I have recently been asked by a friend on how we differentiate a contract of service and contract for service. There is no doubt that many employers, not only could not differentiate, they do not know the purpose of these two different contracts.
The contract of service is as defined in the employment act as
“ means any agreement, whether oral or in writing and whether expressed of implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee and includes an apprenticeship contract.”
Here, we interpret as “one person agrees to employ another as an employee” which is the master and it is an employment and; “that other agrees to serve his employer”. The word “serve” here means that the person signing the document agrees to come under authority. Here we see the existence of a “master and servant” relationship.
Whereas the contract for service differs as there is no master of servant relationship is involved.
Ready Mixed Concrete (South East) Ltd v Minister of Pensions Insurance
“A contract of service exist if the following three conditions are fulfilled:-
a) The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in performance of some service for his master.
b) He agrees expressly or impliedly that in the performance of that service he will be subject to other’s control in sufficient degree to make that other master.
c) The other provisions of the contract are consistent with its being a contract of service.”
What is the acid test for a contract of service?
And in the words of Cooke J in Market Investigations Ltd v Minister of Social Security (1962) 2 QB 173 said: -
The fundamental test to be applied is this ‘Is the person who has engaged himself to perform these services performing them as a person in business on his own account? If the answer is ‘yes’, then the contract is a contract for services. If the answer is no, then the contract is a contract of service”
Here, employers have to be very careful in drafting a contract and whether a person is an employee or not depends on the contract itself. How was it written? What are the terms and conditions? Do the terms and conditions reduced in writing imply that the person is an employee or even contains similar conditions of an employee?
A lot of employers fail and would only think that so long that the title is written Contract For Service and the other person signs it, we are safe. I would safely say that understanding is wrong and may get you in a lot of trouble. Ask yourself those questions before you do anything.
