Differences Between Contractors, Freelancers, Locums and Consultants
Other pages within this section:
- Starting up as a contractor
- Moving from permanent to contracting
- Start Up - Frequently Asked Questions
- Should I set up a limited company?
The terms contractor, freelancer, locum and consultant are often used interchangeably, but in reality there are some stark differences between them. If you are just starting out and are unsure what to call yourself our guide demystifies these terms by looking at each of them in more detail.
Essentially a consultant will come into a company to evaluate the business and provide feedback and ways to make improvements. Contractors and freelancers however hired to actually perform work or to complete a specific project, whereas locums are brought in to temporarily fill the position of someone else.
Consultants are generally self-employed, independent professionals who have extensive skills, training and knowledge in their field. Consultants assess either whole businesses or specific areas, then make suggestions and provide advice on how to make improvements. The consultant will typically not carry out the actual work themselves, but will show the client how to implement their proposals. Due to the expertise and skill level required to be a consultant, they can usually command high rates of pay for their services.
Contractors are also skilled professionals who work for themselves. They are hired by clients to provide a service or complete a project on a contract basis; the stipulations of the contract including the rate are agreed before the contractor starts work. Contractors will work on site at their client’s premises and complete their contract for the designated period of time, although it is not uncommon for contracts to be extended. Companies favour contractors because they are hired only for the amount of time that their skills are needed, and the client is not required to pay any employee benefits such as pension contributions and sick pay. The lack of employee benefits means that contractors can often negotiate lucrative daily rates.
A freelancer is a self-employed worker who completes tasks and projects away from their client’s premises, usually at home. Freelancers charge an hourly rate or fixed price depending on the project, which is agreed before work commences. The main difference between contractors and freelancers is that contractors only work for one client at a time, whereas freelancers will generally work on multiple projects for more than one client. The amount that freelancers charge for their services will depend on their area and the work involved.
There have been a lot of reports in the press about medical locum workers, but locums are not just limited to the healthcare industry. Locum workers are brought into an organisation to replace absent staff members, so if an organisation is short staffed or vital employees are off sick, locums may be brought in to fulfil their duties. Locum workers are an attractive solution for many employers because they can be hired for whatever length of time required and they provide a method of covering absence without the commitment of hiring permanent employees.
Merging job titles
If you have got the skills it is definitely possible to work across more than one of these professions to make yourself more available for work. As a contractor it is natural to progress into consultancy and so you may want to make yourself available for both types of roles while you are making the transition. Many contractors and consultants will choose to pick up some freelance or locum projects in between contracts or consultancy work.
Appointing an accountant
Whether you op to work as a contractor, consultant, locum or freelancer you are going to be working for yourself and therefore taking responsibility for your finances, which includes tax and national insurance contributions. Many professionals in this position decide to appoint an accountant to help them with their accounts and take care of their tax obligations. If you do decide to appoint an accountant you may want to choose one that specialises in the needs of contractors, consultants, locums and freelancers.
How can Nixon Williams help?
Nixon Williams are specialist accountants who have been looking after the taxation needs of contractors, consultants, freelancers and locums throughout the UK since 1995. Their fixed-fee, all-inclusive accountancy packages will take care of all your business and personal taxation requirements and includes direct access to your own dedicated accountant. To find out more about how Nixon Williams could help you take a look at our services page.