THERE are many issues and arguments made to distinguish between contract of service and contract for service in today’s employment contract. Both look similar but the words “of” and make a different connotation.
A contract of service means any agreement, whether oral or in writing and whether express or implied, whereby a person (the employer) agrees to employ another as an employee and that other agrees to serve his employer as his employee, and includes and apprenticeship contract.
For example, it the human resource manager of a company employs a gardener to perform gardening job in the factory premises, then it is called a contract of service. The gardener has no rights to engage other employees to perform the gardening job under the contract of service.
Under a contract of service, the employer has total control over the employee during the tenure of employment, which denotes the employer-employee relationship or master-servant relationship and is a workman under the Industrial Relations Act 1967. The degree of control, which an employer exercises over an employee, is an important factor although not the sole criterion where an employee works under the control of the employer, not only as to what he must do but also as to how and when he must do it.
Some examples of such control over the employee are working hours, break time, overtime, leave supplication, company’s rules and regulations, contribution to the Employees’ Provident Fund and Socso, duties and responsibilities as directed by the management, etc.
On the other hand, a contract for service is a contract by the principal to a contractor who for as agreed fee will provide his principal the services he has contracted to perform a job either by himself, his employees or his sub-contractor. In other words, a contract for service is when an employer engages an independent contractor to do a job.
For example, it a company offers a contract to a person to perform gardening job in the company premises and in return the company shall pay the person a fee for the services rendered, then it is called a contract for service. Another example is for security service company.
An independent contractor engaged under a contract for service is not a workman under the Industrial Relations Act 1967. The employer-employee relationship or master-servant relationship does not exist under a contract for service. The principal has no total control over the independent contractor. For example, the principal has no control over the independent contractor’s working hours, as long as the job is completed during the specified time frame as stipulated in the contract.
The independent contractor is to be solely responsible of his workers while in the company premises. It is the liability of the independent contractor to pay all statutory contributions for his employees. And the independent contractor has the rights to engage his employees to perform the contract for service.