What is a Management Contract?
A management contract is an increasingly popular type of civil law agreement, under which an entrepreneur entrusts the management of the company or its specific division to a qualified and experienced individual. This contract serves as an alternative to a traditional employment contract, offering the manager greater flexibility in organizing their work and allowing the parties to tailor the terms of cooperation.
Key elements of a Management Contract
Although there are no detailed legal regulations specifically governing management contracts, a well-drafted agreement should include:
- Scope of duties – precise definition of the manager’s tasks and responsibilities, such as department management or strategic decision-making.
- Remuneration – specification of the fixed salary and potential bonuses or other forms of incentives.
- Term of the contract – it can be fixed-term or indefinite, with clearly defined conditions for termination.
- Working time – typically flexible and non-standardized, allowing the manager autonomy in organizing their work schedule.
- Liability – the extent of the manager’s civil liability and possible limitations.
- Additional clauses – such as non-compete obligations or confidentiality agreements.
Legal aspects of a Management Contract
The management contract is governed by civil law and does not fall under labor law regulations. This is important because the manager does not enjoy employee rights such as paid leave or sickness benefits.
However, care must be taken to ensure that the contract’s terms do not resemble an employment relationship. Otherwise, there is a risk that a labor court may reclassify the contract as an employment contract, which entails additional obligations for the employer.
Advantages and risks of a Management Contract
Advantages
- Flexibility – the manager has freedom to organize their own working time.
- Motivation – remuneration is often linked to the company’s performance.
- Lower burden on the company – no obligations arising from labor law apply.
Risks
- Lack of employee protections – the manager does not have rights to paid leave or sick pay.
- Civil liability – the manager may be liable for damages caused by action or omission.
- Risk of misclassification – if the contract resembles an employment contract, it may be challenged by authorities.
Summary
A management contract is an effective tool for entrusting the management of a company to competent and experienced individuals who value independence and flexibility. However, drafting such a contract requires care and legal knowledge to avoid misunderstandings and legal risks.