Employment status in Spain

The different categories of worker

There are two main categories of relationships between companies/entrepreneurs and the individuals working or those rendering services to them:

• dependant employee, regulated by an employment contract, and
• independent contractor - for particular services or tasks regulated by contract, eg self-employment, consultant or freelance.

Additionally there is a sub-type of self-employment which is worth outlining as it is kind of a “middle alternative” between employees and contractors. This figure is the “dependant self-employed”.

Distinguishing the categories

In general, if a worker has an employment contract, this means that he/she is an employee, whereas if they have a service agreement he/she will be self-employed. However, it will always be necessary to consider what actually happens in practice, on a day to day basis, irrespective of what the parties have agreed or written down.

The two most important elements of an employment contract are that:

• there is an agreed exchange of work for a remuneration, and
• the employee is dependant on the employer for organisation of work and instructions.

If either or both of these factors are absent, there cannot be an employment contract. If both these factors are present, there may be an employment contract and the labour court will consider the facts of the situation. In general, the greater the degree of personal responsibility an individual undertakes, the more likely it is that he/she will be considered an independent contractor rather than an employee.

There is also a further sub category of self-employment - “dependant self-employed”, which aims to enhance the rights and social benefits of this category of self-employed workers. The “dependant self-employed” are those who broadly meet the requirements of self-employment (they organise themselves, bear financial risk and are not subject to disciplinary control) but in practice are largely financially dependent on one client.

In order to fall within the category of “dependant self-employed”, an individual must

• receive 75% or more of their annual earnings from one specific client (thereby being mainly dependent on that client from a financial perspective)
• not have any employees nor be sub-contracting any of their activities to a third party
• carry out their work in a different way than the client’s employees
• have their own organisational infrastructure and equipment (where relevant to the type of activity being carried out)
• deliver services with a degree of self-organisation, subject to any technical indications from the client where required, and
• take a degree of financial risk by agreeing to receive fees only if the contractually agreed goals are actually achieved.

Legal consequences of the distinction

Employment relationships are governed by labour laws and subject to the jurisdiction of labour courts, whilst the relationship with an independent contractor will be regarded as a commercial relationship governed by commercial and civil laws and regulation. Social Security quotations of employees are bearded, in the larger part, by the employer. However independent contractors must attend their own Social Security obligations.

Categories of employee

Indefinite term

Employees employed for an indefinite term are those with contracts which do not have a fixed expiry date. Employment contracts are usually concluded for an indefinite term and run until notice is given or until it ends in some other way such as retirement.

Fixed term

Fixed term contracts can be entered into in the following cases:

• for the performance and completion of a particular task or service
• used to cover an increase in production needs, subject to a maximum reference period
• to cover the absence of an employee who has the right to reserve their position in the company.
• a training contract - up to four years after the employees finish their studies, a minimum length of six months and a maximum of two years, and
• a learning contract to obtain necessary training for workers aged between 16 and 21.

As a general rule, employees on fixed term contracts and their employers have the same rights and obligations as those on indefinite term contracts.

Directors and senior managers

A worker employed under a senior management contract is a person who has broad authority relating to the overall and strategic management and administration of the company and exercises such authority with autonomy and full responsibility, reporting only to the company’s governing body. In practice, it is often difficult to differentiate senior managers from ordinary employees.

The employment terms of such executives are subject to fewer constraints than those that apply to ordinary employees.