they provide them under their business, which is a separate legal entity.
Dependent contractor
This is considered the middle ground between a contractor and an employee. While these workers are considered contractors because they self-organize, bear financial risk, and aren’t subject to disciplinary action, they are primarily financially dependent on a single client. A dependent contractor:
- Gets more than 75% of their earnings from a single client
- Doesn’t have their own employees or subcontract their work
- Executes their work differently than the organization’s employees
- Isn’t subject to organizational infrastructure
- Has their own equipment or tools
- Takes on financial risk by only being paid if their contractual goals are met
Penalties for misclassifying workers in Spain
Businesses found guilty of having fake freelancers could face the following repercussions:
- Fines for labor fraud between €3,750 and €12,000
- Imprisonment up to six years
- Back taxes on wages
- Paying out for overtime, vacation days, public holidays, or other benefits that the contractor would have accrued as an employee
Of course, as mentioned earlier, companies may also suffer damage to their reputation, as well as increased and lasting scrutiny from the government and legal disputes. Misclassification, whether accidental or intentional, is risky and potentially very costly.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
