Contractor or consultant is a question faced by experienced professionals when they decide to work for themselves. And it’s a question that’s worth pondering over. Contractors and consultants differ in what they offer to companies, what they can expect to earn and what they actually do.

With that in mind, it’s vital to choose the right route for you, to make the most of your skills and maximise the amount you can earn. In this post, Umbrella Broker explores the differences between contracting and consulting, and which route you should take.

Similarities and differences

On the face of it, there are some big similarities between contractors and consultants. Both provide assistance to clients in their area of expertise and both are hired on a temporary basis, albeit ongoing in some circumstances. That’s why some people use the terms interchangeably, referring to consultants as contractors, for instance.

However, there are several differences that set the two apart. The main one being how they work. Contractors are typically hired to complete a job with a ‘hands-on’ approach. They may ‘consult’ with the client initially, to recommend the right course of action. But their main task is to perform the work that needs doing.

Consultants, on the other hand, are hired for their expertise alone. They aren’t expected to complete the work themselves. Instead, they use their knowledge, experience and judgement to recommend how to complete a task or manage a broader business change for the client.

Judging your experience

So, what determines whether professionals should be contractors or consultants? The main distinguishing factor is experience and how it adds value to your services. Contractors, for instance, become more valuable and trusted as they gain experience.

A contractor with just a few months of experience could be seen as a risk for clients, who might worry about the quality of their work or their ability to deal with tricky situations. In contrast, with a more experienced contractor, you know you’re getting someone who has overcome various problems.

However, experience is much more important for consultants. Rather than being an added extra that provides more trust, it’s an essential part of what they offer. Businesses get consultants in to provide expert insight and advice with issues that they don’t know how to tackle. It’s less a case of ‘here’s a problem, do this job to fix it’ and more ‘here’s a problem, how do we go about fixing it?’.

While they don’t get hands on in most cases, consultants can have a much bigger impact on a business by shaping how they approach a problem. And this makes them more valuable to clients, which is why it’s so important to clearly establish your role.

Contractors working as consultants are likely missing out on extra income, while contractors incorrectly acting as consultants are unlikely to fare well.

Suitable sectors

Another key consideration when it comes to contracting versus consulting is the sector you’re working in. Industries which are quite literally ‘hands on’ – like construction or hospitality – rarely have a use for consulting. What they need are contractors who can do the job well when required.

On the contrary, there is a big role to play for consultants in sectors like accounting and IT. From legislation and company structure to software and best practices, consultants can offer vital information and insight that changes the way things are done in the long term.

Even with the premium cost of consultants, it can be well worth it for clients who won’t need to continually pay contractors.

Comparing the benefits

Working for yourself, you get more freedom, a better work-life balance and more money for your time compared to a regular 9-5 job. And this is certainly the case for both contracting and consulting. The difference? Consulting carries a premium in terms of what you can charge along with more flexibility.

As a contractor, you charge by the hour or day to complete a project. Instead, consultants charge for their input on a project. It’s their expertise which is valuable to the client, rather than their time.

With that in mind, they add value to the project simply by providing insight and expertise. And this doesn’t always take weeks or months to provide. In short, consultants can charge a premium fee without having to increase the time they spend working. They can even work on multiple projects at one time.

Is there an overlap?

While contractors and consultants have clear differences, the two roles can overlap in some cases. As we touched upon earlier, contractors may offer their specialist input before starting a job – or even before securing the contract. Think an accountant recommending general cost-saving measures, or a quantity surveyor discussing the best materials with a client.

In most cases, this is simply a way of building rapport with clients and displaying their expertise. And contractors who provide this input will be well prepared for consultancy work in the future.

However, if you find yourself providing this expert advice for jobs outside of your contract, it may be worth considering consultancy work. This way, clients looking for consulting alone know you can provide that too. And you won’t be providing specialist insight without the extra income.

On the flipside, some consultants may work in a similar way to contractors – working on an ongoing basis, rather than just providing one-off guidance and advice. If this is the case, it’s important to establish a clear contract with clients. It’s no good having them pay for a few hours of your time initially if they’re constantly getting in touch for more input without paying.

How can we help?

Both contractors and consultants can benefit from umbrella services. They take tax and payroll admin off your plate and free up your time to focus on work. But how do you get a service that suits you at the best price?

That’s where Umbrella Broker comes in. Compare umbrella services from all the best providers using our online tool. It couldn’t be simpler.