Contract of Service vs Contract for Service: Global Hiring Differences

1. Introduction

When hiring remote talent across borders, many companies face the same dilemma: should they sign a Contract of Service or a Contract for Service? Misunderstanding employer responsibilities or choosing the wrong contract type to use can lead to violations and penalties that slow growth and add compliance complexity.

According to the FlexJobs 2025 report, the U.S. workforce market is projected to have more than 86 million freelance workers by 2027, making up 51% of the total workforce. With remote work and global hiring on the rise as companies now have the flexibility to better allocate resources to match required skills, both types of employment options are becoming common and viable options. 

For global teams, misunderstanding contract types can lead to compliance risks across multiple countries.

In this article, we’ll break down what a Contract of Service and a Contract for Service mean for employers, highlight the key differences, explore common misclassification risks, and offer practical guidance to help you make the most informed decisions for your remote and global hiring needs.

2. What is a Contract of Service?

A Contract of Service is a formal employment agreement that establishes an employer–employee relationship, where the employer has significant control over how, when, and where the work is performed. 

When you hire a full-time employee, under an agreed employment contract compliant with local labor laws, you are able to ask the employee to follow a fixed schedule, use company-provided resources and tools, and integrate into his or her team’s daily operations. This applies to employees working remotely in other countries as well. 

As an employer under a Contract of Service, you are typically required to:

• Provide a written employment contract that meets local legal requirements.
• Pay agreed wages on time.
• Withhold and remit taxes and social security contributions.
• Ensure workplace safety.
• Comply with statutory notice periods and redundancy rules.

Despite the higher compliance and administrative costs, many companies still choose a Contract of Service for core roles, mainly because it’s easier to foster company culture and retain talent by building a coherent, collaborative team to align with your business goals. 

3. What is a Contract for Service?

A Contract for Service is an agreement between an employer and an independent contractor, where the contractor is brought in to deliver a specific project or set of tasks. Unlike an employment contract, the contractor decides how, when, and where the work gets done, as long as the agreed results are delivered.

You can usually tell whether a relationship is a Contract for Service by a few key traits: 

• Payment is tied to the project or deliverables (not a fixed salary).
• There are no employer-provided benefits like paid leave or health insurance.
• The contractor is free to use their own methods and tools to get the job done. 

Think of a graphic designer creating a new logo for a start-up, a software engineer joining a mobile app development project for three to six months, or a marketing consultant brought in to plan and advise on a new product launch campaign.

In this setup, the contractor is responsible for handling their own taxes, social security contributions, and business expenses, including equipment, software, or any other costs that aren’t explicitly covered in the agreement. 

That said, Contract for Service arrangements come with their own challenges, such as higher per-project cost, cross-border payment, currency fluctuations, and the need for a reliable way to find the right contractors. These hidden costs and challenges affect both the employers and the contractors alike. 

4. Key Differences Between Contract of Service and Contract for Service in 2025

• While a Contract of Service is essentially the traditional employment model, a Contract for Service remains an outsourcing arrangement.
• The key difference here is the level of control.
• In the former model, the employer has significant authority over how the work is done, even if the employee works remotely.
• In a Contract for Service, the contractor retains that control and can decide where and how to work unless the contract specifies otherwise.

Reminders for Employers on Global Hiring

5. Misclassification Risks in Remote Hiring

Misclassifying remote workers, such as treating employees as contractors or vice versa, can expose your company to legal and financial risks, even if the misclassification is done unknowingly. As remote working becomes more common, some employers mislabel employees as  “contractors,” skipping required benefits, social contributions, or miscalculating payroll.

In Massachusetts in August 2025, the online grocery platform, Weee, misclassified 164 delivery drivers as contractors, resulting in nearly $865,000 in settlement costs. This shows that negligence or misunderstanding labor laws could deal serious damage to a company, even if the mistake is made unintentionally.

• For example, in the United Kingdom, IR35 rules can quickly turn a contractor engagement into a costly mistake as the HMRC might require full back-payment of income tax and National Insurance, plus penalties up to 100% of what’s owed.
• In Singapore, under‑classification can lead to CPF retroactive contributions, monetary fines of up to SGD 5,000, and even potential legal restrictions. (Read more: Stay Compliant with CPF Singapore: Complete Guide for Payroll and Contribution Rates)

Quick Checklist to Reduce Misclassification Risks:

• Review work hours and the level of control over the worker.
• Check if the role is ongoing or project-based.
• Confirm who provides tools, equipment, and training.
• Align with local labor and tax rules before drafting contracts.

