As technology becomes more advanced, more people can work from anywhere in the world. The COVID-19 pandemic has only accelerated this trend. In 2020, freelancers made up $1.2 trillion of the economy, over 20% from last year.
As the demand for freelancers grows, it’s increasingly more important to control how they present and market themselves to clients. The two paths an independent professional can take are that of a consultant or contractor. The difference between the two is more than just semantics.
While both job titles can be profitable and allow for a flexible work schedule, the key difference is that a company usually hires contractors to complete a specific task, while consultants may have a broader scope of responsibilities. Consultants are usually brought on to create solutions that can optimize a business’s productivity and bottom line using technology and processes that the business might not know about.
This guide aims to educate you about the roles that contractors and consultants play. We’ll go into detail about what each designation entails, how they’re different from each other, and how they can be similar.
What is a contractor?
A contractor is a temporary, independent worker hired to do a specific job for a set period. A contractor will meet with a client to learn their needs and then complete the client’s task. Contractors are self-employed workers who work for others for a pre-determined price, meaning that the contract ends when the task is done.
In essence, contractors are temporary workers who companies can use for jobs as simple as organizing mail or as complex as programming web applications. Their value depends on their ability to do a certain job and the demand for that job.
Note that while contractors must have suitable technical skills to complete their jobs, their work only requires a narrow understanding of an industry as a whole. For example, a business might contract a copywriter to write emails for a marketing campaign. To be successful, the copywriter would need to know how to write effective copy and communicate with a reader. However, they wouldn’t need to know how to complete broader marketing tasks, like organizing entire sales funnels or analyzing data to optimize e-commerce.
Businesses are finding that hiring independent contractors through talent networks can be more beneficial than hiring full-time workers. One reason is that independent talent will usually have the skills necessary to complete a specific task.
What is a consultant?
Consultants are independent professionals with many years of experience and broad expertise in an industry. Like contractors, they also enjoy self-employment, but they are hired for big-picture objectives. They’ll meet with a business to see what the business is working on and devise a plan to achieve the business’s overarching goals most efficiently. Consultants are problem-solvers focused on improving an organization’s practices through expert advice.
For example, a jewelry company might hire an efficiency consultant to improve their manufacturing processes and cut costs associated with operating their factories. The consultant would spend a fair amount of time analyzing how the company uses its resources to judge what the business can do to save money and boost performance. To improve manufacturing, a consultant might make a suggestion, like encouraging a company to use automated machines that don’t require a worker to operate them manually.
Consultants offer professional advice on how a company can improve its operations, and leave the work of translating this advice to action to those in more permanent, hands-on positions within the company.
Contractor and consultant: Being both
The roles of contractors and consultants don’t always have to be mutually exclusive. As contractors work in their industry, they gain experience and knowledge. After several years of contracting in different capacities in a particular field, a contractor might feel comfortable enough to make the switch from selling their labor to selling their knowledge in a consulting role.
Some consultants might find they want to do contracting work, as well. For example, a full-stack developer might offer a webinar to show a company how to maximize their customer’s browsing experience on their website. The same developer might then give the company the option to hire them to implement the changes.
Contractor vs. consultant: 4 nuances to note for your career
There are several differences between operating as a contractor and a consultant. The big difference is that contractors perform work to complete a task, and consultants create solutions to guide how a company can conduct its workflow.
There are more subtle differences in how the two designations operate, which we’ll go into below.
Suggesting solutions vs. doing the work
Consulting firms show clients new, innovative ways to achieve goals and conquer obstacles that can save companies money, time, and effort. However, they don’t do the work to implement the strategies they suggest. They simply offer suggestions on how the business can operate at a higher level of efficiency and then take a step back and let the company run.
Contractors do the work that needs to be done for their clients. Their contracts stipulate that they are to complete a defined job in the manner their client sees fit. They don’t have control over how a company operates, and they must work within a business’s current framework.
Experience and expertise
Consultants must have a broad range of experience and expertise in their industry. Clients must feel confident that their consultant knows enough to revamp the way entire business processes get done. Because consultants are tasked with renovating whole systems, they must also stay updated with new technologies that can push a process from the planning phase to the finishing touches.
Contractors don’t need quite as much broad expertise. Their work requires a much more specific skill set than consultants. To do a particular job, a contractor generally needs to be competent in one area of a business process.
Project rates and hourly billing
Consultants often bill for their work on a project basis. This means that it’s up to the consultant to decide how long a job will take and how much to charge to make sure it’s worth their time. Consultants often bid on jobs for a client. Project rates can be a bit tricky. If a consultant charges too little, they won’t be viewed as a professional, but they could price themselves out of a client’s budget if they charge too much.
Contractors usually bill on an hourly basis. They’re only hired for a short time while they complete specific projects. Sometimes, they’ll create invoices based on their labor costs before starting a job.
Portfolio of work
Consultants are leaders in their field and often have experience as project managers. Businesses trust consultants with their entire operations and, often, their budgets, so they must be sure a consultant is someone who has the broad industry knowledge and can see the big picture. Because of this, their portfolio of work is more than a set of projects. It’s a collection of metrics that show improvement for a company over a long period versus something more short-term.
On the other hand, contractors must demonstrate that they can get a task done efficiently and effectively. They don’t have to worry as much about the broad organizational picture as they do about demonstrating how their specific skills relate to the task at hand.
Contractor or consultant, Upwork will work for you
When you’re navigating which direction to take your career, you want to make sure you’re taking into account your skills, knowledge, and preferences. While you may ultimately be able to wear both hats at different times in your career, knowing what each requires will give you greater freedom to operate in your industry.
Upwork is the best possible place to thrive as an independent professional. With streamlined hiring, our algorithms will highlight the projects where your skills may be a great fit while giving you the freedom to work on the projects you choose. Whether you’re a contractor or consultant, you can set the terms for your career on Upwork.
