What is a contract of service? In the business world, a contract of service, also known as a contract of employment, is the work agreement between employees and employers.

Definition
When a person is hired for a job, an agreement exists that the worker will perform job duties under the direction of the employer in exchange for wages. This expectation is a contract of service. The employer dictates how the job duties will be handled, when they will be performed and at what rate of pay. When the worker agrees to all those aspects of the job, the contract for service is in effect. The contract of service can be a written or oral agreement.

Breaking A Contract Of Service
Either the employer or employee can terminate the contract of service. In most cases, written notice is required in advance, with the length of time dependent on how long the employee worked at the company. In general, the longer the time the employee has spent at the company, the more notice he must provide to the employer.

Employers have several conditions to meet when they terminate a contract of service. One method for the employer to terminate a contract of service is when the employee has practiced negligence. An employer can also terminate a contract if the employee hasn’t arrived at work for two work days and hasn’t contacted the employer about the absences. Employees can terminate a contract of service if there are gross violations with the company, such as repeated failure to meet payroll.

Misconceptions
Don’t confuse a contract of service with a contract for services. A contract of services lasts for an indefinite period of time and covers multiple duties. A good example of this is a self-employed independent contractor who is hired to perform some services on a short-term, limited basis.