What is the difference bet Ind contractor vs employee

Related Topics: | HRM Advice | Employment Act |

What is the difference between an independent contractor and an employee?

This difference lies in the obligations of the employer to provide employee benefits and be governed by the provisions of the Employment Act because there is an employer -employee relationship as compared to an Independent Contractor which is governed by the general Law of Contract.

Generally, employees’ wages are subject to the withholding of personal income tax (through the PAYE system).

Before payment of wages to an employee, the employer has the right to make statutory deductions, like EPF and Socso and other voluntary deductions like insurance premium, sport club fees, loan deductions, etc. as agreed by the employee in writing.

There is no employer-employee relationship between an independent contractor and the person or entity that purchases his services.

The independent contractor hire his own workers, pay wages and controls his own work performance. Hence, the employer is not obliged to provide any employee benefits to an independent contractor for work performed.

Therefore, it is important to know how to draft an independent contractor agreement because it is the legal agreement that binds the contractor or sub-contractor and yourself.

This type of contract is very prevalent in the construction industry, training, advertising and consultancy industry where the assignments are on job to job basis.

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