Difference between contract of service and contract for service

Difference between the contract of service and contract for service

FAQ from our CLIENTS :

1. Is EPF compulsory for all employees even though employees agree on the EPF non-deduction?

2. What happens when EMPLOYERS refuse for EPF/Sosco/EIS/PCB/HRDF?

3. What happens when EMPLOYEES refuse for EPF/Sosco/EIS/PCB/HRDF?

We shall explain the important differences between Contract of Service and Contract for Service.

Contract of Service

  • A contract of service is also known as an employment contract. Meanwhile, the roles in the contract agreement are like “Employer & Employee”.

  • The contract agreement can be oral, written, express, or implied.

  • Terms of termination under employment act 1955.

Contract for Service

  • A contract for service can be known as a contract between an independent contractor or sub-contractor providing services to the client. The services could be an assignment or project.

  • The contract agreement is usually in writing.

  • Follow the terms & conditions stated in the agreement.

What are the statutory benefits - Contract of Service

  • Wage period will be one month and the payment of wages cannot be later than the seventh day after the last day of the wage period.

  • The wages must include lawful deductions such as EPF, SOCSO, EIS and PCB.

  • Working hours will be 8 hours a day and total more than 48 hours a week.

  • General paid annual leave, paid sick leave and holiday.

  • Termination, lay-off and retirement benefits.

  • Maternity protection

What is the statutory benefit - Contract for Service

No statutory benefit for independent contractors and sub-contractors. Only follow the terms and conditions stated in the contract agreement.

Example - Contract of Service

ABC Sdn Bhd is a manufacturing company. They hire an internal worker to do the daily cleaning job in the factory. The company and worker have signed an employment contract. This worker also can enjoy the EPF, SOCSO, EIS, and paid leave which are provided by ABC Sdn Bhd. This kind of relationship between employer and employee will be a contract of service.

Example - Contract for Service

ABC Sdn Bhd is a manufacturing company. They engaged a sub-contractor to provide cleaning services for the factory once a week. ABC Sdn Bhd only paid the cleaning fee and without EPF, SOCSO & EIS to the sub-contractor which was agreed and stated in the signed contract. This kind of relationship between contractor and client will be a contract for service.


Summary Contract of Service

  • Has employer-employee relationship

  • The employee does business for the employer

  • Covered by the Employment Act

  • Includes terms of employment such as working hours, leave benefits, etc.

Summary Contract for Service

  • Has client-contractor type of relationship

  • The contractor does business for their own account

  • Not covered by the Employment Act

  • Statutory benefits do not apply

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