January 10, 2002, 12:00 AM — Question:
What is the difference between a Consultant and a Contractor?
The short answer is that the Consultants role is to evaluate a client's
needs and provide expert advice and opinion on what needs to be done,
while the Contractors role is generally to evaluate the client's needs
and actually perform the work.
However, these terms, Contractor and Consultant, have become blurred
over the years and at times have been used interchangeably. Especially
when the Consultant, after having given his or her professional opinion
or advice on what has to be done, then enters into an agreement
(contract) to provide the services required. At that point the
Consultant may be said to become a Contractor. The terms have also
become blurred as industry has incorporated them into employee job
Generally, a Consultant is a self-employed independent businessperson
who has a special field of expertise or skill. The consultant provides
professional or expert opinion, advice, or services regarding
information or materials in his or her field of knowledge or training
to assist others in making decisions or in performing tasks.
On the other hand, a Contractor is a self-employed independent
businessperson who agrees (contracts) to do work for another usually
for a fixed price. It is usually an 'arms length' transaction. The
individual hiring the contractor defines the desired results and the
schedule. The contractor may supply labor only or labor and supplies.
The Contractor generally retains control over the work to be done
including the means and methods used to do the job, the scheduling of
the underlying work, who performs the work and determines how the work
will get done within the standards and time requirements set. A
contractor will generally use his own tools and work equipment and may
employ others to do the work for them.
The definition of the terms becomes critically important when a trying
to decide whether an individual is an employee, contractor or
consultant. Generally, contractors and consultants are not employees.
They are individuals from outside of the organization that perform
services for the organization and are not subject to the various state
and federal payroll withholding tax laws. Contractors and Consultants
are more likely to be paid without a withholding and issued a federal
tax form 1099 for any monies received. There are some 20 or so factors
used by state and federal agencies, including the IRS, to determine
which category, contractor -- consultant -- employee) an individual
If you need more detailed information or have any further questions you
should contact an attorney with expertise in this field in your local