Differences between Contract of Service and Contract for Services

Running head: HUMAN REASOURCE MANAGEMENT 1
HUMAN RESOURCE MANAGEMENT.
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HUMAN REASOURCE MANAGEMENT 2
Introduction.
Organizations hire people to perform different tasks or projects. The employees may
either enter into a contract of service which involves permanent employees or a contract of
services which includes contractors. They use a control test to determine if a person is employed
or self-employed. The law protects all employees both permanent and casual, and it also protects
the client from contractors by ensuring that the contractor delivers in good time and following
the specifications given by the client. The law also protects the contractors as well as casual
workers, and casual workers should have fair work, although they are not entitled to employment
benefits (Richards, 2015).
Differences between a contract of service and a contract for services.
Contract of service can be defined as a treaty between the employee and his/her employer
while a contract for services is the treaty between a contractor and a client where the contractor
is assigned with a project or an assignment. Other than the definitions, a contract of service and a
contract for services have a number of differences such as: in a deal of service, and the
employee does business on behalf of the employer while in a contract for services, the contractor
is responsible for all activities he/she carries out. In a deal of service (Jim et al. 2014).
An employee is protected by the employment act while a contractor is not. In a contract
for services, the contractor does not enjoy statutory benefits while an employee is entitled to
leave entitlements, limited working hours, overtime payments and allowances among many other
benefits. Persons involved in a contract of service are the employer and the employee while
persons engaged in a contract of services are the client and a contractor (Bradshaw, Millard &
Walden, 2011).

HUMAN REASOURCE MANAGEMENT 3
How to apply a control test to work related to determine if a contract of employment exists.
A control test can be defined as the test used to determine if a person is an employee or
self-employed for purposes of assessing tax. Control is the power of managing, directing,
overseeing business assets, and affairs. Control test involves the capability of an organization to
regulate the behavior of a person. If generally there exists a contract of service, the organization
controls the management, how the work is to be done, and the amount. The relationship that
exists is an employer-employee relationship; on the other hand, a contract of service exists if an
individual responsible for a specific project or assignment has all the freedom to achieve the
desired outcome. The contractor controls everything at work and can also assign some tasks to
other persons; the relationship that exists in the contractor-client relationship (Hood, Hardy &
Simpson, 2016).
To differentiate between an employee and a contractor, organizations using the control
test look at a number of factors that include: the owner of the equipment being used for work, if
the person responsible for a specific task is owned all the tools for the job, the person is not an
employee. Employees are provided with all equipment by their employers. Another way to
determine if a person is an employee or not is the power of the person overwork, and if the
person is controlled on how to work, where and when to work, it is most likely that the person is
an employee and not a contractor. The other way to determine if a person is an employee or not
is if the individual has the power to person has the authority to make decisions on cost while
working to increase the profitability, that person is likely to be a contractor. Nature of work is
also another way to determine if a contract of employment exists or not, if an individual is