An employment contract is a legal agreement between an employee and a company or an employer. It includes terms of payment, benefits, consequences, roles and responsibilities between the two parties. Distinctively, a consulting agreement is a contract between a company and a consultant. Unlike an employment contract, a consulting agreement is short termed and does not provide legal protections that employees have like company benefits and unemployment insurance.
A consulting agreement will benefit the firm in many ways. One, a consulting agreement will enable the firm save on costs even though some consultants are paid hourly wages which are higher than an employee’s monthly salary. Expenses like unemployment insurance, social security taxes, office space, retirement benefits, medical insurance, paid vacations and sick leaves will not be subjected to the firm. The consultant is responsible for all the expenses because they lack legal protection like other employees. Secondly, hiring an independent consultant will enable improve the firm’s efficiency. Consultants can recommend positive changes or provide new ideas that can improve the firm’s credibility. Consultants always have special skills required to complete particular projects. This saves the firm time and cost of training employees.
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An employee and an independent contractor differ in many ways. Employees obtain better benefits than independent contractors. Employees are given tax reliefs in case of an economic crisis. Recently, the Internal Revenue Service, under the department of treasury, provided a list of tax reliefs offered to employers (Employees: Internal Revenue Service, 2020). These are corona virus tax relief and economic impact payments. Independent contractors on the other hand control their earnings and do not receive such benefits like employees.
In summary, a consulting agreement rather than an employment consultant, will be beneficial to the consulting firm because the firm will be able to save money and improve its efficiency and credibility. Despite of the independent contractors earning more money and controlling their earnings, they do not receive better benefits like employees.
References
Employees: Internal Revenue Service. https://www.irs.gov/individuals/employees.
