What determines if a contract is a ‘contract for service’ or ‘contract of service’?
From India, New Delhi
Labour Law & Hr Consultant
Partner - Risk Management
Doctor Siva Global Hr

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Dear Colleague,

Basically in a simpler terms it is can be explained as Contract for Service and Contract of Service are common law terms that are used to distinguish between the nature of service provided by a worker to the employer. While the contract of service refers to a person who is in employment, contract for service refers to a person who provides his services to his clients.

I) Contract for services: A contract for service is an agreement that is entered into by the company ( Company A) with a third-party for availing its services. The third-party ( B) may be an independent service provider, not an employee of the company. The third party (B) is not entitled to the benefits that the employees of the company receive or are entitled to from time to time during the course of their employment. Here it may be noted that the The company does not exercise control over the third-party. For example Company A taking the assistance of a third party B to develop a Software for their business.

(II) Contract of services : A contract of service is an agreement that is entered into by the company A with an individual for availing his/her services. Here the individual is the employee of the company A and is entitled to the benefits as an employees of the company receive . The Company A exercising control over the work by the employee so appointed. For example Company A appointing a Manager with fixed terms of service.

These are some fundamental difference and in the legal parlance there are much deeper and sharper differences.

From India, Chennai

Dear Kumar,

" Contract for service " and " Contract of service ", though contracts or agreements falling under the Indian Contract Act, 1872, they are distinguishable from the nature of relationship created between the parties and the degree of independence in the mutual relationship between the parties to the contract.

In a Contract for service, contractee becomes the beneficiary and the contractor is the service provider or executor of the contract already entered into. Thus the relationship between the parties to the contract for service is substantially independent.
Whereas, a Contract of service creates a substantial relationship of superior - subordinate or master and servant. Thus a Contract of service enables the contractee capable of controlling, not only the quality of work to be executed by the contractor, but also the method of doing the work thereby creating a relationship of employer and employee which is substantial marked by the inevitable factor of interdependence.
In other words, a contract for service, being relatively temporary in nature, gets fulfilled to the satisfaction of the contractee. Therefore, the contribution of the contractor to the organization of the contractee stands just limited to that extent. Whereas a contract of service, being substantial in its currency, lasts until the period agreed to earlier, enlarges the role of the contractor i. e., the employee to that of an effective stakeholder of the organization of the contractee i. e., the employer.

For further scholarly way of explanation in this regard, I shall ask you to go through the judgment of the hon'ble Supreme Court of India in Sushilaben Indravadhan Gandhi v. The New India Assurance Company Ltd., delivered in 2020.

From India, Salem

I hope you are aware that both the contracts are covered under Contract Labour Act if the concerned persons are working in your premises and you are liable for non-payment, short payment of their salary, leave, or statutory dues.
From India, Mumbai

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