Contract of Service vs. Contract for Service

Understanding the difference between a contract of service and a contract for service

The nature of the service provided by an employee to the employer can be termed a contract of service or a contract for service. Because of the difference between these two terms it is important to have a good understanding of what each one means. A contract of service refers to a person who is working for another but a contract for services refers to the services that a person can offer clients. A contract for service used to refer to the relationship between a master and a servant. Today it means something completely different because those who provide the services are independent contractors and are self-employed.

Those who work under a contract of services are the employees of a company. Therefore they do have rights under the term of their contract such as length of employment, conditions under which they can be terminated, and health and pension benefits. This is very important when it comes to matters such as redundancies in the company and unfair dismissal.

Those who work under a contract for services do not enjoy any of the employee benefits that a company offers. This is because they are not officially employees of the company. They operate their own businesses and have a different address than the companies to which they provide services. They control their own business affairs and have employees as well. They determine how to carry out the service for which they have a contract. There can be more than one such contract in place at the same time because there can be many clients. Such a business needs to have its own insurance policy in place.

The rights and the obligations of each party are clearly spelled out in the contract, whether it is a contract of service or a contract for service. It is legally binding on both parties and is beneficial to both. This is why a contract should be clearly defined if a dispute should occur.

Summary

  1. Contract of service and contract for service are two commonly used terms to describe the type of work done for an employer.
  2. A contract of service refers to the contract of a person who is the direct employee of a company and is entitled to benefits.
  3. A contract for service refers to the contract between am independent business and a company to provide specific goods or services.
  4. There are no company benefits involved in a contract for service.