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1.

Introduction on the meaning of employer and employee

MEANING OF EMPLOYER

EMPLOYMENT ACT (1955)

Any person who has entered into a contract of service to employ any other person as an employee and this includes the agent, manager or representative.

INDUSTRIAL RELATIONS ACT (1967)

Any person or body of persons, whether corporate or incorparate, who employs a workman under a contract of employment and includes the government and any statutory authority unless otherwise stated expressly in this Act.

Employer is a person or business that employs one or more people, especially for wages or salar. Other than that, employer is a person or thing that makes use of or occupies someone or something. Employer is the one who has engaged or hired the services of another. He is entitled to rights and bound to perform duties. His rights are to be served according to the terms of the contract. Employer has a right against third person for an injury to the person employed, or for harboring him, so as to deprive the employer of his services.

Employer duties are to pay the workman, the compensation agreed upon, or if there be no special agreement, such just recompense as he deserves. Indeed, employer is a legal entity that controls and directs a servant or worker under an express or implied contract of employment and pays (or is obligated to pay) him or her salary or wages in compensation.

MEANING OF EMPLOYEE
Employee is a person who is hired for a wage, salary, fee or payment work for an employer. This is important to determine if one is acting as employee when injured (for workers compensation) or when he/she causes damage to another, thereby making the employer liable for damages to the injured party. The common law of employee explains that employee is anyone who performs services for us. For example, Lee Ping is a salesperson employed on a full-time basis by Bob, an auto dealer. She works 6 days a week, and is on duty in Bob;s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales managers approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Bob. Bob also pays the cost of health insurance and group-term life insurance for Lee Ping. Now, Lee Ping is an employee of Bob. So, an employee is a person who works in the service of another person under an express or implied contract of hire, under which the employer ha the right to control the details of work performance. An employee is hired for a specific job or to provide labor and who works in the service of someone else ( the employer). The IRS classifies a worker as an employee as follows:-

In general, anyone who performs services for an organization is an employee if the organization can control what will be done and how it will be done. These are the factors designating someone as an employee include:A specific wage or salary An implied or written contract Control of the persons work by the employe Employment act (1955) divide employees into two categories. For the first

category, the employee classified based on the salary they receive (for example not exceeding RM 2000) a month ( Employment (Amendment of First Schedule) Order 2012). While, the second category the employees are classified based on

the type of work they do, even though the salary received may exceed RM2000 a month. The second category includes Manual workers, those having skills and talented such as artisans and apprentices Workers involved in the maintenance of any mechanically propelled vehicles operated for the transport of passengers or goods or commercial purposes Employees involved under the supervision of other employees engaged in manual labour. Employees involved in any capacity that is related to shipping, with the exception of officers, holders of local certificate and who have not entered into any agreement with the merchant shipping ordinance 1952; and Domestic servants

So, as a summary

not all employees are covered by EA 1955 which affects

their rights to enjoy the protection provided by the Act. With regard to the status of part-time workers, they are also covered by EA 1955 so long as they have a contract of service. S. 2 of EA 1955 defines part-time employees as those who work hours which do not exceed 70% of the normal work hours worked by fulltime workers employed in that job capacity.

2. Explanation on the terms, contract of service and contract for service

INTRODUCTION An understanding of the types of contracts between clients, agencies and contractors and employees is very important for a contractor to be able in order to determine whether they are working inside or outside. Otherwise, the debate over contracts of service and contract for service has a long history in employment law, as has the employment status of agency workers long before the contracting sector took off. The exact difference is that: An employee-employer contract is a contract of service A contractor-client contract is a contract act for services. The definition contract of service exists when an employer takes an individual

to work for him and pays a certain amount of wages. The terms and conditions are mutually agreed upon by both parties. Both type of contract, both parties

have specific rights and responsibilities which different according to the type of contract in place. Contractors must aware of their rights and responsibilities

when they have a contract for services between their limited company and their agency.

