The Pros And Cons of Being Under a Consultancy Agreement: An In-Depth Analysis | LabourBlawg

The Pros And Cons of Being Under a Consultancy Agreement: An In-Depth Analysis

by Employment Blawg on August 19, 2023

consultancy agreements(US law and generally) When we say consultancy, this usually refers to a professional practice where a person with a specific field of expertise is “consulted” for advice or his/ her skills to benefit a business. Consultants, and even freelancers, are sometimes referred to as self-employed or independent contractors in legal jargon. This means that they perform services without having an actual employment status for the company they work for. There are a lot of advantages and disadvantages to working as a consultant:


Being an independent contractor can be financially satisfying. It can give you more freedom and privacy compared to working for a company. Here are just some of the advantages of being under a consultancy agreement:

Higher Earnings
When you sign on under a consultancy agreement, you’re usually the one in control of how much you earn. You charge clients on the basis of the quality and quantity of work you do per hour, for as long as they employ you. The Wall Street Journal also attests that independent contractors are paid 20% to 40% more than regular employees.

Tax Benefits
Lower income tax is also a great big bonus when you are a consultant. Because you’re not officially employed, you’re not subtracted federal or state taxes from your paycheck, which contributes to your higher earnings. You can also take advantage of tax deductions from expenses necessary and related to your business such as office, travel, and equipment costs.

As a consultant, you are free to pick and choose your work, so there will always be variety and you won’t get bored. That you can choose the work provides enough room for you to do work that you enjoy, and at the same time to be able for you to pursue your passions.

You can choose to work from home, whenever you want to, and you can work at your preferred time of day. Of course, your clients have deadlines for you to meet, but at least you can work at your own pace and leisure. If you’re an independent contractor, you can almost say that you’re your own boss.


Of course, there are disadvantages to being self-employed. No job out there is too good to be true, after all. Independent contractors would usually have a difficult time getting personal loans or housing loans because of all the additional documents and papers they have to present. Sometimes, you even have to put up with horrible clients that fail to pay you on time, or at all. Here are some other drawbacks of signing on under a consultancy agreement.

No Employee Benefits
One of the biggest drawbacks of being a consultant or a freelancer is that you don’t get regular employee benefits. You don’t have retirement benefits, medical insurance, paid vacations, or paid sick leaves. You can’t even get workers’ compensation because you are not an official employee. Included in these employment benefits are social security taxes.

If you’re employed in a company, your employer covers half of the social security tax, but by being a self-employed or an independent contractor, you pay the full amount of tax. Health insurance might be easy to get for the self-employed but the rates and premium can cost more.

Law Protection
When you are self-employed, you get little to no protection in labor law. For example, California’s wage and hour laws and anti-discrimination laws protect employees, but not independent contractors. All of your rights and responsibilities are also laid out on the contract made with the client. You also don’t get unemployment insurance if you’re a self-employed consultant. That means, if you suddenly find yourself out of a job, you don’t get unemployment benefits from the state.


Now that you’ve seen the pros and cons of a consultancy agreement, you can decide for yourself if this type of employment is suitable for you. Some freelancers have made a successful careers out of being independent contractors, but it takes a special kind of discipline to successfully fulfil all financial obligations and at the same time, take care of taxes, insurance, and other concerns on your own.

If decide to work as a consultant, you need to make sure that your rights are protected. One way to do this is to understand the terms of your contract thoroughly before you sign. Details such as the scope of work, compensation, work relationship, product ownership, confidentiality, and other such important issues must be addressed. For more detailed information on how to protect yourself legally, do your research thoroughly and check out some resources, which are available online.

Author’s Bio

Ryan Del Villar is a content writer and Digital Strategist for Money Hero. Ryan is also a freelance writer at Helm Word, an Online Reputation Management company.

Previous post:

Next post: