What’s the Difference Between a Consultant and a Contractor?

If you are a small business owner trying to figure out what your brand’s next big move should be, you may contemplate hiring the services of a consultant. Or do you need a contractor?

Consultants and contractors can both assist you by completing activities that are tailored to your individual requirements. But what are the distinctions between their responsibilities?

What’s the Difference Between a Consultant and an Independent Contractor?


Simply put, a consultant gives you advice and preliminary counsel based on your requirements. This can include suggestions for strategy, human resources, software adoption, or public relations, all of which are usually related to a specific project. As part of a larger business plan, a consultant could advise a business owner on how to work with a contractor.

Contractors, on the other hand, will be employed to fulfil a specific service or complete tasks that have been outsourced to them. They usually have more influence over the tasks and methods they use to complete a project. Contractors can, for example, provide delivery, cleaning, and data processing services.

Contractors can assist with activities that require specialised knowledge, which is beneficial for companies with limited resources.

If you want to recruit an independent contractor for your business, you need to ensure you have a robust contract in place. An individual contractor agreement is used when you need the services of someone who is not a registered company, whereas a company contractor agreement is used when you need the services of a registered corporation.

When hiring the services of a contractor, you should also include a non-disclosure agreement (NDA) to protect your personal information.

Using the Services of a Consultant or a Contractor

To engage a consultant, you must first form a consultancy agreement, which is a type of service agreement. You should include a full explanation of your company’s endeavour as well as the consultant’s expected tasks in this agreement.

You can start by finding a Consultancy Agreement template that you can then modify to create your own contract. Whatever approach you take, ensure that you have the final contract checked over by a legal expert.

A written agreement, known as a contractor’s agreement, is required to hire a contractor.

Hiring Consultants or Contractors Has Its Benefits

There are a variety of reasons to hire consultants and contractors to help your company improve and flourish. The following are some of the key advantages of hiring consultants or contractors:

  • They can help you gain outside perspective and analysis. An impartial opinion can be constructively critical, especially in cases where you want to improve a certain aspect of your organisation. A consultant can help you determine the best path to success.
  • A consultant with specialised experience might provide more in-depth insights into a certain area of concern. A contractor can actively assist your company’s growth by using their technical and practiced talents.
  • Cost savings: As an employer, you owe it to your employees to pay for additional employment benefits like superannuation. These are not required for independent contractors or outside consultants.
  • Flexibility: Consultants and contractors are normally hired for a specific amount of time, and there are no long-term obligations once their contract expires.

Does your business need outside help?

Engaging a consultant or a contractor may be more cost-effective than hiring a new employee for your company. Employers are increasingly turning to consultants and contractors for their ability to deliver specialised expertise with greater flexibility and cost savings. So it may be worth considering if your business could benefit from some external perspective from a consultant or a contractor.

As a small business owner, from time to time your business can benefit from some outside perspective from a consultant or a contractor. But one thing that your business will always need is business insurance*. But just because you need it doesn’t mean that it needs to be hard. At BizCover, our simple to use online service model makes obtaining insurance for your business a breeze. Go online or give us a call on 1300 920 864 to see how we can help protect your business – minus the hassle.

*This information is general only and does not consider your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
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