📌 Read more to learn how your company can better manage a global team in the age of remote work.

6. How Slasify Helps Businesses Stay Compliant in 2025

When managing multiple teams across markets, it’s difficult to make the right hire you need, but even more challenging is all the compliance you must adhere to. Getting employee contracts and classification wrong could lead to a slew of violations on payroll, taxes, social contributions, and more. 

That’s why many companies deploy software for HR management, such as an Employer of Record (EOR) solution like Slasify, to help manage global hiring effectively. Slasify streamlines drafting employee contracts, onboarding, and making sure every type of employee and contractor is paid and reported properly. Below are some of the most popular services provided by Slasify:

• Expand to new markets without local entities: Support legal hiring in new markets by working with an EOR platform service to enable fast market entry with minimal costs and friction.
  
  
• Stay fully compliant with Employer of Record (EOR) service: By acting as the official employer for remote staff in over 150 countries, Slasify takes on compliance obligations for you. From drafting locally compliant contracts to handling payroll, social contributions, tax filings, and even work permits or visas.
  
  
• Simplify global contractor management: For project-based roles or freelancers, Slasify streamlines onboarding, contractor agreements, and payments in over 130 currencies, to provide a global contractor solution to manage risk and classification.
  
  
• Respond quickly to regulatory changes: Stay compliant as local laws evolve without needing to search for answers yourself, as a dedicated account manager will guide you through the onboarding process and answer any questions along the way.

In this article, we’ve covered the main differences between Contract of Service and Contract for Service, as employers expanding into different overseas markets could easily get confused by what kind of contract is appropriate and the obligations that come with it and cause potential risks: 

• The key difference between a Contract of Service and a Contract for Service lies in control, benefits, and contract autonomy.
  
  
• In remote and global hiring, misclassification risks are amplified, leading to tax, social security, and legal liabilities.
  
  
• Regulations like the UK’s IR35 and Singapore’s CPF updates have increased compliance pressure for businesses.
  
  
• Choosing the right contract type is about making a strategic decision for scaling international teams safely.

  Whether it's hiring a full-time employee as your founding team member or contractors to help with a project, Slasify provides a complete Employer of Record (EOR) and global contractor solution to streamline contracts, onboarding, payroll, taxes, and compliance when you enter a new market.

  Talk to our EOR and contractor experts to begin hiring for success!

7. Remote Work FAQs

1. What is The Main Difference Between a Contract of Service and a Contract for Service?

A Contract of Service establishes a formal employer–employee relationship that defines wages, benefits, and legal obligations. A Contract for Service is project-based, engaging an independent contractor who handles their own taxes, tools needed for the project, and schedule, without benefits like insurance or paid leave. 

2. Can a Contractor Become An Employee?

Yes. If the working arrangement evolves and the contractor starts to work fixed hours, use the tools that the company provides, or becomes more integrated into the team and daily operations, then the company must review and update the contract to take on the right obligations (benefits and entitlements) and compliance (taxes, contributions, and payroll).

3. How do Companies Avoid Misclassification Risks?

As an employer, you can avoid misclassification risks by reviewing the misclassification checklist that we provided in the article. You can also leverage software for HR management, provided by a trusted Employer of Record (EOR) and contractor solution provider like Slasify to ensure the worker classification is done properly and contracts are drafted accordingly. You can read further on the best practices for hiring and paying global contractors here.

4. Is the Contract for Service Legal for Full-Time Roles?

Generally, no. Many countries define full-time, controlled, or integrated work as Contract of Service employment. Using contractor status for such roles can violate labor laws and trigger penalties. 

5. Does an Employer of Record (EOR) Help with Both Contract Types?

Absolutely. An Employer of Record (EOR) legally employs your full-time remote workers in a given country without you needing to set up a legal entity. The Employer of Record (EOR) partner also drafts contracts for both types while handling payroll, taxes, social security, and local regulations.

About Slasify

Founded in 2016 in Taiwan and now headquartered in Singapore, Slasify began with a vision. We saw the rapid expansion of businesses outpacing traditional work models. Inspired by the rise of the internet and the growing demand for flexibility, our founders created Slasify to bridge the gap between global businesses and remote talent. What started as a small team with a big dream has grown into a global powerhouse. Today, Slasify serves over 150 countries and operates in 130 currencies, empowering businesses to expand without borders. Read more!