Business Law
Two Types of Employment
There are two categories of employment available to people: to be an employee or to be self-employed. These two types of employment are known as a ‘contract of service’ and a ‘contract for service’. Someone under a ‘contract of service’ refers to a person who is, for example a person working in a supermarket as a shop assistant is under a ‘contract of service’. In contrast, someone under a ‘contract for service’ refers to a person who is self-employed (also known as an ‘independent contractor’), for example a plumber contracted by a supermarket to repair the supermarket’s sinks is under a ‘contract for service’.
The distinction between a contract of service and a contract for service is very important as the distinction is not always obvious and sometimes the courts are required to conduct tests to determine which of the two categories a person falls under. The reasons why the distinction between the two is so important include the fact that there are different levels of protection through employment legislation for each of the two, employers are much more liable for employees than for independent contractors, in the case of company liquidation employees are treated as preferential creditors whereas independent contractors are treated as unsecured debts, employers are responsible for the deduction of tax and social insurance of their employees but are not responsible for the deduction of tax and social insurance of independent contractors that they pay for a service.
Examples of How to Make the Distinction the Control Test
Case: Ready Mixed Concrete (South East) Ltd –vs. - Minister of Pensions and National Insurance (1968)
In this case the plaintiff, Ready Mixed Concrete, had stated in a contract between the company and lorry driver, Mr. Latimer, that he Mr. Latimer was an independent contractor. Mr. Latimer had been working as a yard batcher for the company from 1959 to 1963 before taking up a new role as a lorry driver. In
There are two categories of employment available to people: to be an employee or to be self-employed. These two types of employment are known as a ‘contract of service’ and a ‘contract for service’. Someone under a ‘contract of service’ refers to a person who is, for example a person working in a supermarket as a shop assistant is under a ‘contract of service’. In contrast, someone under a ‘contract for service’ refers to a person who is self-employed (also known as an ‘independent contractor’), for example a plumber contracted by a supermarket to repair the supermarket’s sinks is under a ‘contract for service’.
The distinction between a contract of service and a contract for service is very important as the distinction is not always obvious and sometimes the courts are required to conduct tests to determine which of the two categories a person falls under. The reasons why the distinction between the two is so important include the fact that there are different levels of protection through employment legislation for each of the two, employers are much more liable for employees than for independent contractors, in the case of company liquidation employees are treated as preferential creditors whereas independent contractors are treated as unsecured debts, employers are responsible for the deduction of tax and social insurance of their employees but are not responsible for the deduction of tax and social insurance of independent contractors that they pay for a service.
Examples of How to Make the Distinction the Control Test
Case: Ready Mixed Concrete (South East) Ltd –vs. - Minister of Pensions and National Insurance (1968)
In this case the plaintiff, Ready Mixed Concrete, had stated in a contract between the company and lorry driver, Mr. Latimer, that he Mr. Latimer was an independent contractor. Mr. Latimer had been working as a yard batcher for the company from 1959 to 1963 before taking up a new role as a lorry driver. In