Differences between Employment Relationships, Service Relationships and Entrepreneurial Activities

A contract of employment is an agreement between the employer and the employee, whereby the employee agrees to undertake work for the employer in consideration of a salary. Work can also be conducted as an independent entrepreneur when the entrepreneur commits to perform his duties independently without the management and supervision of the employer or principal (who is having the work done). A managing director is not employer but an administrator body of the company.

It is important to differentiate independent entrepreneurs and managing directors from employees, as regulations of labor law are not applicable to the work conducted by an independent entrepreneur or a managing director. For example, a managing director does not have protection against dismissal, unless such has been provided for in his/her service contract.