Economics/Business

What is service provision/Provision of services by Individuals

The provision of service is a company-company relationship, that is, without an employment relationship, which has as its object the execution of specific services, recurring or not and without a personal nature. service provision

Are you thinking about hiring some services for your company? This is really a very simple way out to not have to deal with all the bureaucracy and burdens that revolve around the formal hiring process.

The provision of services can be quite a solution for companies that want to reduce operating costs and encourage their employees to assume other responsibilities.

What is service provision?

Provision of services is an economic activity like any other, but the product sold is not material, but human capital through specialized labor.

And it is precisely this characteristic that differentiates the provision of services from the sale of products. 

The second always works with tangible goods and with a very clear result: when buying a car, it is expected that it will be available for collection as soon as possible. With services, it’s not like that. service provision

An example to make everything very clear: when you buy a cell phone, you buy a product; when purchasing a data plan, a service is contracted.

Despite the cumulative 4.5% drop in the service sector in 2020 , this is still an area of ​​great importance for the Brazilian GDP

It is also worth noting that 2020 was the first year of the covid-19 pandemic, which affected this sector considerably, making it the worst performing branch.

Despite this scenario, those who want to rely on the provision of services as a management strategy can be unconcerned.

This is because this sector is responsible for 30% of the national GDP, that is, it is not in danger of disappearing overnight. service provision

Some concepts that will help you understand well what a service provision is follow below:

  • tangibility: the service is, by nature, relatively intangible, being difficult to measure; 
  • ownership: the acquisition of a service does not make it possession of your company, as it will have an end;
  • perishability: a service cannot be considered perishable, since it is not lost in stock, for example, but there is a risk of being poorly made.

Digitization has blurred the line between services and products for some people.

However, by applying these three concepts, you will be able to differentiate them without any major problems.

We can also see a market differentiation by adopting strategies such as SaaS ( Software as a Service or Software as a Service), in which it offers access to management platforms and programs through subscriptions.

Examples of service provision

Discover now the main examples of service provision for companies.

equipment rental

When developing a specific job within the company, the team may perceive the need to acquire the appropriate machinery to perform the task. service provision

However, it is not always worth buying equipment and machines that will only be used for a one-off task.  

That’s where the service provider comes in. The company may hire him to provide the necessary tools. This ensures more practicality and economy for the organization.

Digital marketing

Not every company has the budget to build an internal marketing team.

In this sense, hiring a company to handle social media and ads while the contractor focuses on operations and sales sounds like a good decision.

Modern management apps

The era of digitalization and modernization is here, more and more companies have embraced modern software and smartphones to help with routine and automate functions.

For any manager and entrepreneur who wants to scale their processes, this is a great way to make better use of their employees’ working hours.

Periodic maintenanceu

Companies that work with machinery and equipment that need to undergo periodic maintenance are well aware of the need to hire specialized labor.

Despite this need, it is very expensive to have a collaborator with only this role (in many cases, especially for small and medium-sized companies).

In this way, it can be much more advantageous to only hire the service whenever necessary. service provision

Understanding work regimes

The Labor Reform brought a range of options for the entrepreneur to carry out the necessary hiring for his business.

The most common types of contracting involve the items described below.

Hiring by CLT

Certainly, the CLT contract is the most common form of employment nowadays, used when the employee is expected to perform a series of tasks in a fixed manner and with direct subordination.

Thus, the law requires the employer to pay attention to a series of obligations for this employment relationship to be considered. They are: service provision

  • 13th salary ;
  • annual vacation;
  • overtime pay;
  • FGTS ;
  • INSS ;
  • transportation vouchers;
  • inter-day and intra-day break
  • DSR .

temporary hiring

According to the CLT, the temporary contract has a period of a maximum of 3 months. At the time of signing this employment contract, the start and end date of the bond is already known.

This type of hiring is usually done by retail companies that need a little extra help at certain times of the year, such as at the end of the year.

Something not everyone knows is that a temporary employee is also entitled to everything that a full-time employee enjoys .

The only exemptions revolve around the 40% fine on the FGTS and the prior notice (the individual already enters knowing when he is going to leave). service provision

Legal person

Firstly, what every entrepreneur should know is that hiring another company is not added to the payment of benefits linked to the CLT.

On the other hand, those who work as a PJ have much more flexibility to perform their duties and do not owe direct subordination to their clients (companies like yours that hire PJ services).

Of course, the service must not be provided at the pleasure of the contracted company, so the contract is an excellent tool for assigning roles and expectations.

Don’t worry, we’re going to talk all about good practices for drawing up a service contract.

Many businessmen see the PJ as a way of circumventing the law and hiring without having associated labor obligations. Needless to say this is a giant mistake, do we? Be aware of limitations.

It is worth mentioning that every service provided by a company is considered impersonal, with the exception of MEI (Individual Microentrepreneur).

This is a tax framework that allows individuals to provide services without the existence of a subordination bond and other associated obligations. We will also talk later about the details of hiring an MEI.

Other forms of contracting

These three modalities that we mentioned above are the main forms of hiring, however, a company can still count on the titles listed below: service provision

  • stage ;
  • experience contract;
  • part-time work.