Employer-employee contract of service A contract of service is any agreement whether in writing or verbal, expressed or implied, whereby one person agrees to employ another as an employee and moreover the other person agrees to serve the employer as an employee. The definition of contract of service is it exists when an employer takes an individual to work for him and pays a certain amount of wages. The terms and conditions are mutually agreed upon by both parties. Permanent employees have a contract of service with their employer. By definition, if a worker has a contract of service with an organization, they are an employee. An apprenticeship contract or a agreement is also considered a contract of service. A contract of service can be in the form of a letter of appointment employment. The employer cannot change the terms and conditions of employment unless the employee agrees to it. The key rights and responsibilities service are:The worker is controlled by their employer, so they must perform tasks the of employee status under a contract of

they are instructed to by a line manager according to their job

description. The worker is expected to work at a specific place during specific hours on specific days. On the other hand, the worker must present themselves for work and cannot send send someone else as a substitute. However, employee given statutory rights to holiday pay, sick pay, maternity and paternity rights and redundancy payments.

Employee also will given opportunity to enjoy a range of additional benefits, which can be vary according to the employer, but might include company cars, private health insurance, staff canteens, health clubs and gyms and so on. Employees are not personally liable for any errors they make when

completing work for their employer, nor are they expected to make good in their own time. The relationship between an employee and employer called mutuality of

obligation Mutuality of obligation is one of the key tests of employment status and whether a contract is inside or outside. The definition of mutuality of obligation is an employer is obliged to provide work for an employee, and the employee is obliged to complete the work. Within the scope of their job description, employees have to complete the work that comes down the pipe which is one of their fundamental distinctions from a contractor. Lets say the employee fails to fulfill their obligations, the employer can take action that may ultimately result in the employees dismissal. Similarly, if the employee does not fulfill their obligation, the employer can take action that may ultimately result in the employees dismissal. Similarly, if the employer does not fulfill their obligation to the employee can take action that might result in an industrial tribunal.

Contractor-client contract for services The definition contract for service is exists when an organization/employer offers an outside party (not being an employee of its own) a particular piece of work. Instance, the contractor have a contract for services with their client or agency. Otherwise, to be more precise, the contractors limited company has a contract of service with the client or agency. For example, company X contractually agrees with company Y for the supply of security services. In this case, please think the situation of the security guards who are working with company X. Are they employees of company X? The answer in NO. They only provide services to company X but their wages are paid by company Y. In this context, the status of the security guards working with company X is that of an independent

contractor. These kind of contracts do not create labour relations (employeremployee relationship) between both the parties involved. So, a contract for services is a strictly business to business contract between two firms on a buyer and supplier basis. The client, or agency is a buyer and the contractors limited

company is the supplier. There is no question of any employment relationship. Contractors companies that enter into a contract for services with another

organization (including public sector organizations or not-for-profit companies) have clear rights and obligations. The key rights, obligations and responsibilities that a contractors limited company have under a contract for service as below: -

requirement to supply services to the client according to the contract

schedules specification.

A requirement to complete the project, and any milestones, according to the contract schedule. A requirement to provide services to the standard required by the client as agreed in the contract. An obligation to make right any errors or defective work, without additional remuneration. Liability for any errors or defects in work completed for clients, and this may expand to personal liability ( assuming the contractor is a director) for worst-case scenarious. The right to be paid the rate agreed in the contract, assuming the services have been provided according to the contracts requirements. The right to be paid according to the terms agreed, such as within 7 days, or 30 days depending on the terms agreed in the contract. The right to provide a substitute to complete the work specified in the contract. Often the contractor is required to abide by any health and safety and security arrangements when working on the clients site. The client is obliged to provide a safe working environment for the contractor:As directors of their own limited companies, contractors also have a range of duties, responsibilities and potential liabilities under company , which employees do not have. So, the relationship between a contractors limited company and the client or agency is no different from a major internatio nal corporations

relationship with its suppliers. If either party fails to fulfill their obligations under the terms of the contract, they are in breach of contract and can take legal action to remedy the situation. Contractors who are aware of the full range of issues surrounding contracts of service and contracts for service are in a much better position to judge whether their employment status is affected and can seek professional assistance accordingly.

