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Difference between Consultant and Employee

Table of Contents

Consultants and employees play distinct roles in the working world, each with its own set of characteristics. Here’s a breakdown of the key differences between a (independent) consultant and an employee:

Relationship between Parties

Consultant: Independent contractors, consultants engage in contractual arrangements devoid of employer-employee ties. This autonomy allows them flexibility in selecting projects and clients, offering a diverse range of services.

Employee: In contrast, employees are directly employed by an organization, functioning as its agents. Their roles are integral to the employer’s objectives, emphasizing long-term commitment and stability.

Nature of Service

The nature of service provided by consultants and employees unveils the core distinctions in their professional roles.

Consultant: Consultants are specialists hired for specific projects or fixed terms. Their expertise is honed to address unique challenges, bringing a focused skill set to the table.

Employee: Employees are the backbone of ongoing operations. Regularly required for sustained services, they contribute to the day-to-day functioning and overall objectives of the employer.

Instructions and Supervision

Understanding the dynamics of instructions and supervision sheds light on the autonomy and oversight each role entails.

Consultant: Consultants operate with given timelines and quality instructions. They enjoy freedom in choosing work methodologies, leveraging their expertise to deliver optimal results.

Employee: In contrast, employees work within the parameters set by their employer. Work terms, methods, and supervision are dictated by the organization, ensuring adherence to established protocols.

Working Hours

Flexibility in working hours is a key aspect that distinguishes the professional lives of consultants and employees.

Consultant: With flexible working hours not specified by clients, consultants enjoy the liberty to structure their workdays based on project requirements and personal preferences.

Employee: Employee working hours are determined by the employer, aligning with labor regulations. This standardized approach ensures consistency in operational hours across the organization.

Exclusivity of Service

The exclusivity of service defines the extent to which professionals can engage with multiple clients or organizations simultaneously.

Consultant: Consultants typically have the flexibility to work for multiple clients unless restricted by conflict of interest clauses in their contracts.

Employee: Employees, on the other hand, are generally expected to work exclusively for their employer, concentrating their efforts on internal objectives.


The physical location of work is a crucial factor that sets the workstyles of consultants and employees apart.

Consultant: Consultants operate from their own workstations, eliminating the need to work on-site at the client’s location.

Employee: Employees work from the employer’s designated workstation, fostering a centralized work environment.

Ownership over Work

Understanding who retains ownership of the work produced is vital in appreciating the responsibilities and rights associated with each role.

Consultant: Consultants usually own the work they produce, unless specified otherwise in the contract. This ownership can offer them opportunities for future use or adaptation.

Employee: In the case of employees, the work is considered ‘work for hire,’ with ownership vested in the employer. This ensures that the organization has control over the intellectual property generated by the employee.


The financial aspects of work, including who bears the cost of necessary resources, showcase the financial distinctions between consultants and employees.

Consultant: Consultants are responsible for bearing the cost of their work, including assistants and equipment. This financial independence is a defining characteristic of their role.

Employee: Employers bear the cost associated with the employee’s work, providing the necessary equipment and resources required for their roles.


The question of liability unveils the legal responsibilities associated with the actions of consultants and employees during their tenure.

Consultant: Consultants cannot hold clients responsible for third-party liabilities. Their contractual agreements define the extent of their responsibility.

Employee: Employers are liable for the actions of their employees during the course of employment. This liability is governed by employment laws and regulations.


The mode and structure of payment shed light on the financial aspects of consultants’ and employees’ professional lives.

Consultant: Consultants typically receive agreed lump sum payments for their services. Payment is invoiced after the completion of the specified service or project.

Employee: Employees receive regular remuneration, paid according to the regulations outlined in labor laws. This structured payment ensures financial stability for employees.


The entitlements and benefits associated with each role have significant implications for the overall well-being of professionals.

Consultant: Consultants are entitled to the agreed-upon payment for their services. However, they are not eligible for benefits under labor laws, such as provident fund, gratuity, leave, and insurance.

Employee: Employees, in addition to their regular remuneration, are entitled to various benefits under labor laws. These may include provident fund contributions, gratuity, leave entitlements, and insurance coverage.

Misconducts and Discipline

The approach to handling misconducts and disciplinary issues varies between consultants and employees.

Consultant: Consultants are governed by contractual obligations, including compensation and termination clauses. Instances of misconduct are addressed within the framework of the contractual agreement.

Employee: Employees are subject to disciplinary actions as per labor laws in case of misconduct. The disciplinary process ensures fair treatment and adherence to legal standards.


Understanding the grounds and processes for termination is crucial for professionals in both roles.

Consultant: Termination of a consulting arrangement is guided by the terms specified in the contract. Attention is given to the interests of both parties to ensure a fair conclusion.

Employee: Termination of an employee is regulated by specific grounds outlined in labor laws. These grounds ensure job security for employees, preventing arbitrary terminations.

Tax Treatment

The tax implications associated with payments received by consultants and employees are essential considerations in their financial planning.

Consultant: Consultants may be subject to a 15% tax deduction at source on their payments. This deduction is made to fulfill tax obligations on the income earned through consulting services.

Employee: Employees also experience tax deduction at source as per the income tax regulations. This ensures compliance with tax obligations on their regular remuneration.


The distinctions between consultants and employees extend beyond surface-level differences, encompassing the very fabric of their professional engagements. Navigating these nuances is essential for both individuals seeking clarity on their roles and organizations looking to structure their workforce effectively. By understanding the unique characteristics of each role, professionals can make informed decisions, ensuring a harmonious and productive professional landscape.

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