Terrace issues and rising social security costs bring warnings of buying a bar in Spain

WITHOUT question, the appeals of moving to Spain are endless, with many expats making the leap to start up their own business across the country.

No other business can seem more fruitful than owning a bar, where there are a wide choice of premises available, be that seafront or back street. However, there are many pressing issues that budding entrepreneurs should be aware of before making the move to running your own business.  

Buying a bar in Spain is not as simple as it may first appear and the pitfalls can be plentiful with varying degrees of success. Not only are there many legalities that have to be taken care of, but the running costs can be crippling, regardless of how much trade you are doing.

The best advice before making a purchase or taking out a lease is to speak to a well informed agent who specialises in commercials, and not just by listening to an ex-bar owner, as although they may have experience in running a bar they often do not have the full information on up-to-date legalities or business practices that can make a big impact on profits. 

Once you have your hands on your dream bar, employing staff members will be a top priority. However, on top of paying their salaries, social security payments will be a huge part of your responsibilities, where they have increased considerably – putting a great deal of financial pressure on bar owners.

The overall rate for social security in Spain is high, with contributions set at 28.3% and the employer is expected to cover the majority of the cost. Revenue from contributions is the main source of funding for the Spanish Social Security system, where the figure is expected to reach €123.58 billion at the end of this year, an increase of 7.5% in 2018.

The increase stems from several factors, such as the increase to the minimum inter-professional salary, which stands at €900 per month in 2019, an increase of 22.3% from last year. This has led to a similar increase in the minimum contribution bases which have also increased by 7% from 2018.

Earlier this year, a new law was also introduced in Spain to ensure that every business o keeps track of their workers hours in aim of clamping down on unpaid overtime, which accounts for 2.6 million work hours per week.

According to the decree, every company regardless of their size, must keep a record of when workers begin and end their working day, where local authorities have deployed inspectors to ensure that businesses comply with the rules. Failure to do so can result in a penalty of up to €6,250.

For bar owners this means that you will have to manage very carefully the hours that are allocated to each team member and hire additional employees to cover the working day.

Local councils are also clamping down on bars with terraces, where inspectors are now carrying out routine checks across the country to make sure that every businesses complies with regulations, where the relevant permits must be in place.  

Businesses of this kind are required to request and obtain the pertinent authorisations for putting out chairs and tables, a move introduced by the government to control the growing number of bars taking up space on public streets without complying with the legal requirements.

The majority of businesses have respected this framework of action created by the government, but a great deal also far exceed the dimensions of the space allowed, which can result in heavy penalties. It is advisable to speak to your local council to ensure that your bar’s terrace is the correct size.