All employment relationships are based on contracts between parties. There are two main legal categories of persons who work for others. They may be “Employees” or “Independent Contractors”. The distinction between an employee and an independent contractor is not always clear cut and may in many instances be a grey area. Surprisingly, regardless of any definitions, it may still fall to the courts to decide, based on the facts, whether a particular person is in fact an employee or an independent contractor. It is vital to determine exactly the type of relationship that exists and to distinguish between the two types of relationships as different rights and obligations apply to each.
In most cases, the consideration of whether the relationship is a contract of service or contract for service will determine the employment status.
Contract of Service
A contract of service implies an employee / employer relationship. The element of ‘control ’ that an employer has in the working relationship usually indicates an employee / employer relationship. In this type of relationship, the employee works under the control of the employer, i.e. the employer directs how and where the work is to be carried out, the hours to be worked and the salary. An employee is entitled to holiday leave, sick leave, and also enjoys protection and rights under Employment Legislation, such as the right of maternity leave, parental leave, protection from unfair dismissal et al. Employers generally owe a greater duty to employees with regard health and safety.
Contract for Service
A Contract for Service on the other hand is generally a once off relationship which terminates on the completion of specified duties/tasks/activities. This role is usually that of a self-employed person / independent contractor. The employer in this relationship has less control or responsibility and usually has no liability for the action of independent contractors. Independent contractors usually supply his/her own materials and control the amount of hours worked. It is noteworthy that independent contractors are not entitled to as many of the benefits that employees enjoy, such as the entitlement to sick pay, holiday leave, overtime, and travel expenses.
As such, an employee works under a contract of service to perform specific duties, whereas an independent contractor provides services.
As the distinction between an employee and an independent contractor is not always clear cut, it would seem that in order to determine the exact status of the relationship, one must analyse the exact workings of the relationship, examine the contract of employment and furthermore assess the issue of remuneration.
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