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Consultant vs. Contractor: What’s the difference ?

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I’m often asked if I describe myself as a Consultant or a Contractor. These days I call myself a Consultant but once upon a time I was a Contractor. So what’s the difference?

A Consultant is someone engaged by a client to complete a specific project.

The project is normally for a set time and cost pre-agreed between the Client and the Consultant. Depending on the size and scope of the project this agreement, normally referred to as the “Scope of the Project” can be done in one of two ways.

For small projects most Consultants will provide this analysis free of charge after consultation with the client. For larger projects the Consultant will be paid by the client for a pre-set period to analyse the project to come up with a scope. The scope is then usually signed by both the client and the Consultant. This protects both parties in the event that the project changes or is not delivered as agreed.

Consultants do not usually work onsite unless the technology requires it. They are normally self-employed individuals or part of a consultancy firm. Consultants are not employees of the client and are not treated as paid workers with the rights and benefits that accompany that.

A Contractor is essentially a temporary employee of the company.

They are usually engaged by the client for a set period of time, usually less than 12 months. The reason contractors are usually employed for less than the period of 1 year at any time is that this reduces the legal obligations of the client to them as an employee. This may vary a little from country to country.

Companies often engage outside agencies to “employ” the Contractor. In this case the Agency acts as the employer. This is a form of outsourcing. However, even though the agency is technically the employer the client usually acts in this capacity as a day to day practice.

Although Contractors are often employed to work on a specific project this is not necessarily the case. The Contractor often enjoys the benefits of being an employee, like holiday pay and sick leave that a Consultant does not. They are usually required to work onsite although remote working is now becoming more common.

Advantages and Disadvantages:

When you work as a Consultant you are usually charging an agreed upon set fee for a project. This means you can work to your own schedule as long as you meet the deadline set with the Client. However, this can also be a disadvantage if you have underestimated the time and work involved because as the consultant you have to deliver the project within the agreed scope for the cost agreed in advance.

As a Consultant you work usually under your own direction. This requires some self-discipline. I recommend either joining or building your own community of like-minded experts in your field. This gives you someone to ask for advice or bounce ideas off that you would normally find in a workplace environment.

When you work as a Contractor you have the security of knowing you have a set income for a fixed period which helps with financial planning. However, you don’t have any of the tenure, pension or statutory rights of a full time employee. Also it can be difficult to arrange contracts to flow concurrently and this often leads to a break in employment.

Over time you can build up a good and wide ranging resume of experience. This can be useful if you intend to stay as a Contractor or move to working as a Consultant. However, if your ultimate aim is to obtain full time employment then multiple contracts can be seen by some employers as a disadvantage. To some it represents a restless nature.
May 10 '13 #1
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