Geoffrey Caesar, Solicitor

An employment contract and a service agreement define the relationship between an employer and a worker. They have other implications for the rights and obligations of both parties, as well as the applicable laws and regulations.

An employment contract is a contract of service, which means that the worker is an employee of the employer. Employees work under the employer’s control and direction, pay them a salary or wage, and provide them with benefits such as sick pay, holiday pay, pension contributions, etc. Employees also have certain statutory rights, such as protection from unfair dismissal, discrimination, and redundancy. An employment contract can be verbal, written, or implied by conduct, but it must include specific terms and conditions, such as hours of work, place of work, duties and responsibilities, etc. An employment contract is governed by labour law and the Employment Rights Act 1996.

A service agreement is a service contract, meaning the worker is an independent contractor or a freelancer. An independent contractor provides a specific service to the employer but retains control over how they perform their work, sets their fees or rates, and is responsible for their taxes, insurance, expenses, etc. An independent contractor does not have the same statutory rights as an employee but can negotiate their terms and conditions with the employer. A service agreement must be written and signed by both parties, and it must clearly state the scope of work, the duration of the contract, the payment terms, the termination clauses, etc. A service agreement is governed by civil law and contract law.

An example of an employment contract would be a teacher who works for a school. The teacher has to follow the school’s curriculum, policies, and procedures, and they receive a monthly salary, paid holidays, sick leave, etc. The teacher also has the right to join a trade union, claim unfair dismissal if fired without a valid reason, and receive redundancy pay if the school closes down.

An example of a service agreement would be a web developer who works for a client. The web developer agrees to create a website for the client according to their specifications, but they can choose their own working hours, tools, and methods. The web developer charges a fixed fee or an hourly rate for their service, and they have to pay their taxes, insurance, etc. The web developer does not have any employment rights or benefits from the client, but they can terminate the contract if the client does not pay them on time or breaches any other terms of the agreement.