What to consider when concluding a contract for services?

The biggest difference of the employment contract and the contract for services is the fact that in case of the contract for services there is no definite employee-employer subordination 

(fixed workplace, time, facilities), and the absence of the rights proceeding from the employment act like the right to minimum pay, paid holiday and health insurance. On the other hand, the contract for services provides the contractor freedom to choose the suitable time and method for the executing the work – the achievement of results agreed to according to the deadline established prior is important. Irrespective of the type of the contract, execution of work has to be registered in the Employment Register.

By a contract for services the contractor undertakes to make or change an item or by providing a service achieve some kind of result agreed upon prior, and the contracting entity obliges to pay salary for that. Based on the above-said, it is important that the contract for services between the contractor and the contracting entity is clearly and properly worded. A contract in writing gives the parties confidence that a common understanding is reached in regard to the work results and the salary is paid for the corresponding work. Besides, in case of a written contract, it is not necessary to remember the established conditions because it is always possible to recall them on the basis of a written contract. It is especially important when dealing with long-term projects and it takes weeks and even months to execute all the work.

In case of a contract for services, it is important to agree to as follows: the work executed, the deadline of the work and the salary paid. When describing the work to be done, it is important to agree to the expected results, e.g. making 10 cakes or car repairs to make it passable at the technical inspection. The more detailed is the description of the performed work, the more understandable it is for the contractor for execution, and the contracting entity can be sure that the executed work complies with the expected results. If the work fails to be in conformity with the contractual conditions and terms, the contracting entity may provide an opportunity to improve the work or execute new work. You also have to establish a deadline for the execution of work. The contracts for services are mainly established for a certain term, which means a certain date is agreed to as the deadline (also the time of the day if necessary). The agreed deadline for the accomplishment of the work has to be realistic to enable the contractor to execute the work. The appointed salary for the work has to be paid after the work is delivered. Taxes like the social tax, the natural person’s income tax (possible to use basic exemption from the contractor’s total income up to 500 EUR a month), payment of the mandatory funded pension (if the contractor has joined column II) and unemployment insurance payments have to be paid. The appropriate salary for parties can be calculated by using the salary calculator of Arveteenus.ee.

It is important to point out that health insurance occurs to the contractor on the basis of the contract for services, when the minimum rate of the social tax deducted from the salary is registered per month. It is possible to become familiar with taxes and their rates deducted from the salary on the homepage of the Tax and Customs Board www.emta.ee.

Under your own account on the homepage of Arveteenus.ee, it is possible to see and use a prepared contract for services, which can be changed and improved according to each new employment. We also register the contractor in the Employment Register for one day on the date the salary is paid and the payment of legal taxes is deducted from the salary. For the contracting entity it means the payment of one invoice and stress-free work for the contractor and the accrual of the salary, knowing that all legal liabilities have been fulfilled.

Photo: Andrea Piacquadio