In general, persons engaged under a ‘contract of service’ are considered to be employees, while those who are engaged to work under a ‘contract for service’ are deemed to be independent contractors.
There is no single test for ascertaining whether someone is an employee or a contractor, but there are some key points that help to define whether someone is an employee or an independent contractor.
There are several ways to determine if someone is an employee or a contractor. Some of the most common are:
Employers in Singapore are responsible for paying contributions to the Singapore Central Provident Fund (CPF) in respect of employees who are Singapore citizens or Singapore permanent residents. An employee will be taxed on their full income, while an independent contractor can treat expenses as business expenditure and lower the taxes paid this way.
There are significant differences in both benefits and protections for employees and independent contractors. Under the Singapore Employment Act, some employees are entitled to benefits including annual leave, maximum working hours, public holidays and paid medical leave. Independent contractors are not entitled to these benefits.
If you have any queries about defining employment classifications, including the benefits of hiring employees or independent contractors, we are here to help. Please do not hesitate to contact us.
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