Posted Workers: Why Compliance Is Key in International Employee Posting

In the context of increasing international mobility, more and more companies are posting employees to other European Union countries as part of service provision. However, many organizations continue to make a critical mistake: assuming that mere compliance with regulations is sufficient. The reality is different.

In the area of posted workers, compliance alone is not enough: companies must be able to demonstrate compliance at the right time. Failing to do so can result in sanctions, even when the situation is legally valid in substance.

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Practical Case: Sanction for Non-Compliance with Posted Workers in Spain

A recent ruling by the High Court of Justice of Madrid perfectly illustrates this risk.

During a labor inspection in Spain, an employee was found providing services without being registered with the Spanish Social Security system. At that time, the company could not provide:

• A1 certificate

• Posting notification

• Documentation proving the transnational context

Faced with this situation, the Labor Inspectorate acted based on the evidence available at the moment:

• Reclassified the relationship as local employment in Spain

• Proceeded with registration in Social Security ex officio

• Imposed a financial penalty for failure to register

The most relevant aspect of the case is that the company did have the A1 certificate, but did not present it at the appropriate time. The result: a sanction was imposed despite a valid posting.

Importance of Compliance in Posted Workers

This case highlights a fundamental principle for any company with international operations: having the legal right is not enough if it is not documented at the right time.

In practice, the Labor Inspectorate acts based on the documentation available during the inspection, and the burden of proof lies with the company. If the company cannot demonstrate that the worker is correctly posted, authorities may:

• Reclassify the employment relationship

• Initiate sanctioning procedures

• Consolidate penalties that are difficult to reverse later

As Tanel Feldman, Senior Partner at Immigration Law Associates, explains in his analysis on cross-border work: “Lack of clear documentation at the time of inspection can generate significant legal and procedural risks.”

Obligations in Posting Workers

To avoid these situations, it is essential to control the main obligations regarding posted workers:

Prior Posting Notification

The notification must be made before the start of activities in the host country. Omitting or delaying it constitutes a violation.

A1 Certificate

Confirms that the worker continues to contribute in the country of origin. It is key to avoiding double contributions and justifying the posting.

Documentation Available in the Host Country

Companies must be able to provide immediately:

• Employment contracts

• Payroll records

• Working time records

• Proof of posting

Application of Local Labor Conditions

It is mandatory to guarantee the minimum labor standards of the host country (salary, working hours, breaks, etc.).

Designation of a Representative

In many cases, a local contact person must be designated for interaction with authorities.

Best Compliance Practices for Posted Workers

To mitigate risks, companies should adopt a proactive and structured compliance approach:

1. Planning in Advance – Verify all legal obligations before the posting begins.

2. Document Management – Ensure all documentation is updated, organized, and accessible at all times.

3. Inspection Protocols – Define clear internal procedures to respond immediately to inspection requests.

4. Internal Coordination – Align HR, Legal, and International Mobility teams to guarantee consistent management.

5. Continuous Monitoring – Regularly review compliance, especially for medium- or long-term postings.

Tax Obligations in the Posting of Workers

In addition to labour and Social Security obligations, there is another critical scenario for posted workers: when their stay in Spain exceeds 183 days. In such cases, a tax liability arises, as the employee must be taxed on employment income derived from work performed in Spain, either as a tax resident or as a non-resident.

Key Obligations for the Employee

1. Determine tax residency status, particularly when exceeding 183 days or when Spain becomes the main center of economic interests.
2. Notify the change of tax residence, both to the Spanish Tax Agency (AEAT) and to the employer, to ensure correct income tax withholdings.
3. File annual tax returns (Personal Income Tax – IRPF or Non-Resident Income Tax – IRNR), both in Spain and potentially in the country of origin.
4. If tax residency is acquired in Spain, file Form 720 (declaration of foreign assets).
5. Assess the possibility of applying for the Special Regime for Posted Workers (“Beckham Law”), which allows taxation at a flat rate on Spanish-source income during the year of relocation and the following five years, thereby limiting taxation on worldwide income.

Obligations for the Employer

1. Apply tax withholdings, either under IRNR or IRPF, depending on whether the employee acquires tax residency in Spain.
2. Implement a shadow payroll, i.e. a parallel payroll system in Spain reflecting the employee’s remuneration to correctly calculate and report tax and Social Security obligations without duplicating payments.
3. Remit withholdings to the AEAT using the appropriate forms:
   • Form 111 (quarterly) and Form 190 (annual) if the employee becomes a tax resident
   • Forms 216 (quarterly) and 296 (annual) if the employee remains a non-resident

How Adlanter Can Help

At Adlanter, we assist companies in managing international worker postings with a comprehensive compliance approach. We support you in:

• Preparation and review of posted worker documentation

• Management of A1 certificates and mandatory notifications

• Risk analysis in international mobility

• Support during labor inspections

If you are looking to optimize taxation and compliance for posted workers through a shadow payroll system, explore our Labour 360 Service for HR.