Contracts for Service: Everything You Need to Know
Contracts for service are agreements in which a business or employer enters into an arrangement with a self-employed individual.3 min read
2. Contract Details
3. Contract Differences
4. Contract Roles
5. Mutuality of Obligation
Contracts for service are agreements in which a business or employer enters into an arrangement with a self-employed individual. Service contracts outline specific acts or roles that an employee must do for a business. Such acts could include:
- Tuning a car
- Painting a house
- Lawn maintenance
Contracts for service are different from contracts for goods. Service contracts are used mainly by:
Such agreements may involve a party paying another to perform a certain duty. A general contract for services is useful when providing services for another person, or they can provide a service to you. Placing all agreements in writing keeps everything on record and establishes good relations with contracted workers. You may agree in the form of a handshake, but proving your case in court may be harder if an agreement is simply stated orally.
A written agreement solidifies the roles and duties of a contractor at a negotiated price. You may draft a general contract for services to establish clear parameters and terms for any service given.
You may choose other contracts that permit you to end a contract when necessary, and both parties need to sign the agreement to make it official. In addition, consider using the contract to maintain a clean record of the agreement to prevent misunderstandings. If the opposite party breaks the agreement and does not live up to his or her end of the agreement, you can take legal action against that person.
After you work out the essential details, such as payment and due dates, you may be thinking of what else you need to include. You may detail the hows and whats if you’re crafting a contract, and make sure to include specific materials and any approved alternatives. All details in a contract will safeguard your rights in case anything goes array.
When it comes to contracts for service, the differences primarily lie between services and service. Self-employed people provide a work on a finite basis, while employed people are employed permanently. Such division also separates those who have rights via employment and others that do not. Self-employed individuals usually don’t have rights in the form of the following:
- Pension plans
- Health benefits
- Other rights
However, a person who is employed permanently will have such rights and benefits. With that, the contract debate over contracts of service and contracts for service has an extensive history in labor law, as is the case with the employment status of all workers before the contractor sector soared in popularity.
An employee-employer contract is an agreement of service, while a contractor-client contract pertains to contract for services. In each contract type, both parties have certain responsibilities and rights, which differ based on the contract. Contractors should also be aware of rights and duties when they have an agreement for services between a limited liability company, agencies, or individual clients.
Important rights and duties include:
- The employee is controlled by an employer – they should perform the duties they are mandated under the job description
- The employee must work at a certain place during the hours on certain days
- The employer must show up to work and will not send anyone else in his or her place
- Workers have certain statutory rights in regards to holiday payments, sick leave, paternity and/or maternity rights, and redundancy payments
- Workers have statutory rights in regards how they will be asked to exit their employment
- Workers may enjoy a wide range of other benefits, which depends on the employer discretion, but includes company vehicles, health insurance, staff canteens, health clubs, etc.
- Workers are not personally responsible for any mistakes they may make when finishing work for an employer
Mutuality of Obligation
A relationship exists between an employer and employee known as “mutuality of obligation,” otherwise known as MOO. Mutuality of obligation is one of the important employment tests that determine whether an agreement is inside or outside of IRS guidelines. Mutuality of obligation means that employers must provide work for the employee, and that employee must complete the work. Within the parameters of the job description, employees must complete work that “comes down the pipe,” which is one of the main distinctions from a contractor.
To find out more about contracts for service, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s lawyers have graduated from some of the most prestigious law schools in the country and will help you draft a solid contract for service that will get you the results you desire. In addition, our lawyers will help you adhere to all applicable labor laws when it comes to hiring contracted employees.