Employees vs Independent Contractors Spain

Updated as of 2017

Introduction

The present article will analyze the differences between an employee who has an employment relationship with its employer and an Independent Contractor who has a mercantile relationship of independence with the Company (its client).

In this sense, it will hereby be explained what is required for the existence of an employment relationship, concluding that it is especially necessary that the Company (receiver of the services) assumes the costs, risks and economic results inherent to the productive activity (what is known as “alienation”), as well as a degree of dependence or subordination of the employee with regards to the employer, being included in its governing, disciplinary and organizational circle.

Thus, we will see how the independent contractor does not comply with the characteristics mentioned above, since it will be in charge of organizing its own work, making use of its own resources and assuming the risks of its activity.

Another difference between an employee and an independent contractor is the type of contract that regulates the employment relationship, which may be set for an indefinite or temporary duration. On the other hand, the contract that regulates the specificities of an independent contractor may be civil or commercial. However, it should be taken into account that despite of the type of contract that the company uses, in the event of a conflict, the principle of primacy of reality will always be applied in order to decide whether the person is an employee or an independent contractor.

If a person claims for the recognition of the labor nature of its relationship with the employer, two assumptions may arise with their respective consequences, depending on whether (i) the employee can demonstrate the existence of an employment relationship while continuing providing services, or (ii) the employee interposed the claim after being dismissed and got a favorable judgment. In both cases, if the plaintiff obtains a favorable and final decision, the following step would be to report the current situation to the Labor Inspectorate. The public authority would then request the Company for the unpaid Social Security contributions accrued during the last 4 years prior to the filing of the claim.

In the present article, we will also make a comparison of the Tax aspects between independent contractors and employees, such as the income tax (IRPF), VAT and social security contributions.

Another topic that we will be discussed in this work will be the main differences between the General Social Security and the Special Social Security Scheme for independent contractors, which may have different effects on retirement, maternity and paternity benefits.

Due to its importance, we will also explain the figure of the independent contractor economically dependent (hereinafter “TRADE”), who constitutes a special category of independent contractor that mainly work for one client.

Finally, we will discuss the same case seen from two different perspectives in order to be able to distinguish the difference between an employee and an independent contractor.