Consultant vs. Contractor: What's the Key Difference?

As self-employment rates continue to reach new heights, terms like contractor, consultant, and freelancer have become more commonplace.

While these roles provide valuable services, they have key differences — namely, in the work they carry out and their level of expertise.

Here, we'll explore the role of contractors and consultants, and pinpoint the differences between the two.

What is a contractor?

A contractor provides a specific service within a set period of time. They typically possess specialized skills that an organization (or individual) doesn't have in-house. 

For example, a company may hire a virtual assistant to manage the details of new project, or a website designer to revamp its website. Alternatively, freelancers and contractors often use a lot of third-party apps and software to help them manage their workload. If you see someone using apps like PayPal or Joist, they more likely going to be a contractor.

More and more of these professionals are falling into what’s called the “new collar” set of jobs. These are career paths that may have required a degree at one point, but thanks to the internet and the power of hard work and self-education, these contractors have managed to do without. 

Programmers and writers can fit into this category. But certain types of contractors, like plumbers and electricians, still go to trade schools and participate in apprenciceship programs.

While contractors often work for businesses, they aren't employed by them. Instead, they are self-employed, only working for companies (or individuals) on a contract basis. Because of this, they don't have access to benefits or protections of a full-time employee.

However, since contractors are temporary employees, they have the flexibility to pick and choose projects, negotiate contracts, and create their own schedule.

Due to the nature of the job, contractors are typically paid on a project basis or hourly rate and may be responsible for their own tools, equipment, and materials. 

What is a consultant?

You can think of consultants as problem solvers. They provide expert advice and support to clients to help them solve problems, improve their performance, and gain a competitive advantage.

Consultants are typically hired for their specialized knowledge and expertise in a particular field or industry. They may work on a project basis or provide ongoing support to clients.

The specific duties of a consultant can vary widely depending on the client, their needs, and the consultant's area of expertise. However, some common responsibilities include:

Conducting research and analysis.

Consultants gather and analyze data to identify problems or opportunities for improvement. Typically, they leverage market research and other tools to understand the client's industry and competitors.

Finding solutions.

Based on their analysis, consultants will start developing solutions to address any issues. For instance, they may design new processes, develop new products or services, or create business plans.

Sharing advice and guidance.

Most consultants have significant experience in their field, putting them in a great position to share advice, best practices, and industry trends. For example, a financial consultant can help clients navigate complex regulations and tax laws.

Providing training and coaching.

Consultants may also provide training or coaching to help employees or teams learn new skills or improve their performance.

The Difference Between a Contractor and a Consultant

While both provide services on a contract basis, the main difference between a contractor and a consultant is the nature of their work.

Contractors are hired to perform specific tasks or projects, such as building a property or developing a new software app. They often work in industries such as construction, engineering, and technology. While they may provide advice relating to their area of expertise, their primary focus is on delivering a specific outcome.

Consultants, on the other hand, are responsible for providing expert advice and guidance on a particular issue. They often work in industries such as management, finance, and marketing, and their ultimate goal is to help organizations improve their performance or achieve their goals.

Another key difference between contractors and consultants is their relationship with the client. Contractors are responsible for completing a specific task or project within a certain timeframe. However, consultants may have an ongoing relationship with clients, providing support over a longer period.

Back to You

Whether you should hire a contractor or a consultant depends on the nature of your project. Both types of workers can provide valuable services, but they have different areas of expertise and perform different types of work.