Employment due diligence in Andorra: what to check before buying or investing in a company

Employment due diligence is the review of a company’s employment position before buying it, investing in it or restructuring it. It sits alongside the tax, legal and financial workstreams of any acquisition. Its purpose is to identify employment liabilities (contribution arrears, penalties, claims or the cost of restructuring the workforce) that could affect the valuation, the price, the warranties and indemnities or the structure of the deal.

In Andorra, the review is carried out against Llei 31/2018, de relacions laborals, as currently in force, the social security rules administered by the Caixa Andorrana de Seguretat Social (CASS) and other applicable legislation. UK assumptions do not carry over: there is no Employment Rights Act 1996, no TUPE, no HMRC and no National Insurance in Andorra.

The difference has practical consequences. When a deal involves the transfer, assignment or change of ownership of a business, Andorran law provides that the new employer is subrogated to the existing employment rights and obligations. In certain cases, transferor and transferee are also jointly and severally liable for earlier obligations for up to one year. Liabilities identified during the review can therefore affect the price, the contractual protections, retentions from the purchase price or other terms of the deal.

What employment due diligence covers in Andorra

A full employment review follows a checklist similar to the one used in a UK deal, but each item is tested against Andorran law. This is the review model we apply:

• Employment contracts. We check that every contract has been put in writing, as Andorran law requires (failing to do so is a serious infringement), and that contract type, length of service, working time and special clauses have been set up correctly. A UK-style written statement of particulars is not a substitute for the contract itself.
• CASS contributions. We check that all staff are registered and that contributions have been paid. The general rate for employees is 22%: 6.5% paid by the employee and 15.5% by the employer.
• Monthly declaration of hours actually worked. Since 1 January 2023, employers must report to the CASS each month the hours actually worked. Buyers used to RTI reporting under PAYE will recognise the idea, but the obligation has its own rules, and a declaration that is not up to date is a warning sign.
• Minimum wage and pay structure. No salary may fall below the Andorran minimum wage, set at €1,568.67 per month for standard full-time hours from 1 July 2026. We also review bonuses, variable pay and benefits in kind.
• Health and safety. Risk assessments, training and the accident register.
• Claims and inspections. Ongoing claims, pre-action complaints and proceedings opened by the Servei d’Inspecció de Treball (the labour inspectorate).
• Key people. Senior employment contracts and post-termination non-compete covenants. Andorran law only allows them for management or organisational roles, or for people with access to sensitive information; they must be in writing, include agreed compensation and last no longer than three years. The review checks whether these covenants are valid and assesses the effect that losing key people would have on the business.
• Contractors and supplied staff, because of the joint and several liability explained below.

UK and Andorra: employment differences to consider before investing

Many of the people who contact us are based in the UK and are considering buying an Andorran company or moving their own business to Andorra. For them, employment due diligence starts from a different place, because much of what they take for granted does not apply:

• No UK-style statutory framework. In the UK, employment rights come mainly from statute (the Employment Rights Act 1996, TUPE, the Working Time Regulations) and are enforced in the employment tribunal. In Andorra, employment relationships are governed by Llei 31/2018, by the employment contract and, where applicable, by collective agreements, which can be cross-sector, sector-level or company-level.
• A single social security system. There is no National Insurance and no auto-enrolment pension: the CASS handles registration, contributions and benefits, with a combined rate of 22% and a monthly return that includes hours actually worked. By comparison, UK employers pay 15% employer National Insurance on earnings above £5,000 a year, on top of the employee’s 8% main rate.
• A lower minimum wage. The Andorran minimum wage (€1,568.67 per month) is below the UK National Living Wage, which rose to £12.71 an hour from April 2026 for workers aged 21 and over. Any comparison should take into account that the employee deduction in Andorra is only 6.5%.
• Dismissal without a reason is possible. In the UK, once an employee has the qualifying service (two years, falling to six months from 1 January 2027 under the Employment Rights Act 2025), dismissal needs a fair reason and a fair procedure. In Andorra, an employer can end a permanent contract without giving a reason, provided it pays the statutory compensation. The amounts are set out below.
• Hiring from abroad is subject to quotas. UK nationals, like other foreign nationals, need an authorisation under the immigration rules and quotas in force. Since October 2026, the general quota allows 900 authorisations, split between 702 residence and work authorisations and 198 cross-border work authorisations, valid until 30 April 2027. The exact requirements depend on nationality, professional experience and the type of authorisation, among other factors.

No social security agreement between the UK and Andorra. Unlike Spain or France, the UK has no bilateral social security agreement with Andorra, so contribution periods in the two countries are not aggregated. Anyone moving should check how this affects their UK State Pension record, for example whether voluntary National Insurance contributions make sense.

According to semi-final data for January 2026, Andorra had 49,134 employees, 1.8% more than a year earlier, and the average salary declared to the CASS was €2,689.20. Employment costs are lower than in the UK, but relocation is not automatic: the quota limits how many people can come from abroad and its requirements cannot be bypassed.

If you are considering moving a business to Andorra, check early which members of your team will be able to join the project and under which work permit in Andorra. The requirements for each authorisation depend on the case and should be reviewed with a professional.

