Spain has been one of the preferred destinations for employees working for UK employers during the COVID19 Pandemic, and a number of them have requested to continue to work from Spain upon the end of the Pandemic. Although many companies accepted this arrangement in the belief that the situation would last for a few weeks, the length of the Pandemic, and changes in Spanish law on remote work require some adjustments to those arrangements.
Employees working outside of the UK will be subject to mandatory employment laws in Spain, for example laws on working time, minimum pay, health and safety obligations, etc. The fact that they are working remotely for a UK employer will not be relevant. Under the latest Spanish regulations on remote work, the UK employer will need to enter into a remote work agreement with the employee, covering areas such as payment of remote work expenses, providing remote work means and tools, regulating privacy and disconnection rights, etc. Some of these requirements will not apply if the arrangement remains during the COVID19 Pandemic.
Many of the protections conferred by Spanish law will be familiar to UK employers, since they derive from EU law – for example the laws on discrimination and working time. However, the elements of employment protection that derive solely from Spanish local law are different, and in some important respects more generous to a worker than the corresponding rights under UK law.
If the employee is a home worker, they can bring the dispute in front of the Spanish labour courts.
Tax and social security
The issue of tax residency is a complex issue and requires specialist advice in each case. However, an individual is treated as being resident in Spain if, in the tax year from 1 January to 31 December an individual is physically present in Spain for more than183 days.
Having an employee working from home in Spain for the UK employer does not necessarily entail the existence of a permanent establishment.
Working permanently from home in Spain will require the employer to make Spanish social security contributions on behalf of the employee. These are calculated as a percentage of salary (currently approx. 30% at the employer’s charge with some variation possible due to different accident contribution’s rates, and 6.35% at the employee’s charge). Salary for social security contributions calculation is capped annually, currently at annual salary of EUR 48,841.2. The UK employer will need to register the company in Spain as a foreign employer to fulfil these obligations.
The UK employer does not necessarily need to make income tax withholdings but doing so should be reviewed on a case-by-case basis.
Company law considerations
Due to the need to fulfil social security obligations, the UK employer will need to register with the Spanish authorities to obtain a tax and social security identification number
Provided the worker is EU national, there will be no requirement to obtain a visa or work permit.
However if the worker is a UK national they would need to comply with Spanish immigration rules, unless they were already resident in Spain as at 31 December 2020 and have filed their residence permit as of March 31, 2021. The UK/EU Trade and Cooperation Agreement does not contain any provisions to facilitate new remote working arrangements of the kind envisaged by UK nationals.
Therefore UK nationals will be treated like third country nationals. As such they will be required to obtain a work permit if they are engaged in work on Spanish territory, unless they qualify for a work permit exemption. They will require a residence permit, if their stay in Spain or the Schengen area exceeds 90 days in any 180 day period. During the COVID19 Pandemic, additional requirements may apply.
This is document is a very brief summary of complex legal provisions. Specific advice should always be sought, based on your organisation’s precise situation.
For advice on Spanish law please contact Lara Vivas, Labour and Employment partner at Cuatrecasas