What is a Consultant vs a Contractor

There are 64.6 million independent workers in 2022 self-employed Americans today working as consultants, freelancers, contractors and more. This independent workforce touches all segments of the economy—from on-demand drivers and freelance writers to marketing professionals and website designers serving major companies.

With so many types of independent workers, what do the terms independent consultant and independent contractor really mean?

Independent professionals go by many names: consultant, contractor, freelancer, self-employed, and small business owner may be used to accurately describe a non-employee that performs work for a company for an agreed upon price.

Definition: What is a Contractor?

Independent contractor is a legal term that encompasses all independent professional workers who are not considered employees under the law. The general rule is that workers are considered to be independent contractors if the client controls only the result of the work that is done, not what or how it will be done.

According to the Internal Revenue Service (IRS): “people such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business or profession in which they offer their services to the general public are generally independent contractors.” Use occasionally, only in reference to the legal definition of independent contractor.

Definition: What is a Consultant?

Some independent contractors may refer to themselves as independent consultants, as this term more accurately describes the nature of their work. Independent consultants seek to enhance aspects that are already working well for their clients while redefining, eliminating, or changing aspects that hinder the overall operation of the client’s business. This may include making recommendations for merging departments, adding or eliminating positions within the full-time workforce, or devising ways to be more efficient and productive.

Why companies hire consultants vs full time employees

Independent professionals exist across a variety of industries and areas of expertise. These workers can be graphic designers, IT professionals, writers, procurement specialists, or in another field entirely—consultants are only limited by their ability to have a clearly articulated area of expertise that can be packaged and sold to clients.

Companies that engage an independent professional are seeking a strategic problem solver—an expert with the ability to diagnose an issue and develop and implement a plan to cure it, not just a body to complete a specific task. Some independents enjoy the intricacies of this level of strategic detail while others prefer to simply work in their area of expertise. The idea is to make a conscious choice about how your services are positioned to your clients.

To learn more about how to become an independent professional, read our article: How to Transition from W-2 Employment to Self-Employment