The thought of becoming self employed or "autonomo" in Spain is one that crosses many TEFL teachers' minds at some point, especially those who have taught business classes. The question is, is it worth it? We investigate.
A huge chunk of English classes being taught in Spain is paid for cash-in-hand. The black economy in Spain is huge.
Although at the height of the economic crisis figures of 20 to 25% unemployment have been bounced around, you will not see one in five of the working population out of work. From cleaners to fruit pickers, waitresses to the men that help you to move house, there is a huge army of workers in Spain, plying their trades without it going through the books.
Some argue that this fact has contributed to the Spanish recession in that the Governments coffers wouldn't be so empty had a few more people done their bit and chipped in with their taxes. Others argue that paying more tax doesn't improve the country, it just allows corrupt politicians to embezzle more. Whatever your point of view, two facts remain, it's illegal, but it's not going away any time soon.
No Work Permit? No Contract!
Let's get this bit out of the way first, if a teacher has no work permit a work contract can not be registered for them so no Social Security and taxes can't be paid which excludes them from the benefits of those contributions. An American, Australian, Canada or pretty much any non-European on a tourist visa would fall into this category. Applying for a work permit is massively complicated and with high unemployment and the trend going against migrant entry bravery, patience and a good immigration lawyer would be needed.
Despite this fact thousands on Americans and other non-EU teachers come to Spain each year, stay and work, have no problems and later move on when they're ready to. Cash-in-hand work covers their living expenses, maybe topped up with a wire from parents back home or a credit card and there's plenty of it about.
Private classes are the easiest option, Craigslist type adverts offering private tuition or simple ads knocked up in Word and pinned to walls in cafes generate millions of Euros in revenue for switched on teachers.
Cash jobs from school do exist, especially in remote locations where native speakers are rarely seen and desperation kicks in. In bigger cities like Barcelona and Madrid the risk of a school getting caught with uncontracted workers is perceived to be higher so less schools take the risk. Read down to the bottom of this article to see about "phantom freelancers", a common approach to get teachers with no papers working in a school.
The Case For Paying Taxes And Working On Contract
For those with an EU passport or a work visa who decide to take a formal job in an English school or language academy where contracts are signed, tax is paid and Social Security is contributed, a sense of security is gained. There is also access to unemployment benefit too. For every three or four months that you're on the books, the Government -at the time of writing- awards you with one month's worth of unemployment benefit for if or when it's needed. This works out quite well for long term teachers who can enjoy the extended summer break, like their students, whilst still having some kind of income.
On top of virtually unlimited medical insurance ("gee whizz!" I hear our American reader cry out) and access to free education for your kids if you have them, the benefits of being a tax payer in Europe are pretty well understood.
One of the big gripes from teachers in these schools where teachers are legally contracted can often be the level of pay. For a full time teacher in a private language school it could be between 800 and 1300 Euros a month.
My School Pimps Me Out For How Much?!?!
It's a workers right to complain and not many people in any industry (except maybe investment banking) will ever be satisfied with their pay, but when an in-company teacher hears that the client is paying their school 40, 50 or maybe even 60 Euros an hour for their presence, it's quite logical that they think about going solo.
Circumventing Your Employer
Upon realising they are picking up 10 or 12 Euros an hour for in-company classes which are charged out at as much as 60 Euros an hour by their employer, it's not irrational for a teacher to have an "I could do that myself" moment.
What needs to be understood is that costs the school a lot of money to pay a teacher legally. Besides the costs of running the school, the accountancy, the odd lawyers bill and the administration; for every 100 Euros paid to a teacher about approximately 35 Euros goes towards the tax and social security costs. The cost of employing a teacher extends further beyond that when the school begins to make provision for severance pay, sick pay and paying for teachers to cover when things go wrong.
Beyond the economics of it all there are the ethical issues. The teacher is there on the job through choice and consent. The school worked to find and maintain those classes. Making an offer to cut out the middleman is hard to ethically justify. An employee poaching clients whilst in a position of trust is commonly justified by the employee saying they feel abused and unloved but to the outside world, regardless of the justification, it will always leave a cloud hanging over their perceived professionalism.
The Costs Of Going Freelance
Be aware that Spain has no fame or history for helping small business or entrepreneurs so the cards are stacked against you from the start. The most crippling aspect is the one which would make most teachers stop reading any further - there is a fixed social security cost of around 270 Euros a month if you want to be a leagl freelancer, regardless of what you earn.
