Consultants vs. Contractors - Do you know the difference?

What’s the difference between a consultant and a contractor?

Do you think consultants and contractors are the same thing? If you answered yes, you are not alone. Unfortunately the distinction between consultants and contractors has become blurred in the recent past. I’ve heard the terms consultant, contractors, independent contractors (ICs), freelancers, and free agents all used interchangeably, when in fact, there are important differences.

Contractor Defined

“A ‘contractor’ or ‘independent contractor’ is a person, business, or corporation which provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Contractors can work directly for a client, or through an umbrella company that provides contracting services to a broad range of clients.” (Wikipedia)

Many times contractors are used as substitutes for employees (temporary or supplemental staffing):

• Engaged to work on a specific project until its completion
• Programmer developing software
• Writer creating user guide
• Trainer delivering a client developed/owned course
• A resource brought in to supplement internal resources (specific expertise)
• Their role is very directed and limited
• Typically they are placed by another firm (staffing)
• Generally treated as IRS 1099 non-employee labor

Consultant Defined

“A consultant is a professional who provides advice in a particular area of expertise such as management, technology, human resources, performance support, marketing, finance, etc. A consultant is usually an expert or a professional in a specific field and has a wide knowledge of the subject matter. A consultant usually engages with multiple and changing clients providing deeper levels of expertise than would be feasible for clients to retain in-house. Clients purchase only the service they require from an outside consultant.” (Wikipedia)

Consultants are usually viewed as external “service providers”:

• A highly knowledgeable resource brought in to define and address a specific business need
• Experienced as an external adviser to many clients
• Brings business models or proven methodologies to address client needs
• May perform a range of duties, but are entirely responsible for all aspects of the project
• Contracts and invoices directly with clients
• Generally required by clients to be incorporated and have general and professional liability insurance