Hi, today the topic that I am going to tackle is about the difference between "Contract of Service" and "Contract for Service".
In practice, both types of contracts can have very different elements despite sounding similar. Let's get into defining each and compare the differences.
Contract of Service:
A contract of service defines an employer and employee relationship which often includes terms and condition of employment. The contract of service must include terms and essential clauses such as hours of work, job scope and wages.
A contract of service is a contract between a company or a business (employer) and an individual (employee) in which one agrees to employ the person and the person agreeing to serve as an employee.
Contract for Service:
A contract for service simply refers to a contract between two entities (can be companies, businesses or persons i.e. independent contractor or free lancers) in which the contractor is engaged to carry out a service for a fee. It can also be long term or short term and based on project basis.
Key Differences:
Contract of Service | Contract for Service |
Employee-Employer relationship | Client-Contractor relationship |
Employee does business for employer | Contractor does business on their own account |
Covered under Employment Act | Not covered under Employment Act |
Employment benefits such as annual leave and medical leave are applied | Employment benefits are not applied |
In a nutshell, Contract of Service is a contract between a company or business to employ a person as an employee; whereas Contract for Service is to engage a contractor to complete a specific project or assignment, similar to a purchase of goods and services.
Example of Contract of Service:
Agnes is employed as a Marketing Manager by Best Marketers Pte Ltd with a fixed monthly wage of $5000 with CPF contributions from the company and full entitlement of medical and annual leave benefits.
Her job scope stated in the contract includes taking charge of the company's marketing campaign and advertisement efforts. After the 6 months, she is expected to write a report and present the findings to the Marketing Director.
Example of Contract for Service:
Robin is contracted by Best Marketers Pte Ltd to run a campaign for 6 months where Robin is requested to provide full suite of marketing services including an audit on company webpage and search engine optimisation. She is expected to be paid $30000 upon completion of the campaign.
She is to run a marketing campaign to find the best and most cost-effective advertising methods. After the 6 months, she is expected to write a report and present the findings to the Marketing Director.
Based on the 2 examples show above, the terms and job scope may sound similar but the difference lies in the contract where employment benefits are clearly stated. In the second scenario, Robin is not expected to stay on and continue on the marketing campaign once her final report has been presented to the Marketing Director as she has fulfilled her duties.
In the other case, after completing the campaign, Agnes is expected to continue her role at the company and perform other duties required of her.
Lastly, whether you are an employee or independent contractor, it is important for you to be aware of your rights and responsibilities under the applicable type of contract.
Always make sure to carefully read the terms and conditions of your contract, and always clarify and/or negotiate terms that you are unsure of.
Well, that's it for this article. I hope you find this useful. Feel free to leave any questions or comments and we can discuss!
Comments