Editor’s note: This article was first published in December 2010; it describes Spanish rules at the time, and its forecast that this would be companies’ preferred way of hiring for a couple of years refers to 2011 to 2012. Spain’s self-employed contribution system has changed since.
With the crisis, commercial contracts have become a more common way for companies to hire people. Companies look for sales reps willing to work under a commercial contract (a contrato mercantil in Spain, a non-employment agreement), and the rep is often not told the whole truth about the dangers and problems this kind of arrangement can bring.
Let’s define, very briefly, what a commercial contract means for a worker. Put simply, if you’re a salesperson, seller or agent and you go to work with a company under this contract, you automatically become self-employed. You work for a company, but in reality you become a business owner with very little room to manoeuvre.
Some companies will tell you that you don’t need to register as self-employed and that it will only be temporary, but watch out: they’ll be covered for tax purposes because, among other things, a commercial contract releases the company from liability as far as Social Security payments are concerned.
The dangers of working under this kind of contract are very clear:
- If you decide to do it by the book, you’ll have to register as self-employed (autónomo), so every month you’ll have to pay your self-employed Social Security contribution whether or not you make a profit (whether or not you sell anything). And remember that being self-employed puts all your present and future assets on the line, since you are liable with everything you own.
- If you decide to try your luck under a commercial contract without registering as self-employed, you’ll be playing Russian roulette, because the company will declare its payments to you to justify money going out or as “hiring” expenses. Sooner or later you may receive one of those wonderful letters from the tax authorities or Social Security demanding unpaid contributions, or simply asking you to explain income you haven’t accounted for.
In short, when in doubt, or at the start of a working relationship with a company, a commercial contract benefits only the company, since it’s a way to take someone on without incurring hiring costs and to avoid responsibility.
However, if you’re entering a sector you know well, with a good chance of earning high income selling the product or service you’re hired for, it can be an excellent way to get started in business, as long as you’re not tied to a single product or a single company.
Start getting used to the words “commercial contract”, because this will be companies’ preferred way of hiring for a couple of years. But always make sure nobody takes you for a ride, and remember that with public authorities so keen to collect revenue, you’ll be examined with a magnifying glass, so you’ll need to do things as legally as possible.
If you think the job won’t pay once you’ve covered your self-employed contributions, you’re better off not taking it. There’s always time to lose money.
Further reading
- Commercial contracts: answers to frequently asked questions
- The difference between a commercial contract and freelancing
- Which legal structure to choose for your business
- Mistakes companies make when hiring sales reps
Featured image: Chris Tucker Mear, CC BY 2.0, via Flickr.
