High-level advisory for Spain's employment and HR sector

Spain’s employment services sector — comprising temporary employment agencies (ETTs), recruitment firms, HR outsourcing companies and Professional Employer Organisations (PEOs) — concentrates approximately 5,900 active companies and directly employs more than 248,000 Social Security-registered workers, a figure that represents only a fraction of the millions of employees these companies manage on behalf of their clients. With aggregate revenues of €8.5 billion, a five-year survival rate of 47.6% and gross margins of just 3.4%, operators rely on tight control of labour, tax and regulatory costs as the principal lever of profitability. Spain’s 8.0% share of the European market is a position that leading domestic groups maintain by competing against global-scale multinationals.

Spain’s Labour Inspectorate has intensified enforcement campaigns targeting unlawful labour supply, bogus worker cooperatives and misclassified employment relationships, raising the risk significantly for operators without proper legal support. Law 14/1994 on ETTs, the Employment Act (RDL 3/2015), sectoral collective agreements and data protection legislation together create a compliance environment that requires constant monitoring. Pressure on sector margins is further compounded by the rise of digital staffing platforms whose worker classification models are being scrutinised by the courts in the wake of the Rider Law and its evolving interpretations.

At BMC we advise ETTs, selection agencies, BPO firms and PEOs across their full range of legal, employment and tax needs. Our services cover obtaining and renewing administrative authorisations to operate as an ETT, negotiating and applying collective agreements, managing ERTE and ERE processes for both the HR company and its client businesses, running payroll for placed workers, and representing clients before the Labour Inspectorate and in the social jurisdiction courts. We also support international operators in structuring their entry into the Spanish market via the PEO model or through establishing a directly licensed ETT.

Data protection compliance is a critical area in a sector that processes employment and biometric data at scale: professional histories, candidate profiles, health data for occupational risk prevention, and performance metrics. We advise on drafting GDPR-mandated records of processing activities, structuring contracts with client companies as data processors, managing international data transfers within multinational groups, and handling security breach notifications within the 72-hour window required by the supervisory authority. Our integrated employment, legal and compliance approach ensures that HR companies can scale their operations in Spain with full confidence.

Key services for HR and employment

Employment law in Spain requires navigating an increasingly complex regulatory landscape: the 2021 labour reform that reduced temporary employment, the Rider Law that established a presumption of employed status for platform workers, the Remote Working Law and its implementation regulations, and the continuously evolving framework on algorithmic management and digital rights of workers. Our bilingual team advises in Spanish and English, supporting both Spanish companies with international operations and foreign companies establishing themselves in Spain.

Payroll and social security management for Spanish operations requires specialist knowledge of the Social Security contribution system, the management of sick leave and maternity/paternity benefit claims, the correct application of IRPF withholding rates including the reduced rates for expatriate employees, and the preparation of annual income tax reporting certificates (modelo 190). We manage payroll for companies ranging from single-employee Spanish subsidiaries to multi-site operations with hundreds of employees.

Compensation structuring for senior executives creates significant value for growing companies. Variable compensation plans, long-term incentive schemes (phantom shares, stock options, restricted stock units), flexible remuneration packages and deferred compensation arrangements all have significant income tax, social security and corporate tax implications that must be modelled in advance. The Spanish Startup Law exemption for stock options (up to €50,000 per year free of IRPF on exercise) is a particularly valuable tool for talent attraction in the tech sector.

Regulatory challenges for HR and people management

Data protection in HR is one of the most complex compliance areas. Employee monitoring systems, AI-assisted recruitment and performance management tools, biometric access systems and remote work monitoring technologies are all subject to GDPR restrictions and AEPD guidance. Data protection impact assessments (DPIA) are mandatory for monitoring systems and AI used in employment decisions. We advise employers on designing HR data governance frameworks that comply with data protection law while meeting their operational needs.

Workforce restructuring and collective redundancies (EREs) in Spain require compliance with strict procedural and justification requirements. Negotiations with worker representatives, interaction with the SEPE and management of employment tribunal claims require legal expertise and practical knowledge of Spanish industrial relations. Our team has managed ERE processes across a wide range of sectors and company sizes, from 20-person redundancy exercises to large-scale restructurings affecting hundreds of employees.

KPIs and trends in Spanish HR management 2025-2026

Spain’s HR and staffing services market exceeded €12 billion in revenues in 2024, driven by the growth of outsourced payroll, talent acquisition technology and workforce management platforms. Absenteeism remains one of the highest in the EU, with an average of 18 days lost per employee per year — a significant productivity challenge that is driving investment in wellbeing, flexible working and preventive health programmes. Remote and hybrid working is now standard for 38% of knowledge workers in Spain, creating new legal and operational challenges around tax nexus, equipment provision and productivity measurement.