A service contract or employment contract is not determined by the title of the document. Article 12 of the Labor Code defines the employment relationship as one in which work is performed under the organization and orders of another person, in exchange for remuneration. When the relationship is not clearly defined, its true nature is determined by the competent court based on the facts.
This page outlines the criteria that distinguish the two, the signals that draw the auditor's attention, and how to draft a service contract that holds up.
Read also: The Boundaries of the Employment Relationship: The Complete Guide
Both are governed by different laws. The employment contract is governed by the Labor Code, while the service contract is governed by the Civil Code. Everything else follows from this.
| Criterion | Employment contract | Service contract |
|---|---|---|
| Objective | Making work available | Achieving a specific result |
| Dependence | Work is performed according to the employer's orders and organization. | The provider decides for themselves how to carry it out. |
| Business Hours | Assigned by the employer | Free, tied to the delivery deadline |
| Sold | Usually the employer's environment | Chosen by the provider |
| Tools | Provided by the employer | Provided by the provider |
| Economic risk | The employer keeps it. | The provider keeps it. |
| Payment | Periodic payment, with contributions and withholding tax. | Invoice for the service rendered |
| Exclusivity | Usually an employer | Some clients |
No single criterion solves the issue. The big picture determines it, and the criterion that carries the most weight is dependency.
Read also: Mandatory elements of the employment contract
These are the elements that in practice draw an inspector's attention the fastest.
Caution: The risk doesn't lie in the fact that someone works on an invoice. It lies in the combination. A provider with a single client, a fixed schedule, working on the client's premises and using their equipment, is practically an employee, regardless of what the contract says.
When true nature is defined as a working relationship, the consequences come simultaneously from both sides.
| What's up? | Consequence |
|---|---|
| Labor rights | All obligations of the Code apply, from the contract and schedule to breaks and notice periods. |
| Penalties of the Code | Violations of the relevant articles are punishable under Article 202. |
| Contributions | Liabilities for the past period arise under the tax legislation. |
| The person's claims | Unused vacation leave, allowances, and, where applicable, longevity pay. |
| Prescription | Three years from the birth of the right, according to Article 203. |
The three-year period is the part most often underestimated. A collaboration closed today can still be challenged three years later.
Read also: The self-employed individual and the reclassification of the employment relationship
There are cases where it is the correct form and poses no risk.
The common element is the same in all four. The provider decides for themselves how to carry out the work and bears the risk of the outcome themselves. A separate case is company administrator, which does not fall into either form without being analyzed separately.
These clauses have been prepared by AlProfit Consult. They do not change the nature of the relationship, but accurately reflect it when the relationship is truly a service.
Object
The provider undertakes to carry out the specified concrete result, not the general activity, within the deadline and in accordance with the attached technical specifications.
Independence in Execution
The provider independently determines the manner, timing, and location of service delivery. He is not subject to the client's schedule, daily orders, or internal organization.
Tools
The provider uses its own tools, equipment, and software. When, for technical reasons, the client's tools are used, this is explicitly noted and limited to those only.
Deadlines and Submission
The service is delivered by the due date and accepted with a written report or written confirmation. Payment is made on a delivery basis, not on a time-spent basis.
Payment
The price is the amount in figures and words, invoiced in accordance with the applicable tax legislation. It does not include any salary components, allowances, or other benefits under the Labor Code.
MOSEXCLUSIVITY
The provider has the right to perform services for other individuals during the validity of this contract.
Responsibility
The provider is responsible for the quality and conformity of the delivered result and bears the risk of non-performance.
The Nature of the Relationship
This contract does not create an employment relationship between the parties and is not governed by the Labor Code.
The final clause is necessary but not sufficient. If the facts show dependency, it does not protect the relationship.
Read also: Ready-made templates and forms for employment
The two forms have different costs and reporting requirements.
Under the employment contract, the employer retains income tax and contributions, issues a pay slip and reports the payroll each month. Under the service contract, the provider issues an invoice and is personally responsible for his own tax obligations, according to the regime to which he belongs.
The choice is not made on the basis of cost. It is made on the basis of the actual form of cooperation, because the wrong form gives rise to liabilities that go back in time.
Read also: The regime and rates for the self-employed
Subordination. Under an employment contract, work is provided within the employer's organization and orders, as set forth in Article 12. Under a service contract, the service provider decides for themselves how to perform the work.
When the relationship is not clearly defined, the competent court determines its true nature based on the facts, in accordance with Article 12.
No. It is useful, but if the facts show the client's dependence, schedule, and means, the clause does not protect the relationship.
It's possible, but long-term exclusivity is one of the strongest signals of a working relationship, especially when combined with the client's schedule and resources.
The obligations of the Labor Code are enforced, contributions for the past period become due, and the individual may request vacation leave, allowances, and, where applicable, a longevity bonus.
Within three years from the birth of the right, pursuant to Article 203 of the Labor Code.
Not necessarily. Remote work can also constitute an employment relationship, under Article 15 on home work and telework. It's the dependency that matters, not the location.
This is not the right question. The form is chosen according to the actual nature of the cooperation, because the wrong form results in obligations back in time and in sanctions.
