Are You An Employee Or An Independent Contractor In Singapore?
Published on 23rd January, 2021 by Bonsai Law
It isn’t always straightforward to recognize whether you’re an employee of an organization or an independent contractor.
For example, a person you hire to handle your plumbing or to renovate your house is likely to be an independent contractor.
At first glance, it may not appear to make much of a difference whether you are one or the other but there are unfortunately legal consequences that follow depending on whether you’re considered an employee or an independent contractor.
For example, if you’re an employee of a company, the law imposes certain duties and obligations under common law and statute on the employer which may not apply to independent contractors.
A common example that is often cited is that employers have to make employer contributions to an employee’s CPF whereas they will not need to do so for independent contractors.
So How Do You Tell Whether You're An Employee Or An Independent Contractor?
For the most part, the relationship between an employer and an employee is regulated by the contract of employment between them. Employees are individuals who work under a contract of service with a company, performing work in return for salary.
On the other hand, independent contractors work under a contract of service with a company for an agreed fee, and the independent contractor’s work isn’t usually subject to the company’s control. This is important because individuals who enter the company as employees are statutorily entitled to certain benefits such as annual leave, medical insurance and employer benefits (i.e. CPF contributions) whereas individuals who join the company as an independent contractor aren’t.
While there are a few sources of law governing employment, the most relevant statute in Singapore is the Employment Act, which applies to every employee (regardless of nationality) who is under a contract of service with an employer.
In Singapore, the law looks into various factors to determine whether the individual is truly an “employee” of the company. Using the contract as a starting point, the courts will look into the substance of the relationship between the company and the individual, particularly the amount of control the company has over the individual. The more the individual is subjected to the control of the company, the more likely he is to be an employee. In addition, the courts will also assess:
1). Whether the individual’s work forms an integral part of the business.
2). Whether the individual owns and provides his own tools and materials.
3). Whether the individual works predominantly for the company or whether he works for multiple companies.
4). Whether there are specific working hours.
With the proliferation of outsourcing and hiring of consultants in the Singapore startup scene, it is more important than ever to be able to distinguish whether you're operating as an independent contractor or as an employee of a company.