It is also very important to be aware of everything that has changed with the Labor Reform . We recommend reading our text on this, just click on the previous link.

Best practices in choosing providers

The business-business model has grown a lot in recent years. However, some companies still do not know how to deal with this reality.

Here, you will find some good practices for making the contract and other attitudes that may be necessary during the period of provision.

Contract for services

Often a contract can seem like a big bureaucratic obstacle, after all, why bother moving the legal sector to write a contract?

The answer to this question involves several reasons. However, first, let’s differentiate between service provision and contract work: service provision

  • provision of services: the hired professional commits to a specific service without connection with results — in other words, it is a continuous provision;
  • undertaking: the undertaking, in turn, is a commitment to a result.

It is interesting to differentiate this very well so that the contract is not written wrongly. So we can go into other details about the contract.

Always remember: the contract is the only document that determines obligations.

Who is responsible for writing the contract?

The contractor is responsible for writing the service contract. More specifically, the Personnel Department (DP) is ideal for this. Among the functions of the DP is the management of business bureaucracy.

Thus, DP employees have a lot of experience in dealing with these bureaucratic issues and are able to write a contract in line with what the situation calls for.

What must be in the contract?

There are some items that must be included in the contract. 

The service provision contract will contain:

I – qualification of the parties;

II – specification of the service to be provided;

III – term for the performance of the service, when applicable;

IV – value.”

How to cancel the contract?

Problems happen everywhere. Therefore, sometimes, hiring a service provider does not have a happy ending, requiring the cancellation of the contract. service provision

Be aware that both parties agree to fines and other penalties when signing the contract. Therefore, it is important to investigate the possibilities offered by the wording of the contract.

Try to be very careful and tactful when dealing with this situation, as it can lead to legal problems.

How do fines work?

This time, who answers this question is the Civil Code

If there is no stipulated term, nor can it be inferred from the nature of the contract, or from the custom of the place, either party, at its discretion, upon prior notice, may terminate the contract.”

There are still some conditions for this regarding a kind of notice of breach of contract:

I – eight days in advance, if the salary has been fixed for a period of one month, or more;

II – four days in advance, if the salary has been adjusted per week or fortnight;

III – the day before, when it has been contracted for less than seven days.”

Provision of services by Individuals

When you hire an employee to perform a service for your company, that individual is acting as a legal entity.

Then, these people perform a series of tasks previously agreed by contract (or not), but on an occasional basis. That is, there is no permanence for this type of contract. service provision

Just emphasizing once again the importance of signing a contract for any service provided.

MEI employees

Now we go deeper into the MEI. In summary, this individual is a self-employed entrepreneur who has tax obligations and must pay attention to a series of rules.

As we said before, this professional does not enjoy several rights that are only mandatory for professionals with a formal contract (the famous CLT workers).

The employer has no obligations related to 13th salary, vacation, overtime, etc. But all this can be negotiated and included in the contract.

Main rules

The first issue that must be clear is that it is impossible to hire a MEI to act as an employee. The law talks about self-employed people, that is, people who already have an interest in operating as a company.

Therefore, directing a candidate for a vacancy, for example, to open a company in order to be hired is not the best way out.

It is also worth noting that MEI is not a self-employed person in itself, it is a company. This tax framework serves precisely for millions of Brazilians to leave informality.

So, how to hire an MEI?

There are some asterisks when hiring an MEI that the entrepreneur should always be aware of. They are:

  • the services must be punctual, that is, they must not be part of the company’s normal routine;
  • it is not a problem that there are recurring hires, however, the professional must be paid for each one of them.

In summary, MEI provides specific services that can be performed by another professional in the area. 

Nothing prevents you from being a recurring service provider, however, payment must be made for the deliverables: either for your knowledge or for some service provided.

Not only that, there cannot be any kind of control over the working hours or performance of the self-employed hired. service provision

Shall we go to an example?

Rare are the companies that develop an IT department. This is not always a daily necessity, so what often happens is hiring professionals or companies to perform specific services.

Whether it’s the development of an app, periodic monitoring or even adjustments to some internal platform, these are examples of services that can be performed by the “MEI employee”.

Care when hiring the MEI

The main concern of a company when hiring a MEI is precisely that this condition of providing services does not mask an employment relationship. We have already said that this has the possibility of generating a lot of headache.

But there are some characteristics that help define a labor relationship, and these are precisely the points that the contracting company should avoid:

  • personality: when only the professional can perform that task and cannot be replaced;
  • subordination: the professional submits to the company’s hierarchy;
  • Habituality: days and times set to work, which cannot be done occasionally.

Tips for managing service providers

If you’ve read this far, you know that there are a number of limitations to the relationship between a company and a service provider, right? service provision

So, to help you not go overboard in this relationship, we have created a small guide on the company’s posture.

1. Perform strategic planning at the beginning of the project

Team up with the service provider and organize all aspects of the work beforehand, remembering that all of this should be described in the service specifications.

In this way, it is possible to define deadlines, objectives and other strategic issues.

2. Constant feedback

Once the planning is in hand, it is possible to offer constant feedback in order to achieve the agreed result.

It is valid to ask about the progress of the project, ask for partials and also make yourself available to eliminate doubts and help solve any problems that arise.

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