Service Contract – Everything You Need to Know Before Signing

In business, there is often a need to hire someone temporarily—to carry out a specific task, complete a project, or provide a specialized service. In such situations, a service contract is the most practical and lawful form of cooperation.

But what exactly does a “service contract” mean? And what are the rights and obligations of both parties?

WHAT IS A SERVICE CONTRACT?

A service contract regulates the relationship between the client and the service provider.

Under a service contract, the service provider (contractor) undertakes to perform a specific job (creating or repairing an item, performing certain physical or intellectual work, etc.), while the client undertakes to pay compensation for it.

The core idea is simple:

• The service provider agrees to complete a specific task.
• The client agrees to pay the agreed fee for that task.

Unlike a standard employment relationship, in a service contract the amount of time spent is not what matters—the final result is.

WHEN IS A SERVICE CONTRACT USED?

A service contract is the ideal choice when you hire someone for specific, time-limited tasks.

Common examples include:

• creating a website, logo, or promotional materials,
• translating documents,
• writing content or providing consulting services.

Important: A service contract must not be used for work that represents the company’s primary activity or for tasks that are performed continuously.

DEADLINES AND LIABILITY

Every service contract should include a deadline for completing the work. If no precise deadline is specified, the law states that the work must be completed within a “reasonable period”—the amount of time objectively needed to complete the job properly.

If the service provider fails to complete the work as agreed or misses the deadline, they may be liable for any damage the client suffers.

Therefore, it is advisable for the contract to clearly define obligations, deadlines, and quality-control procedures.

RIGHTS OF THE SERVICE PROVIDER

A person engaged under a service contract is not in an employment relationship.
This means they are not entitled to:

• paid annual leave,
• sick leave,
• severance pay.

This type of cooperation serves a different purpose: flexibility, a clearly defined task, and payment based on results. Compensation is typically paid after the job is completed, because the payment is for the result—not the time spent working.

TAXES AND CONTRIBUTIONS – WHAT IS THE REAL COST?

One of the most common questions is:
“How much does a service contract actually cost?”

The answer depends on whether the service provider is already employed or not.

• If the service provider is unemployed, the employer pays taxes, surtax, and contributions.
• If the service provider is already employed, the employer pays only tax + surtax.

Therefore, the provider’s status directly influences the total cost and the employer’s obligations.