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21/04/2016

Difference between contractor, freelancer and consultant

A lot of contractors starting out or who have just decided to change their work style are sometimes unsure what to call themselves, Lets clear a little of the fog surrounding the various terms.

From our point of view these three terms are often used interchangeably, but in fact – to be pedantic – they are quite different! And these differences become particularly noticeable when you start talking about what people will expect to pay for each one and how they will expect to engage you.

The short answer is that the consultant’s role is to evaluate a client’s needs and provide expert advice and opinion on what needs to be done, whilst the contractor or freelancer role is generally to actually perform the work.

Consultant who-am-I

A consultant is generally referred to as an ‘experienced professional’ and will provide expert knowledge in return for a fee. They tend to work in an advisory capacity only and are usually not accountable for the outcome of a consulting exercise.

Some consultants have brought dramatic shifts in management thinking and improvements in the performance of organisations. Consultants can command a very high fee due to their years of experience and are seen as being some of the most knowledgeable people in their chosen field.

Contractor ( Self Employed) 

A contractor is also an experienced professional, but one who provides a specialist service in return for a fee. Unlike a consultant, a contractor will actually carry out physical work, although they may also advise on what that should be beforehand.

Contractors are used by organisations that wish to acquire a given skill set for a period of time, but which do not want to employ someone permanently. As such, the ‘contract’ is usually full time but for a set period only – which can be extended if both parties agree.

 

Freelancer

The terms freelancer and contractor are often interchanged. Whilst a contractor will work full time for one client or ‘employer’ on client site, a freelancer usually has multiple clients. Freelancers may work on an hourly basis and could have many different pieces of work ongoing for a number of different clients.

Freelancers generally command similar rates of pay to contractors, but will only earn the same as a contractor if they bring in enough business across all of their clients, to enable them to work a similar number of hours as a full time contractor does. 

So which one would you rather be?

Well for many roles it really makes no difference what you call yourself, you’ll be hired on your skills and experience and the contract role is predetermined by what the client demands. 

Don’t forget to make sure your charge out rate is covering you for the fact you are not entitled to holidays or sick leave or public holiday pay especially if you are just new to contracting/freelancing or consulting and have come from a permanent role.

One quick way to do that is work out how much you want to earn a year and divide that by 220 days to give you a daily rate and then by 8 to give you an hourly rate,

e.g. $100K / 220 = 454.55 daily / 8 = 56.82 you then can adjust this figure to suit your required income, (perhaps x 1.5 = daily 681.83) but it give you a base figure to start from.

Contractor, Consultant or freelancer, these roles all have one thing in common; all tax responsibilities and liabilities are in your hands.  

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