How to negotiate a senior management contract?

When hiring a worker, it is very important to assess the various legal formulas for hiring , either through a labor contract, senior management contract or service provision.

The legal consequences of the choice are very disparate and it is the company that must choose the contractual figure that is most embedded in its business strategy.

In this sense, the contractual formula most used for the incorporation of personnel with maximum responsibility in the company is usually that of the senior management contract.

The senior management contract

Its regulation is governed by the Real Decree 1382/1985 and entails the application of a special legal regime by which the protection that the legal system grants to employed workers is substantially limited.

The willingness of the parties to negotiate a senior management contract must be subject to the provisions of the aforementioned Royal Decree, but the special relationship of senior management personnel is based on the reciprocal trust of the parties, which must accommodate the exercise of their rights and obligations to the requirements of good faith in accordance with article 2 of the Royal Decree.

By virtue of the foregoing, since the will of the parties prevails in the senior management contract, it is very important to carry out the negotiation of the clauses and conditions that regulate the professional relationship between the parties and will be the legal basis that prevails throughout the duration of the relationship. As a result, each senior management contract will be individual and unique.

The professional profile of senior management

Senior management professionals are usually in a similar position to the company and usually have sufficient negotiation power to discuss the clauses and contractual conditions that will govern their own employment contract.

That is why formalizing a senior management contract is not an easy task, neither for the company nor for the manager himself, since both parties must feel comfortable with the resulting contract, otherwise it is likely that the relationship will break off sooner than expected or that later conflicts are generated that could have been avoided with a negotiation.

Negotiation phases

To negotiate a contract of these characteristics it is very important to be advised by a lawyer specializing in the matter, as it denotes strength and self-confidence on the part of the Executive, which will be rewarded when the contract is signed final.

To carry out such a negotiation, the following phases are usually followed:

1. Preparation. It is the key to success. Having a lawyer specialized in senior management will help define our objectives and direct them in order of priority. In preparation it is important to obtain information and data about the company. It will also be essential for the lawyer to know the reserve value or the minimum acceptable for the Director in a negotiation, in this way the objectives and their priority will be defended based on certain conditions and irremovable clauses.
2. Exchange and Development. In this phase, once the information is collected, the proposals and conditions are transferred. Proposals from the company are also received. It is important that both parties are willing to offer something in return (concessions).
3. Closing and Agreement. Once the clauses and conditions that govern the senior management contract have been agreed, both parties will sign it in duplicate.
4. Assessment of results. Once the contract is signed, the Manager must make sure that the agreements are fulfilled and will be able to evaluate the results of the agreed clauses and conditions.

[fusion_highlight color=”rgba(0,188,212,0.41)” rounded=”no” class=”” id=””]More information: The negotiation of the contract of the Senior Manager

Recommendations during the negotiation

In the first place, it must be taken into account that the senior management contract is advantageous as long as the Manager obtains a good remuneration, that is, that the amount offered as a fixed annual salary must be above the salary standards of employees who occupy positions relevant in the company.

Secondly, during the negotiation it is important to take into account the basic clauses of the contract but not to forget the additional clauses, where the most, due to their relevance, can be abusive. For this reason, a senior management contract has a multitude of fringes and matters subject to specific regulation that are impossible to cover by someone not specialized or familiar with this type of contract.

Finally, the correct wording of the clauses is essential because, from a legal point of view, if the aspects negotiated are not correctly worded and their wording is unclear or confusing, they will seriously harm the Director causing helplessness. Therefore, the advice of a lawyer who intervenes in the drafting of the clauses is essential for the negotiation of this type of contract.

Most common clauses in negotiation

Finally, it must be taken into account that the most common clauses in negotiations are the following:

• Trial period: the maximum that the Law provides is 9 months for a senior management contract, although it is normal to set a period of 6 months for the effective provision of services.
• Exclusivity and post-contractual non-competition agreement: it is one of the agreements that causes the most controversy, since Companies tend to penalize said non-compliance abusively and the consequences for work are usually very burdensome . For this reason, it is important to pay special attention to the wording of these clauses and adjust the amount to be received (in no case can this be higher than the base salary).
• Variable remuneration or bonus: the clause or clauses that set the variable remuneration must clearly specify the objectives to be met, the amount that can be opted for, the accrual period and the payment date . The bad writing of this clause can give rise to multiple conflicts and confusions. It is also important to unlink the subscription to permanence in the Company.
• Compensation in the event of dismissal or withdrawal: This must be clearly and reliably established and must consider both contingencies.

Lastly, stress the importance of good advice for negotiating this type of contract, as it is a key element that will make a difference.

It may interest you: Severance pay for dismissal and termination of the Senior Manager

Labor Law Department

11/14/2019