1. Concept of an Employment Contract and a Service Contract
An employment contract is an agreement between an employee and an employer regarding paid employment, wages, working conditions, and the rights and obligations of each party in the labor relationship (Clause 1, Article 13 of the 2019 Labor Code).
A service contract is an agreement between parties whereby the service provider performs work for the service user, and the service user is obligated to pay service fees to the service provider (Article 513 of the 2015 Civil Code).
Note:
Where the parties enter into an agreement under a different title, but the contents indicate paid work, wages, and the management, administration, or supervision by one party over the other, such agreement shall still be deemed an employment contract.
Therefore, in determining whether an agreement is an employment contract or a service contract, it is necessary to consider not only the title of the contract but also the substance and terms agreed upon by the parties.
2. Differences between an Employment Contract and a Service Contract
| Criteria | Employment Contract | Service Contract |
|---|---|---|
| Legal basis | Article 13 of the 2019 Labor Code | Article 513 of the 2015 Civil Code |
| Contractual contents | Must contain the essential terms prescribed in Clause 1, Article 21 of the 2019 Labor Code in order to be recognized as an employment contract | An agreement whereby the service provider performs work for the service user, and the service user pays service fees |
| Legal relationship between parties | There is a legal subordination relationship between the employee and the employer; during performance of work, the employee is subject to the employer’s management and supervision | There is no employment-based legal subordination between the service user and the service provider; the contract primarily focuses on the work result |
| Person performing the work | The employee must personally perform the work and may not delegate it to another person | The service provider may replace the person performing the work with the consent of the service user |
| Duration of performance | The work must be performed continuously during the agreed period and may not be arbitrarily interrupted except as permitted by labor law | Continuous performance is not required, provided the agreed work is completed |
| Objective of the employer/service user | The employer is concerned with both the labor process and the outcome | The service user is primarily concerned with the final result |
| Basis for payment | Payment is based on the labor process and working time | Payment is based on the completed product or result |
| Method of performance | Work must be performed continuously for a definite or indefinite term | Work does not need to be continuous as long as it is completed within the agreed timeframe |
| Insurance obligations | Mandatory participation in social insurance, health insurance, and unemployment insurance schemes | No mandatory insurance obligations for the service provider |
| Annual leave entitlement | Employees working for 12 months are entitled to paid annual leave: 12 days for normal working conditions; 14 days for minors, disabled employees, or hazardous work; 16 days for especially hazardous work | No statutory annual leave entitlement |
| Sick leave entitlement | Employees working under normal conditions are entitled to sickness benefits: 30 days if social insurance contributions are under 15 years; 40 days if from 15 to under 30 years; 60 days if 30 years or more | No statutory sick leave regime |
3. Types of Employment Contracts
Pursuant to Article 20 of the 2019 Labor Code, employment contracts must be entered into under one of the following forms:
- Indefinite-term employment contract: a contract in which the parties do not specify the duration or termination date of the contract;
- Definite-term employment contract: a contract in which the parties specify the duration and termination date of the contract, provided that the term does not exceed 36 months from the effective date of the contract.
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