In recent decades, as a consequence of internationalization of companies, employees frequently move to different countries to make the most of their experience and technical training, simultaneously optimizing the company resources.

This article offers an overview of the principal issues to be taken into account in mobility of employees taking Spain as the destination country to which an employee may be temporarily posted from a foreign company. In other words, what is commonly known as impatriate.

“…Which legislation will govern his/her employment agreement and therefore which will be the applicable working conditions?”

The principal questions raised in the situation of an employee temporarily posted to Spain to render his/her services are the following: Which legislation will govern his/her employment agreement and therefore which will be the applicable working conditions? Another aspect that should be considered is the one related to Social Security contributions, i.e., Do employees maintain their contribution in the country of origin or otherwise can they pay their contributions in Spain? The foregoing, without losing sight of a fundamental aspect such as the authorization for the relevant work and residence permits which may be required if the employee comes from a Non-EU country.

In this sense, contrary to the tax measures scope, which particularly regulates the special Tax Regime applicable to workers posted to the Spanish territory, on the labour and social security scope there is not a specific provision regulating the situation of impatriates, which will be regulated depending on how their posting has been carried out.

1. Working relationship of the impatriate. Employment agreement with the company of origin or at destination.

Regarding the posting of employees and therefore the working conditions that will regulate their working relationship while rendering their labour services in Spain, there are mainly two options: the first one, to maintain their employment agreement with the company of origin; and the second one, to enter into an employment agreement with the destination company (Spain).

In this sense, one of the elements to be clarified is the governing law of the employment agreement: either the one of the destination country, in this case the Spanish law, or the one of the country of origin.

For these purposes, we must differentiate between impatriates coming from EU Member States, European Economic Area States or Non-EU States.

If the impatriate comes from a Non-EU country, Rome I Regulation will be the one to determine the applicable law for the employment agreement. The governing law of employment agreements will be thus the one chosen by the parties, or otherwise the agreement will be governed by the law of the country where the worker may usually render his/her services (Spain). In the absence thereof, the agreement will be governed by the law of the country where the establishment through which the worker has been hired, may be located.

Furthermore, if the posting is between EU or EEA Member States, Directive 96/71/EC will apply. Even though it does not expressly establish the applicable law in such cases of geographic mobility, such EU regulation provides that the minimum working conditions must comply with the legislation of the destination country, in this case Spain, i.e., the public law rules must be respected. Then, in order to determine the applicable law of the employment agreement we must adhere to that set out in international conventions, particularly, Rome I Regulation.

“…one of the elements to be clarified is the governing law of the employment agreement…”

For this reason, the applicable law for impatriates shall be the one agreed by the parties in their contract or otherwise the Spanish law, since the employee will render his/her temporary services in Spain.

Similarly, the fact that the impatriate comes from a Non-EU country or if the worker is a Croatian or Austrian citizen, special procedures for the residence or work permits in Spain shall be required for such workers to be able to legally perform their services. Such procedures shall be carried out pursuant to legislation on foreigners.

2. Working conditions of impatriates

Once the applicable law of employment agreements has been established, we must question whether such law must be the applicable one to determine the working conditions of impatriates.

In this regard, as set out in Directive 96/71/C and Act 45/1999, regardless of the governing law of employment agreements, the minimum working conditions provided in the basic labour regulations of the destination country must be established during the posting.

Then, if the employment agreement is regulated by a foreign legislation, impatriates will have their minimum working conditions provided in the Spanish labour legislation guaranteed, which are also regulated in the Workers’ Statute and the applicable Collective Bargaining Agreement.

3. Where must impatriates pay their contributions to the Social Security?

Finally, a last aspect of certain importance for impatriates is the Social Security contribution. We must say that there are two possibilities depending on whether the posting is within or out of the EU area.

In general terms, both in the case of impatriates from EU Member States and Non-EU States, impatriates will be subject to the legislation of the country where they may render their services, in this case, the Spanish Social Security law and therefore they would pay their contributions in Spain.

However, in the event of temporary postings of impatriates coming from EU Member States as provided in article 12 of Regulation 465/2012 and article 14 of Regulation 987/09, the person carrying out a remunerated activity in a Member State on behalf of an employer who usually carries out its activities therein and who may be posted by this employer to carry out a work on its behalf in another Member State, shall remain subject to the legislation of the first Member State, provided that the term expected for such work does not exceed twenty-four months and such person is not posted in replacement of another person.

In this regard, if the posting is carried out within the EU, contribution to the Social Security may be made in the country of origin of the impatriate during twenty-four months. To that end, the impatriate must obtain the form A1 to certify that he/she is covered by the Social Security of the country of origin during a maximum period of 2 years.

Similarly, if the posting is expected from the very beginning to exceed 24 months, an exemption may be requested, whereby the worker will be allowed to maintain the Social Security coverage of the country of origin during the whole posting. Such exemption must be requested under form TA-204. We must say that such exemptions are established on a case-by-case basis, must be approved by the competent administration of the countries involved and they are only valid during a certain period of time.

“In general terms, impatriates will be subject to the legislation of the country where they may render their services…”

Therefore, there is the option that if no employment agreement has been executed in Spain, the impatriate would carry on contributing in the Social Security of the country of origin. However, we remark that within the European Union, the principle of reciprocity of contributions is applied with the purpose of guaranteeing contributions made in the different countries.

In turn, if the impatriate comes from a Non-EU country, the Bilateral Agreements signed between Spain and the relevant country establishing the requirements and terms of contribution for each case, shall apply. In the event of a temporary posting, the legislation of his/her country of origin will be usually maintained during the term authorized by the relevant Bilateral Agreement, which may range between one and five years.

Finally, as mentioned above in this section, in the event that there is no Bilateral Agreement with the country of origin of the impatriate, the legislation of the Social Security of the country in which the impatriate is carrying out his/her labour activity will be applied, i.e., the Spanish legislation.

In conclusion, there are many factors to be taken into account when planning and executing a temporary posting of an employee from a foreign country to Spain in order to provide security to the impatriate during the process and simultaneously guarantee the performance of the obligations established in the Spanish legal framework. Consequently, given the complexity of these situations, each specific case should be analyzed to offer the best solution and possible alternative.