HR MANAGEMENT - Difference Between Contract of Service and Contract for Service

Apr 4th, 2011 | By Andrew

Contract of Service vs Contract for Service 

Contract for Service and Contract of Service are common law terms that are used to distinguish between the nature of service provided by a worker to the employer. While the contract of service refers to a person who is in employment, contract for service refers to a person who provides his services to his clients. In earlier times, in a contract for service the relationship between the service provider and the employer was that of a servant and a master, but with the concept of contract for service, this relationship has undergone a seas change and now the service provider is an agent while his clients are principals. Today, those who work for others are either employees or independent contractors, also known as self employed.

This bifurcation of workers has significance in many areas such as welfare, employment, and employee benefits. This classification is thus important in case of any dispute, unfair dismissal, leaves, redundancy etc. These actions are applicable only to employees which is the person who works under a contract of service.

A contract is an agreement between two parties that clearly defines the rights and obligations of both parties, is legally binding and is mutually beneficial. Hence it is necessary to have the contract clearly defined in case of a dispute.

People who work for contract for service are generally not entitled to any rights that are there for people who work under contract of service. These are people who are independent contractors having their own business and a fixed address. They have control over their business and they know what is to be done at what time, and how the job is to be carried out either personally os through others. These people can provide their service to more than one client at a time and such people usually provide for their own insurance cover.

Summary • The terms contract of service and contract for service are in vogue these days to identify the type of agreement between the employer and the worker • Contract of service refers to a person who is in service or employment whereas contract for service refers to a person who is an independent contractor • The person under a contract of service is entitled to all employee benefits whereas the person under a contract for service gets no such benefits an has to provide for his own insurance cover