A contract of service and a contract of employment are two legal terms commonly used to describe the relationship between an individual and an organisation. While they are often used interchangeably, they have some significant differences.
Phakisa knows that understanding these differences is essential for individuals entering into an employment agreement and for organisations hiring employees. Let’s get into it!
Contract Of Service
A contract of service, or a self-employed contract, is an agreement between an individual and an organisation outlining the terms and conditions of work the individual will perform for the organisation.
In this type of contract, the individual is considered an independent contractor responsible for their own taxes and benefits. The organisation is not legally obligated to provide the individual with employment benefits such as health insurance, paid time off, or other financial support. The individual is responsible for providing their equipment and supplies, and they are also responsible for managing their schedule and workload.
Contract Of Employment
In contrast, a contract of employment is an agreement between an individual and an organisation that outlines the terms and conditions of employment. In this type of contract, the individual is considered an employee of the organisation and is entitled to employment benefits and protections.
The organisation is legally obligated to provide the individual with employment benefits such as health insurance, paid time off, and other financial support. The individual is not responsible for providing their equipment and supplies; the organisation is responsible for managing their schedule and workload.
Some Key Differences
One of the key differences between a contract of service and a contract of employment is the level of control the organisation has over the individual. In a contract of service, the individual has more control over how they perform their work and when they perform it.
They are not required to work specific hours or follow specific procedures. In a contract of employment, the organisation has more control over how the individual performs their work and when they perform it. The individual is required to work specific hours and follow specific procedures.
Another difference between a contract of service and a contract of employment is the level of financial support the individual receives. In a contract of service, the individual is responsible for their taxes and benefits.
They are not entitled to employment benefits such as health insurance, paid time off, or other forms of financial support. In a contract of employment, the organisation is responsible for providing the individual with employment benefits and financial support.
Legal Protection
There are also significant differences in the legal protections available to individuals in a contract of service versus a contract of employment. In a contract of service, the individual is considered an independent contractor and is not protected by many of the same employment laws that apply to employees.
For example, independent contractors are not entitled to minimum wage laws, overtime pay, or the right to form a union. In a contract of employment, the individual is considered to be an employee and is entitled to all of the legal protections that apply to employees.
Basic Labour Laws
It is important to note that the Basic Conditions of Employment Act (BCEA) provides certain protections for employees who are on fixed-term contracts. For example, if an employee has been employed on a fixed-term contract for over three months and the contract is not renewed, the employee may be entitled to severance pay.
Additionally, suppose an employee has been employed on a fixed-term contract for longer than six months, and the contract is renewed or extended. In that case, the employee may be entitled to certain employment benefits, such as paid time off and, sometimes, even medical aid.
When entering into an employment agreement, it is crucial to understand the difference between a contract of service and a contract of employment. Individuals entering into a contract of service should be aware that they are responsible for their taxes and benefits and are not entitled to many legal protections that apply to employees.
Choose Phakisa to help you navigate employment agreements.