When you factor in the cost of an accountant, which would be a few hundred Euros a year, and then around 18% tax on any profits over about 5000 Euros, then suddenly a 40 Euro an hour gig leaves you needing a lot of hours to break even.
1100 Euros Per Month, The Threshold To Consider Going Self Employed
The most significant point to remember is that the fixed social security cost of a freelancer really is fixed, yet the cost on a school's salary contributions are a percentage.
When we were discussing this subject with our accountant we did a few sums on the back of an envelope and it turns out that when a school budgets for a salary of an employed teacher(salary plus tax plus social security), if the total budget figure rises above 1100 Euros it's actually cheaper to employ them as a freelancer.
Small print time, the following examples are just ball park figures, check this all out with a Spanish accountant before you begin planning any career moves as there are many variables and tax rates always change.
Example A) 1350 cost to the school = 350 Social Security + 1000 salary for the teacher
Example A) 1350 cost to the school for an invoice of 1350 = 270 social security + 1080 income for the freelancer
Example B) 2025 cost to the school = 525 Social Security + 1500 salary for the teacher
Example B) 2025 cost to the school for an invoice of 2025 = 270 social security + 1755 income for the freelancer
Things may change, but at the moment, there is a 20% discount for the first year or so on that 270 Euro Social Security payment if you're under 30, it's not much but 54 Euros is 54 Euros!
How To Maximise The Benefits Of Being Self Employed
The main reason salaried teachers become self employed is to access and serve the in-company classes which are always the best paid part of the industry. Being able to pass a business card and say you'll only be charging 30 Euros an hour is a great buzz and if executed correctly can lead to a very dignified bank balance at the end of the month.
Taking hours offered by established schools is a simple way to complement the income from the in-company classes. Understanding the total cost to a school of bigger salaries can be handy when negotiating pay and conditions. A freelancer maybe have less employment rights but this is usually compensated for with bigger invoices and less complications in contracting them, which in turn allows them to be taken on with less resistance.
Phrases to throw around at an interview would include "Employ me, don't be scared, I'm Freelance so if it doesn't work out you just drop me." or perhaps "Employ me, I'm a Freelancer so I'm cheaper, just ask your accountant." As you can see it's often good business for schools to employ Freelancers but read on to see how that fact can be abused.
Checking out available teaching positions will often result in finding decent looking pay packets offered but at the interview the candidate is told they would be paid via invoice. With a nudge and a wink it's then hinted that the school won't check if the teacher is correctly registered and really paying their tax and social security or just pocketing the cash.
If it were really a position for a self employed teacher it would be explained on the advert or the first telephone call to save wasting everyone's time. So the school offers a slightly better rate of pay albeit with no Social Security payments, no questions will be asked about your work visa or residency rights and all they ask for in exchange is a piece of paper which resembles an invoice and a copy of your passport. So really it's just cash-in-hand and if questioned, they tell their accountant and the tax man that they figured you were self employed.
That's a risk that many non-EU citizens are happy to live with. The average American who is teaching on tour wouldn't perceive too much risk from the Spanish tax man, they'll be on another continent before the school files there taxes and they've never heard of anyone having been in trouble over this before.
According to our accountant there is a risk, albeit very small, that the Spanish taxman could contact the taxman in your home country if he thought tax was being avoided. Whilst this could happen one would have to question the will to do it and consider the amount at stake to the Spanish treasury. If there were a problem it's also likely that they would actually make the school pay the tax as they could not have done sufficient due-diligence to check that you really were self employed. Since they allowed the tax dodging to happen they would likely be fined and have their whole employment policy looked at.
The True Benefits For True Professionals
But for those who are totally legal as freelancers, paying their dues correctly, a whole new world of work opportunities open up. Suddenly your a one-man school. You can go to any business and offer in-company classes, invoices will get passed and the money is yours. Language courses offered by local government to unemployed people are run by private schools who can only employ fully registered self employed people and being a government gig it gets checked out. Any English academy can offer you ad-hoc work as teachers call in sick, just get in there, teach and they'll pay your invoice.
Being a self employed English teacher in Spain does have it's advantages especially when you've been around for a while and have the contacts for work. The general thought is to hold out for as long as possible until you really must do it, having so much freelance work offered to you that you just cant turn it down.
The first step without a doubt is to find an accountant and go through a list of expenses, make sure it's worth it and then start filling in forms. Lots of forms.