An interesting event occurred just a few days ago that was enough to make me want to write about the experience (with my clients’ consent of course). I was representing a British couple for a property purchase on the island and after they confirmed to me the conditions they had agreed with the developer in their initial meeting, I carried out the necessary property searches and in so doing contacted the developer directly. In one of our conversations, the developer mentioned off hand, a couple of other conditions that had not come up before; the buyer would be liable to pay outstanding local council rates and community charges for the previous year. This of course can lead to the buyer being held responsible for any other outstanding community charges three years prior.
Last year, I wrote an article about the polemic floor clause in mortgage loan contracts, a subject that has frequently cropped up in the news and is now a regular mainstay at Spanish Courts of Law. Most readers are now familiar with this concept but for those of you who aren’t, here is a brief explanation:
Around this time of year, most people find themselves reflecting on what they have done the last 365 days, what they wish they had done and what they plan on doing in the upcoming year. It is also a fantastic time to plot, plan and scheme so you can take your business to the next level or fulfil your dreams of finally starting your own business.
If you have had an idea in your head for some time but feel hesitant about moving forward with it, now is the time to really get serious and put your thoughts to paper. If you do not draft a business plan to map out your project, it may always remain a dream, one you may regret not pursuing further down the road, the same if you want to advance your existing business.
As we are all aware, over the last couple of years in particular, Public Administration Offices are making a conscientious effort to ensure that the many of the Laws and Regulations that have gone unenforced for a number of years are fully applied from now on.
At this moment, the Catastro Office has initiated an inspection campaign to update its database. The Catastro Office is a Property Registry Office normally situated within the local Town Hall but should not be confused with the Land Registry Office. This registry allows the Town Hall to update its records with regards ownership, size, characteristics and value of the properties within its jurisdiction. This department must be notified whenever a property changes hands or is altered in a significant way so that the details can also be modified and if necessary its tax value updated.
This is an article I have had in mind to write ever since Law 3/2014, 28th Feburary, was approved back in March of this year, however, as has been the case with numerous Government initiatives to combat the crisis, they are not always as they appear to be on face value but now this policy has been active for a few months, we can examine whether it measures up to the hype or not.
Created to incentivize business owners to give their employees indefinite or fixed contracts (full or part-time) in return of reductions on normal employee costs, the contract would only cost a mere 100 Euros per month over a 24-month period instead of 38-40% of the gross salary, it was welcome news.
All companies regardless of their size are eligible to apply and contracts must be received before the 31st December 2014 to be valid. Payable costs vary depending on the hours stipulated in contract:
- Full-time: only 100€/ month
- Part-time (at least 75% of a full-time contract workday): only 75€/month
- Part-time: (equivalent to 50% of a full-time contract workday): only 50€/month
This is the spiel the Government bombarded us with and hey, everything sounds great. Business owners can hire at a fraction of the price but when do we ever get something for nothing? So what were the other conditions that were not really explained properly or made evident?
As is the norm, there are requirements the employer must meet to benefit from this reduced rate:
- Must be up-to-date in all tax and Social Security obligations at the time of application and throughout the period in which the reduced rate will apply
- Cannot have dismissed employees in the 6 months prior to the application. Not applicable if it occurred before 25th February 2014.
- Must not have been excluded from applying due to serious labour violations in the past
Everything still sounds perfectly reasonable but some clauses of the law were not actively disclosed:
- The new contract must equate to an increase in the company’s work force and number of fixed contracts within the company. This means you cannot change an existing employee’s contract, you have to hire new blood which is risky as you cannot simply fire that person without consequences if it doesn’t work out, however, there is nothing to stop you from converting existing contracts onto the new system later.
- Maintain the same number of employees and the same number of fixed contracts in the company for a 3-year period. If the employee leaves the company, somebody else under the same contract must replace them, if not, you would be liable to pay social security back.
Another drawback that was not specified in the propaganda is that this reduced rate only applies to one concept payable to social security, namely Common Contingencies. Even though this concept is the most expensive, calculated at 23,6% of the gross salary, all other concepts such as unemployment, professional training etc. must still be paid on top so the resulting amount is not going to be the 100€ flat rate promised and if your employee receives a higher than minimum salary, expect to pay quite a bit more. The outcome is more like a 100 Euro discount, which is a completely different scenario.
Further reductions can apply after the initial 24-month period as long as there were at least 10 employees contracted to the company at the time the first fixed contract was issued but as mentioned, if all conditions are not met, the business owner is liable to return monies saved under the scheme in the manner detailed in the law.
Only 23,4% of the 292,273 new indefinite contracts registered between March and May came under the new scheme and comparisons from previous years show that the measure has not increased work stability. Before diving in, ensure you read and comprehend the Law in its entirety before making any type of decision.
