Terri has an annual contract with Jackson Mortgage Brokers to provide property m

Question

Terri has an annual contract with Jackson Mortgage Brokers to provide property maintenance services; this includes lawn care, snow removal and parking lot maintenance. Terri spends, on average, 20 hours per week working at the company’s premises and is paid a flat amount monthly. She hires part-time workers, when necessary, to assist her. Terri does not have any other clients. Terri uses her own small tools; however the company supplies and maintains a riding lawn mower and a snow plow for her use. Her contact at the company is Glenn Simpson, the Facilities Manager, who meets with her every Monday to discuss the work to be done that week. Glenn approves Terri’s monthly invoices and submits them to Accounts Payable. Does Terri have a contract of service or a contract for service with Jackson Mortgage Brokers? As the company’s Payroll Supervisor, explain to Glenn the process and factors you used to make your decision.

Explanation / Answer

This is a contract for service.

Contract of service is the simple relationship between an employer and an employee. The employee gets salary out of his/her service in the company.

Contract for service is the relationship between the owner of business and an independent contractor. The contractor works for the company and gets the contracted amount; if not paid during the period then should be recorded as Accounts Payable.

The person “T” doesn’t get salary, since her due amount is not recorded in “salary payable” but recorded in “accounts payable”. Therefore, this is the clear case of “contract for service”.

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