Most of us have some idea about how life between an employee and a self-employed person differs. We know that employees and freelancers in Spain enjoy other freedoms and rights. It can be contracted, paid time-off or even the physical location of the work.
But what about the less apparent scenarios? Here we answer the questions that you may have. So, first of all, let’s understand the basics and why they matter!
Table of contents
- What is an employee versus a freelancer in Spain?
- What is a freelancer compared with an employee in Spain?
- Types of self-employment in Spain:
- Social Security Contributions for employees and freelancers
- Can I be self-employed and an employee simultaneously?
What is an employee versus a freelancer in Spain?
An employee is a person who decides to provide professional services to a company or an organisation. This is their employer, and they pay them a fixed salary in exchange for their time and work. This is the main difference between employees and freelancers in Spain.
An employee has signed a contract which shows their employment terms, like salary and annual leave. They must also register as a company employee at least three days before the labour relationship starts.
Here are some of the things that apply to an employee:
- They have work hours, breaks and a workplace determined by its management.
- They are 100% dependent on their employer, so the latter provides them with the means to carry out their activities.
- However, they are not liable for its activity, so they receive the previously agreed salary.
The relationship between the employer and employee is usually set in a contract. The contract is typically full time but doesn’t usually give the worker an automatic choice to work from anywhere.
What is a freelancer compared with an employee in Spain?
These individuals conduct their professional activity without a contract linking them to a specific company. Essentially, a self-employed person acts in their own name. Digital Nomads and other remote workers are often self-employed. This is a key difference between employees and freelancers in Spain.
They usually have unlimited liability, which means no difference or separation between their assets and their company. So, if they fail to comply with their responsibilities during their professional activity, their assets can be seized as compensation.
Self-employment comes with risks and responsibilities, which isn’t for everyone. But, often, self-employed people are entrepreneurial and rely on their determined personalities and talent to build ideas into businesses.
They develop their professional work without a boss, formal oversight or imposed guidelines. This is common with remote work and Digital Nomads. In addition, they must file invoices and complete business accounts, so they must always separate professional and personal expenses.
Types of self-employment in Spain:
Several factors related to the type of activity, management, or contribution led to different self-employed workers. This is ionly implies to freelancers and not employees in Spain.
These professionals manage a small physical business or work in professional activities that are subject to certain tax codes. Freelancers make regular contributions to social security.
This typically refers to professional association members, like doctors, lawyers, or psychologists. However, it can also cover workers in non-membership groups, like writers or computer programmers. They withhold personal income tax from invoices if the invoice recipient is a legal entity.
This approach (called Autónomo Societari) is when the professional incorporates as a corporate entity and is self-employed for the company. They must register with social security officials when they have effective control of the company and perform its functions.
Corporate self-employed persons have limited liability, so they are not liable for their assets in the event of a debt. However, their personal income tax contribution base is higher than that of the freelancers as a “natural person”.
TRADE or economically dependent self-employed workers:
Economically dependent self-employed workers are those whose turnover is at least 75% dependent on a single client. This has given rise to controversial situations such as “false self-employed”, which some companies use to avoid social security costs.
Social Security Contributions for employees and freelancers
One of the main differences between the freelancers and employees in Spain is paying Social Security contributions.
Employees contribute to social security together with their employer. The amount depends on salary, overtime, maternity leave and illness at work, to name a few variables.
The self-employed contribute to Social Security through the Special Regime for Self-Employed Workers or RETA.
Can I be self-employed and an employee simultaneously?
Some people work under this arrangement, known as “pluriactivity”. They must register with General Social Security Scheme and RETA if the work is ongoing and at the same time.
This shouldn’t be confused with “moonlighting”. A worker performs activities for two or more companies simultaneously but is only part of the General Social Security Scheme. This is important to remember when deciding between being an employee or freelancer in Spain
A freelancer has more legal obligations than an employee in Spain. A self-employed person must register with social security to pay their contributions and register with the tax authorities to pay taxes.
On an emotional level, being a freelancer is incomparable as you conduct your own project, which is very satisfying. Conversely, an employee brings greater peace of mind on a day-to-day basis, but regular supervision isn’t for everyone.
To lower the stress of being a freelancer and enhance the opportunity, we recommend having a good plan and working with experts. More information gives you more confidence, so research your business model and double down on your talents.
Getting started can be like climbing a mountain, but the Spanish state makes life simpler by giving freelancers rights to unemployment benefits, bonuses for new registrations with social security and the flexibility to register and deregister several times a year.
Speak with us today to understand how to structure your freelance life and understand your rights and benefits. Be the boss of yourself and do it in Spain. Speak with Lexidy to understand the differences between employees and freelancers in Spain