Every CEO needs to have a good relationship with his or her company and partners. Which contract would best reflect that bond? The senior management contract seems to be one of the least used options compared to the commercial and labor contract. So, what are the particularities of each one? Here we tell you about them!
The best choice will depend on the size of your company and the complexity of its structure. Here we will answer these questions so that you can choose the best contract.
What is a senior management, commercial and labor contract?
The employment contract is the foundation of an employment relationship. It must be understood as an integrated creation in which all aspects are interrelated. It must therefore be distinguished from other agreements that may be concluded separately.
In Spain there are 3 forms of employment contracts. Each of these models has its particular benefits and relationships. Let’s see what each of them is about:
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What is the relationship of each contract to the CEO?
The Chief Executive Officer with a senior management contract
This in theory should be the contract par excellence for any CEO and his company or partners.
Senior management contracts are often associated with commercial contracts. This is because they often involve services provided by professional personnel working for one or more companies under a single contract.
In most cases, these professionals work for companies run by individuals or groups that receive considerable amounts of money from their clients in exchange for their services.
In this case, they have full authority to make decisions on behalf of their employer on all matters related to their work. The contract may also include provisions for bonuses, vacation pay and other benefits.
The Chief Executive Officer with a commercial contract
The business relationship between the CEO and a commercial contract should be chosen when the director’s status is most obviously administrative and not that of an employee. Slightly different from the senior management contract.
In the event that the CEO holds this administrative role with executive functions, it is necessary to review the content of Article 249.3 of the Capital Companies Act (LSC).
This law stipulates that if an administrative member is to be engaged in managerial duties, he/she must enter into a contract. The latter must be previously approved by two thirds of the board of directors.
This leaves no doubt that any managing director or administrator of the company must necessarily enter into a commercial contract with the company. With all that this implies, i.e. to be registered in the self-employed regime and to be registered as part of a business activity with the tax authorities.
The General Manager with an employment contract
This contract is intended for a dependent relationship. It is subject to several rules such as compliance with schedules, remuneration and obedience to the directives of a superior.
That is, it does not work for a General Manager because the manager (also an employer) and he would be the same person. This does not occur with the senior management contract or the commercial contract.
There would be a confusion of roles because what labor law seeks to do is to provide protection and rights of the workers’ statute to the worker against possible arbitrariness of the employer.
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For which case is a senior management contract or a commercial contract beneficial?
A senior management contract is very common in the case of startups. The most common example is where the founder does not work for the company and a managing director is hired to perform the functions of CEO. However, he or she is not a significant shareholder and does not sit on the board of directors.
There are two types of senior management contracts: full-time and part-time.
In both cases, these contracts require the payment of an initial fee by the client. The amount depends on the number of hours worked per week, plus the expenses incurred during each month. Fees vary by location and depend on each project and the requirements of each contract.
However, with the use of a commercial contract we have a different case. For example, we have the scenario of a CEO who decides the employees to be hired, the activities to be performed, the working hours, among other labor aspects of the company.
In addition, he or she must account for all expenses incurred by the company and submit invoices to clients. The client may be a single individual or a partnership that has hired senior managers to work on specific projects or tasks.
In any case, it is advisable to seek advice from experts in the area. This is due to the series of fines or sanctions from any labor inspection for not complying with the regulations.
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Find out what we can do for your business if you wish to use a senior management or commercial contract. In TAS Consulting we have specialized consulting services. Schedule your free appointment through firstname.lastname@example.org