Business transfers and subrogation in Andorra

Article 12 of Llei 31/2018 governs what happens to employment obligations when a business changes hands. UK buyers will see similarities with TUPE, but the liability rules are different and should be analysed before signing:

• The new employer is subrogated to all the employment rights and obligations of the previous one. Employees keep their terms and conditions and their length of service (art. 12.1).
• On a transfer, assignment or change of ownership, the transferor is jointly and severally liable with the transferee, for up to one year, for certain obligations that arose before the transfer and relate to employees already under contract (art. 12.2). Under TUPE, by contrast, liabilities pass to the transferee and joint liability is limited to the failure to inform and consult.
• In the case of unlawful supply of workers, the supplying and the receiving business are jointly and severally liable (art. 12.4).
• A business that contracts or subcontracts work or services forming part of its own activity may be jointly and severally liable, for the year after the contract ends, for certain employment and social security obligations of the contractor or subcontractor (art. 12.5).

How these rules apply depends on how the deal is structured. In a share purchase, the company remains the employer and keeps its employment obligations, as it would in the UK; in a transfer of a business, undertaking or economic unit, the application of article 12 must be analysed case by case.

CASS contributions and penalties

In employment due diligence, CASS arrears are among the easiest liabilities to quantify and among the most significant. Contributions are declared and paid between the 1st and the 15th of each month for the previous month, and the CASS can claim unpaid contributions for five years. HMRC can normally go back four years for PAYE and National Insurance, longer where there is carelessness or deliberate behaviour. Late payment triggers surcharges:

• 5% if the delay is no more than one month.
• 10% if it is between one and six months.
• 20% if it exceeds six months.

Infringements relating to the CASS are penalised in retirement points, whose value is updated every year. Withholding the employee’s 6.5% without paying it over is a very serious infringement, with a fine equal to the sale price of between 501 and 20,000 retirement points; failing to keep records for five years is a serious infringement, with a fine of 51 to 500 points. You will find more detail in our guide to social security in Andorra.

Separately from the CASS, Llei 31/2018 has its own penalty regime. Employment infringements carry fines of €50 to €500 (minor), €501 to €3,000 (serious) and €3,001 to €24,000 (very serious), with limitation periods of six months, one year and two years respectively. Failing to put contracts in writing, for example, falls under this regime.

Costs of restructuring the workforce

If the business plan involves reducing headcount after the acquisition, the cost of those dismissals is part of the price. For a permanent contract, Llei 31/2018 sets the following amounts:

For comparison, statutory redundancy pay in the UK is half a week’s, one week’s or one and a half weeks’ pay per year of service depending on age, for up to 20 years, with a week’s pay capped at £751 from 6 April 2026. Statutory notice is one week per year of service, up to 12 weeks. Contractual enhancements and unfair dismissal awards come on top.

Andorran law gives enhanced protection against dismissal during pregnancy and in other specially protected situations. Depending on the circumstances, the dismissal may be declared void or give rise to a specific compensation regime, so it must be assessed individually. For fixed-term or project contracts, early termination by the employer costs 25 days’ pay per year of service plus 2 days for each month remaining until the agreed end date. If the termination is unjustified, that compensation is increased by 25%.

Beyond the amounts, employment due diligence must check the following rules:

• Reference salary: the daily salary is the fixed salary for the last month divided by 30, plus the average variable pay over the last twelve months.
• Collective dismissal: a collective dismissal occurs when dismissals for objective reasons affect more than 10% of the workforce and at least five people within a 90-day period. The procedure requires a consultation period and the involvement of the ministry responsible for employment, which approves the agreement reached or, if there is no agreement, decides whether to authorise the collective dismissal. In the UK, collective consultation is triggered by 20 or more proposed redundancies at one establishment within 90 days, so the thresholds are different.
• Form: dismissal must be notified in writing, by registered letter with acknowledgement of receipt, through a notary or by hand against a signed receipt. For dismissals for objective reasons and disciplinary dismissals, the letter must state the reason. If these formalities are not met, the dismissal becomes unjustified.
• Void dismissal: the law provides for dismissals to be void in certain cases, including discrimination or breach of fundamental rights, and in some specially protected situations such as pregnancy or employee representation.

As a general rule, claims arising from the employment contract are time-barred after one year. Claims for compensation following certain dismissals, however, must be brought within 40 working days of the employee becoming aware of the dismissal.

A worked example

A purely illustrative example: an employee with 4 years’ service, calculated only on a fixed monthly salary of €2,500 (a daily salary of €83.33), with no variable pay or other circumstances that could change the amount.

For a UK buyer the reference point is different: in the same case in the UK, an employee aged between 22 and 40 would receive statutory redundancy pay of four weeks’ pay, roughly €2,300 on the same salary, before notice and any contractual enhancement. In Andorra the employer does not need a reason, but the exit cost is higher and predictable. Multiplied by each planned departure, this calculation lets the buyer quantify the risk and take it into the negotiation.

From employment due diligence to valuing the company

The liabilities identified can be quantified, where possible, and reflected in the negotiation through price adjustments, retentions or escrow, warranties and indemnities from the seller or other contractual mechanisms. A prior review allows these liabilities to be built into the economic and legal analysis before the deal is signed.

Timing and cost of employment due diligence

There is no standard fee: timing and cost depend on the size of the workforce, the number of sites and contractors, and the agreed scope.

At Augé, we carry out employment due diligence in coordination with our corporate, tax and financial teams when the deal requires it, to identify liabilities that could affect the structure, valuation or terms of the transaction.

Are you considering buying, selling or investing in a company in Andorra? Our team can review the employment liabilities of the deal and assess their impact before completion. Contact us.