TN 8 (02-11)

RS 02101.107 Employment Status of Consultants

A. Consultant defined

A consultant confers with and advises people on matters within a specialized field. Consultants develop a peculiar knowledge or special skill of a professional or semiprofessional nature through extensive training, education, or experience in a particular occupation.

Consultants are generally self-employed. However, restrictions and rules bind consultants to the point that they may be employees. Quite often, individuals pursue consulting duties after retirement in order to supplement their income or because they do not wish to remain idle.

A consultant can either have the status of an employee or an independent contractor, depending on the work conditions.

B. Employee status of consultants

Some consultants are employees. They work under conditions where they are greatly restricted as to when, where, and how they work. Such consultants may be employees under the common-law rules.

An employer-employee relationship exists when the consultant:

  • is not free to seek other work;

  • receives a fixed salary;

  • receives assignments; and

  • works during specified hours.

Usually, such consultants receive facilities to do the work, and the employer provides helpers as needed. They may work during fixed hours or agree to place themselves “on call” to work whenever requested. They regularly report their progress on assignments and the employing firm can change their assignment. They have no business expenses and no investments in facilities for doing the work, so they cannot realize a profit or suffer a loss. Their work is an integral part of the firm's business. In addition, they do not determine the schedule for their services, nor are they in control of their own time, as they are subject to the will of the employer as to their services.

There are cases where some firms utilize the services of certain retired employees by retaining them as consultants under arrangements that appear on the surface to constitute an independent contractual relationship, but actually serve as a means to continue the employer-employee relationship.

C. Independent contractor status of consultants

A large number of consultants:

  • establish their own businesses;

  • rent offices or have offices in their homes;

  • advertise in newspapers, trade journals, etc.,

  • maintain business listings;

  • hold themselves out to the public as available for a particular type of service;

  • may hire clerical help and assistants; and

  • succeed in the business world by their efforts and the demand by the public for their services.

As independent contractors, consultants ordinarily operate under an arrangement where:

  • they give technical advice or assist an employing firm for a set fee;

  • their service contract is for a specified period of time or purpose;

  • they are free to work for others and often work for several firms at the same time;

  • they do not have to observe regular work hours, either at the firm's offices or at home;

  • they agree only to be available for conferences and consultations at the firm’s request or to perform services on a specified minimum number of days;

  • they do not have to make regular reports, or attend regular conferences with members of the firm;

  • the firm does not provide the consultant with work facilities;

  • they are not subject to control or supervision;

  • the firm employs the consultant to do a specific job; and

  • the firm is interested only in the result and not in the manner and means to accomplish the result.

D. Weight of factors

Because of the technical nature of the work and general practice or customs in this field, we give some factors less weight than others. For instance, the consultant does not receive detailed instructions and generally, does not have to work during fixed hours. Quite often, the consultant maintains an office at home for personal use and his or her pay includes traveling expenses. These factors may exist in both independent contractor and employer-employee cases.

The principal factors that indicate an employment relationship are:

  • the consultant cannot integrate his or her services into another business;

  • the consultant cannot invest in the facilities or incur business expenses;

  • the consultant has recurring, rather than sporadic or infrequent services;

  • the consultant must perform the services personally;

  • the consultant must report on the progress of assignments;

  • the consultant’s services are not available to the public;

  • the employer has the right to first call on the services; and

  • the right of either party to terminate the relationship at any time.

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RS 02101.107 - Employment Status of Consultants - 02/02/2011
Batch run: 07/03/2014