A great deal turns on this question. If you are an employee under a contract of service, the Employment Act (Chapter 373) gives you minimum hours, leave, wage protections and notice. If you work under a contract for services as an independent contractor, it does not.
The statutory definitions
“Contract of service” means any agreement, whether oral or in writing, express or implied, by which one person agrees to employ another as an employee, and that other person agrees to serve as an employee.
“Employee” — a person serving another under a contract of service, and includes a prospective employee.
“Employer” — a person who employs another under a contract of service, and includes a prospective employer.
Three things follow immediately:
- No writing is required. An oral or even an implied agreement is a contract of service.
- The definition is circular by design — it points to the relationship of employment, which the general law supplies.
- The label does not appear in it. Nothing in the definition turns on what the parties call the arrangement.
How the question is decided
Papua New Guinea applies the common law distinction between a contract of service (employment) and a contract for services (independent contracting), adopted through Schedule 2.2 of the Constitution, which makes the principles and rules of common law and equity part of the underlying law so far as they are appropriate to the circumstances of the country.
| Factor | Points to employee | Points to contractor |
|---|---|---|
| Control | The employer directs not just what is done but how | You decide the method; the client specifies the result |
| Integration | You are part of the organisation — roster, uniform, email, chain of command | You work alongside it, not within it |
| Tools and equipment | Supplied by the employer | Supplied by you |
| Delegation | You must do the work personally | You may send a substitute |
| Financial risk | Paid regardless of the job’s profitability | You bear the risk of loss and chance of profit |
| Exclusivity | You work for this one business | You have, or may have, other clients |
| Payment | A wage or salary at regular intervals | A price for a job, invoiced |
| Provision of leave | Paid leave, sick leave, public holidays | None — you carry your own |
The court looks at the totality of the relationship. Control remains the most weighty indicator, but a modern skilled worker may be closely integrated without being minutely directed, so integration and economic reality matter too.
Why the contract’s label does not settle it
A term of a contract of service that is less favourable to an employee than any condition of employment prescribed by the Act is void to the extent that it is less favourable.
If the substance of the relationship is employment, calling it a “consultancy” or a “service agreement” is an attempt to remove statutory conditions by agreement — which is exactly what section 11(4) does not permit. And section 11(1) makes it an offence to employ a person otherwise than in accordance with this Act.
Two further provisions bear on disguised employment:
- Section 136 — hiring out of labour. An employer who, for gain, places an employee under the immediate authority of a person other than the employer, a member of the employer’s firm or partnership, or a person employed by the employer, is guilty of an offence (fine not exceeding K300.00). A prosecution requires the Secretary’s consent. See hiring out of labour.
- Section 133 — fraud for employment purposes. It is an offence, among other things, to mislead an employer or employee as to his rights, duties and responsibilities under the Act or under a contract of employment.
What turns on the answer
| Employee | Independent contractor | |
|---|---|---|
| Notice on termination | Section 34 minimums | Whatever the contract says |
| Recreation and sick leave | Part IV Divisions 3 and 4 | None |
| Overtime | Section 52 rates | None |
| Wage protection | Part V — deductions, method, timing | Ordinary debt recovery |
| Priority on insolvency | Section 93 | Unsecured creditor |
| Liability for injury at work | Workers’ compensation scheme | Your own insurance |
| Employer’s vicarious liability | Generally yes | Generally no |
Working out your own position
- Write down how the work actually happens — who sets the hours, who directs the method, whose equipment, whether you can send someone else.
- Look at the pay records. Regular equal amounts on a fixed cycle look like wages; variable amounts against invoices for defined jobs look like fees.
- Check for integration — a staff number, a uniform, a place on the roster, a line manager, an email address.
- Check for exclusivity — are you free to work for others?
- Count the casual days — if you were engaged as a casual and worked more than six days in a month, section 10 deems you an oral contract employee anyway.
- Ask for the section 15 record or the contract — and remember section 138 makes refusing reasonable information an offence.
- Take advice before signing anything that recharacterises an existing job — the Public Solicitor, or a firm from the law firms directory.
In a non-criminal proceeding under the Act, the National Court or a District Court is guided by equity and good conscience and is not bound by the rules of evidence and legal procedure. A worker without formal documents is not without a remedy — contemporaneous notes, messages and photographs can carry the case.
Sources
- Employment Act (Chapter 373) — ss 1, 10, 11, 15, 34, 52, 93, 133, 136, 138, 149
- Constitution — Schedule 2.2 (adoption of common law)
- Michael v Morobe Consolidated Goldfields [2008] PGNC 300; N3855
- Kinaram v Vanimo Forest Products Ltd [2011] PGNC 137; N4413
- Lo v Hevilift Aviation Ltd [2023] PGNC 177; N10413
Before relying on anything here, read the current text of the Employment Act (Chapter 373) and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.