Contract of service

economic-dictionary

A contract for the provision of services is an agreement between two parties. Through it, the necessary conditions are established for the performance of a certain service. And this, in exchange for an agreed fee.

Within the different modalities of commercial relations, there is the contract for the provision of services.

It is a very widespread contracting tool between individuals and organizations, as it allows establishing agreements for the performance of professional services in exchange for a consideration.

This contractual modality is commonly adopted by self-employed professionals. They develop a certain economic activity for a third party, establishing specific conditions in writing.

On the other hand, this type of contract is mostly used by service providers of a very different nature, as well as by employees in companies for finite or limited periods of time.

Basic elements of the contract for the provision of services

This type of formal agreement has some characteristics that define it in the professional and work environment:

  • Identity of the intervening parties: The professionals and participating entities must have an official identification and a signature that represents their acceptance of the agreement.
  • Development date: The contract defines the period of time during which the particular service will be provided.
  • Economic conditions to be satisfied: The performance of the work entails the payment or remuneration established in the document, which will be previously agreed upon bilaterally.
  • Nature of the service: There are many types of commercial collaboration through which these types of labor agreements are established. All of them refer to the provision of a service and not a tangible good.

The service provision contract as an outsourcing strategy

In a way, the contract for the provision of services is closely linked to the business phenomenon of outsourcing or subcontracting.

In this sense, this type of contractual formality stands as the legal tool that enables the development of this type of labor relationship.

The latter responds to the need for organizations of all kinds to turn to external professionals for the satisfaction or fulfillment of a series of tasks or duties.

This relationship usually arises in certain periods of time. For this reason, this contractual modality is used, or other similar ones, such as the work and service contract.

Difference between contract for the provision of services and employment contract

This type of contracting gives the contracted party a greater level of freedom or independence when defining the conditions for the development of its activity.

In terms of remuneration conditions, compliance terms or many other labor characteristics, the traditional contract (the most common would be the indefinite one) implies an acceptance, to a greater degree, of the conditions imposed by a company or institution.

Another point of distinction to highlight is the compensation of official and tax obligations. In this sense, in employment contracts it is the contracting company that must satisfy these requirements.

Alternatively, the professional linked by means of a contract for the provision of services must undertake on his own account to duly comply with his tax obligations.

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