Contract of Service and Contract for Service
1. A contract under which a person is take part in the service of an employer to do work as is where the employer do what it is need to do directly and contracted for. A contract of service are an agreement in writing or oral. If it is expressed or implied thereby one person consent to employ another as an employee and the other person agrees for serving the employer as an employee. It basically a relationship of employer or employee.
A contract for service, there is no employer and employee relationship. A contractual arrangement by which one person consent to provide office services to another. The person giving the services is an independent contractor. A contract for service is an agreement and whether in writing or oral. It is by expressed or implied thereby one person agrees to employ another as an independent contractor and in payback. The other person will work for or on behalf of his or her “employer’’ on freelance basis at a fee. It basically a relationship of employer or sub-contractor or independent contractor. After that, the paragraph show the five difference between contract of service and contract for service.
The difference between contract of service and contract for service are the employee’s status. Contract of service are the employee status while the contract for service are the self-help or independent contractor and advisor. For example, contract of service is the employer employ the person then the person acts as employee of the company. However, the contract for service is the person is work for service and he or she is the freelance.
The second difference is wage, contract of service is take the payment of wages and salaries while contract for service is take the payment of fees or retainer and the need for the contractor to submit payment invoices for each piece of work completed. For instance, contract of service take the wage either in monthly or weekly while the contract for service is obtain their money when they already finish their job but in case of some contractor will keep payment invoice for future requirement to hire them again.
The third difference is the termination of contract. The contract of service can make their indication or representation through the Industrial Court if he or she had been wrongly discharge. The contract for service is the independent contractor can sue in the civil courts for breach of contractor. In case of contract of service have to give notice to terminate the contract. Nevertheless, contract for service terminate the contract without notice. Termination by notice of contract of service is intentionally terminated by one party giving notice and this notice must be writing and the length of notice is provided in the employment contract. Termination without notice is for contract for service may be terminate by either party without notice. If notice has already been given, without waiting for the expiry of that notice terminated by payment of an indemnity to the other party.
The fourth difference is the right and responsibilities, the contract of service exists the rights and responsibilities of employers, employee and vice-versa but contract for service only exists the rights and responsibilities among the parties concerned under general contractual terms. The terms (legal parts) of the contract can be many types of forms which are verbal agreement, written contract, implied terms, inside offer letter from employer and so on. A contract of employment comes into force as soon as a firm offer of employment has been made and accepted, even if agreement has only been verbal, e.g. at an interview. All employees are qualified to a written statement of the terms and conditions of their employment within two months of beginning work, given the contract is longer for more than one month.
The fifth difference is the statutory requirements for Income tax, EPF AND SOCSO. The contract of service is the employment legislation regulate the employer and employee relationship. While the contract for service is no statutory requirement to subject the payments of fees or retainer to independent contractor to the deduction of income tax or contribution to the EPF or SOCSO. For example, employer is responsible for contributing a certain percentage of the employee’s wages to the EPF and SOCSO on behalf of the employee and subjecting the wages to deduction of income tax and vice versa for contract for service.
In conclusion, there are three types of employment status, which show that a person’s rights and responsibilities at work are worker, employee or self-employed. Worker include people working under a variety of contracts. Employees are workers but there have different rights and responsibilities than workers. Employee are workers, but employees have a larger range of employment rights and responsibilities than other workers. For example, the statement or requirement to give notice if you want to leave your job. The last one is self-employed people are not covered by employment law ordinarily, apart from health and safety. The person’s contract with their customer determined the rights and responsibilities. Rules and rights are governed the termination of employment contract which can protect the employer and employee from unfair treatment.