3. Discussion the legal tests to determine employer-employee relationship. They are several tests adopted by the courts to decide whether an individual has the actual status of an employee. So, there are four legal tests that are usually used by the courts as given: Control test Organisational test Multiple test Mutuality obligation test CONTROL TEST The definition of control test which is also known as the traditional test, refers to the level of control of the employer over his employee. The control test is used to determine whether a person is in a position to direct or require not only what work is to be done, but also how it is to be done. Usually, in an

employer-employee relationship, the payer or master controls, directly or indirectly the way the work is to be done and the work methods used was appropriate or not. The payer will assigns specific tasks that define the real framework within which the work is to be done. The control test may not determinative when examining the employment of

professionals who, because of their expertise and specialized training, may need less direction and supervision. A professional who is subject to limited control and supervision may still be an employee based on other factors.

Indicators that the worker may be an employee: THE WORKER:o Receives training or direction from the payer on how to do the work. o Has to perform the services personally and the worker cannot hire others to do the work. o Requires permission to work for other payers while working for this payer. o Worker is required to devote his or her full time and attention to this payer.

The payer has the right to:


o o o o o o o o o o o

direct, scrutinize, and effectively control many elements of how and when the work is performed plan the work to be done and determine what jobs the worker will do instruct the worker on how to perform the work control the number of hours worked set standards for quality and quantity of work prepare performance reports or evaluations impose disciplinary measures determine where the work is done approve contracts negotiated by the worker ultimately determine and control the method and amount of pay require the worker to comply with its instructions or policies including safety standards.

ORGANISATIONAL TEST The definition of organizational test is also known as integrational test. It refers to the fact that employees are an essential group for an organization. The integration or organization test check whether the tasks performed by an individual form an integral part of the business as opposed to merely being accessory to the business. The organizational test will also determine whether the individual is in business in his or her own right and provides services to other businesses as an independent contractor. An employee is not perceived as operating his or her own business, but rather as being an integral and necessary part of the payers business.

Indicators that the worker may be an employee:

The worker: o is hired on a full-time or part-time basis for a specified or indeterminate period of time rather than a specific task o is financially dependent on the payer o has few or no other clients, is not actively seeking other clients or is not free to seek other clients o does not have a business license o does not have a business telephone line, website or e-mail address o may be identified with the payer's business in any of the following ways by appearing on the payers organization charts or website using the payer's letterhead and forms using an e-mail address associated with the payer wearing the payer's uniform using tools or equipment painted with the payer's colours or logo. o The payer: Advertises for new customers, maintains a customer list, and assigns the worker to a territory or to its customers.

MULTIPLE TEST/MIXED TEST The meaning of multiple test is more wider than control test and integration test. So, the multiple test or the mixed test refers to the entire situation. In order words, all the related and relevant factors are considered. This multiple test or mixed test is used to determine whether a worker is an employee. The test involves a great degree of subjectivity even with all the facts and it still may be difficult to say that services were performed as an employee. These are the factors should be closely weighed against the worker and the employer. Hours of work The person whose hours of work are set by the employer is usually an employee. This makes that particular person from being master of his or her own time, which is a right of the independent contractor. This is because the nature of the occupation, fixed hours are not practical, a requirement that the person work at certain times is an element of control. Full-time work Employer control over the amount of time the person spends working. An

independent contractor on the other hand, is free to work when, and for whom he or she chooses. Full time does not necessarily mean an 8 hour day or a 5 day per week, Its meaning may vary with the intent of the parties, the nature of the occupation, and customs in the locality. These conditions should be

considered in defining full-time.

Place of work The worker does the work on an employers premises is not control in itself. However, the employer has control especially where the work is of such a nature that it could be done elsewhere. A person working in the employers place of business is physically within the employers direction and supervision. Training Training is a factor of control because it is an indication that the employer wants the services performed in a particular method or manner. This is especially true if the training is given periodically or at frequent intervals. The training may be by an experienced employee, by correspondence, by required attendance at meetings or by other methods.

MUTUALITY OBLIGATION TEST Mutuality obligation test requires that the employer feels obliged to offer and the worker feels obliged to take it when offered. The significance of mutuality of obligation is that it determines whether there is a contract in existence at all which that the engager must be obliged to pay a wage and that the worker

must be obliged to provide his or her own work or skill. Without mutuality of obligation there can be no contract of any kind. This situation is typical of most employer-employee relationships, in which the employee is paid by their employer each week or month.

4. Suggestions to amend current legislations regarding above issues

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