Remote work in Spain (teletrabajo)
The new Remote Work Act imposes several obligations on employers. Among others, it would be mandatory for the parties to conclude a written remote working agreement before remote work starts which regulates the following matters:
- An inventory of the means, equipment and tools required for the development of remote work, including consumables and furniture, as well as the lifetime or maximum period for renewal of these;
- A list of the expenses that the employee might incur as a result of remote work, specifying how the compensation for expenses that must be paid by the employer has been quantified, detailing as well when and how said payment shall be made and respecting the applicable industry-wide CBA provisions;
- A timetable of the remote work and, if applicable, rules of availability;
- Percentage and distribution between office work and remote work, if applicable;
- Work location of the company to which the remote employee is assigned and, if applicable, where the remote work could provide services in those cases of mixed remote and office work;
- The place that is chosen by the employee for the performance of remote work;
- Notices that may be observed by any party to return to office work;
- The means to be used by the business in order to control the employee´s activity;
- A procedure to be followed in the event of technical difficulties preventing the normal development of remote work;
- The instructions given by the company specifically in the area of data protection applicable to remote work;
- The instructions issued by the company on information security, specifically applicable to remote work; and
- The duration of the remote work agreement.
Please note that the lack of formalisation of said individual remote working agreement is considered a serious infringement and therefore the Work Inspectorate could impose an economic fine that may range between 750 and 7500 Euros.
Misclassification of Employment
Spanish law does not provide a specific definition of ‘employee’. Instead, there are certain criteria and characteristics that would indicate if a worker is an employee:
- An employee must be an individual or ¨legal person¨, it cannot be a legal entity or substituted by another employee.
- The work produced by the individual and the results of that work belongs to the employer. The employee does not carry any risk related to the work, such as any financial loss or bankruptcy.
- There is a subordinate relationship between the employer and employee – the employer has authority over the employee
- The employer pays an agreed salary in exchange for the time given and work produced by the employee
Self-employed workers (or independent contractors) should are defined by the following characteristics:
- Legal entities can not be self-employed workers, it must be a ¨legal person¨
- The services are provided regularly and receive a payment in exchange
- The work produced is owned by the self-employed worker, and they carry all the financial risk associated with the work
- There is no subordinate relationship here, the self-employed worker can receive guidance but is not bound by instructions.
A dependent self-employed worker works 75% of their services to the same client. The difference here is that the law recognizes a dependence on the client and that these dependent self-employed workers can not hire employees.
Self-employed workers are responsible for their own social security contributions. Whereas for employees are made by the employer.
For misclassification of an employee, an organization may have to pay social security contributions for up to the previous four years of the working relationship, in addition to a surcharge. There may also be a fine imposed depending on the severity of the case from €6,251-€187,515. Both the employee and the employer may be requested to pay any outstanding sums to the tax office for any relevant payments.
Misclassification risk leads to a liability for not withholding wage tax and social security contributions. This risk must be analyzed on a case-by-case basis since the circumstances may be different.
The request of a self-employed contractor to be recognized as an employee before the labor courts or by the Inspectorate of Work may start a procedure leading to penalties for wrongly classifying someone as self-employed.
The main social security risk is misclassification. This would imply:
- The payback of all social security contributions from the past four years + a 20% surcharge + interests
- Administrative sanctions for the company consisting between 100% and 150% of the amount of contributions not paid during the past four years
The company would also need to consider right-to-work implications if an individual (non-EU foreign national) is reclassified as an employee.
Costs for Independent Contractors
It’s also worth noting, there are costs, in addition to income taxes, for being an Independent Contractor in Spain. These have been recently updated to be more favorable for lower-income earners. Here are the updated costs per month:
- Flat rate for newly self-employed: 80 euros per month for the first 12 months.
- Reduced rate for self-employed with low income: 160 euros per month for the first 36 months, if the self-employed person forecasts that they will earn less than 14,000 euros in the following year.
The following table shows the official thresholds and contribution amounts for self-employed workers in Spain in 2023:
| Threshold | Monthly income | Monthly contribution |
|---|---|---|
| 1 | 670 euros | 230 euros |
| 2 | 700 euros | 260 euros |
| 3 | 730 euros | 290 euros |
| 4 | 760 euros | 320 euros |
| 5 | 800 euros | 350 euros |
| 6 | 830 euros | 380 euros |
| 7 | 860 euros | 410 euros |
| 8 | 900 euros | 440 euros |
| 9 | 930 euros | 470 euros |
| 10 | 960 euros | 500 euros |
| 11 | 1,000 euros | 530 euros |
| 12 | 1,200 euros | 560 euros |
| 13 | 1,500 euros | 590 euros |
| 14 | 2,000 euros | 590 euros |
| 15 | 6,000 euros | 590 euros |
Please note that these thresholds are subject to change. The Spanish government may adjust the thresholds in the future, depending on economic conditions.
Social Security Rates for employees:
- Employee: 6.35% of the employee’s gross salary.
- Employer: 30.40% of the employee’s gross salary, plus a variable rate for occupational accidents (e.g. 1.50% for office work). Social security is capped at €4495,5 per month, therefore any salary amount above this will not incur social security contributions.
The income tax payments in Spain for 2023 are based on a progressive tax scale, with rates ranging from 19% to 45%. The amount of tax you pay will depend on your taxable income, which is your total income minus certain deductions and allowances.
Here is a table that shows the income tax rates in Spain for 2023:
| Taxable income | Tax rate |
|---|---|
| Up to €12,450 | 19% |
| €12,451 to €20,200 | 24% |
| €20,201 to €35,200 | 30% |
| €35,201 to €60,000 | 37% |
| Above €60,000 | 45% |
In addition to the progressive tax scale, there are also a number of deductions and allowances that you can claim to reduce your taxable income. Some of the most common deductions and allowances include:
- Personal allowance: This is a fixed amount that everyone can claim, regardless of their income. The personal allowance for 2023 is €5,550.
- Dependents: You can claim a deduction for each dependent child or relative that you support. The deduction for each dependent child is €2,400.
- Rent: If you rent your home, you can claim a deduction for the rent that you pay. The deduction is limited to 10% of your taxable income.
- Work expenses: If you incur expenses in the course of your work, you may be able to claim a deduction for these expenses. Some common work expenses include travel expenses, professional fees, and clothing expenses.