Contract of Service vs Contract for Service

Contract of Service

A Contract of Service, as defined by the Ministry of Manpower (MOM), is a formal agreement between an employer and an employee. It provides a crucial foundation for both parties, offering security and protection. Essentially, it functions as an employment contract.

For employees, this contract ensures a sense of security as it outlines their professional responsibilities within the organization, providing clarity on the expectations they must meet. Employers, on the other hand, find security in the fact that employees’ obligations are well-defined and enforceable, allowing them to take legal action in case of contract breaches.

The Contract of Service outlines various terms and conditions of employment, including Key Employment Terms (KETs) and essential clauses such as working hours and job scope.

In Singapore and many other countries, most working adults are considered employees and operate under a Contract of Service. This legal status entitles them to protection under the Employment Act, which includes statutory benefits. The Employment Act covers different types of employees:

1. Full-time employees: Those who typically work an average of 40 hours per week and receive company benefits like healthcare, dental care, vacation days, and paid time off.
2. Part-time employees: Individuals working less than 40 hours per week who do not qualify for the full range of benefits available to full-time employees.
3. Temporary employees: Hired for short periods based on a company’s temporary needs.
4. Contract employees: Individuals engaged for a predetermined time and price, often known as freelance workers. They may be compensated hourly, daily, monthly, or piece-rated.

It is essential to note that certain categories of workers, such as seafarers, domestic workers, statutory board employees, and civil servants, are not covered by the Employment Act.

The Employment Act offers benefits like sick leave, annual leave, maternity leave, incentives, bonuses, relocation assistance, healthcare benefits, retirement fund contributions, childcare benefits, and transportation reimbursements. By providing these benefits, the act aims to create a supportive work environment, leading to increased productivity, higher employee retention rates, and a positive impact on a company’s bottom line.

Contract for Service

In contrast, a Contract for Service establishes a client-contractor relationship instead of an employer-employee relationship. In this type of contract, a self-employed or independent worker (freelancer) agrees to complete a specific task or project for a predetermined fee.

Unlike a Contract of Service, a Contract For Service does not fall under the protection of the Employment Act. Consequently, individuals operating under this type of contract do not receive statutory benefits such as annual leaves, maternity/paternity leaves, public holidays, medical leaves, and other benefits.

Their key differences

To summarize, the key differences between a Contract of Service and a Contract For Service are:

Contract of Service:

• Involves an employer-employee relationship.
• The employee conducts business on behalf of the employer.
• May be covered by the Employment Act, entitling the employee to statutory benefits.
• Includes terms of employment, such as working hours and leave benefits.

Contract For Service:

• Establishes a client-contractor relationship.
• The contractor conducts business independently.
• Not covered by the Employment Act, resulting in no statutory benefits for the contractor.

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