How to Start a Consultancy Agreement

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What is a Consultancy Agreement?

This agreement comes into existence when an organization is planning to appoint an external consultant to work on a definite task or assignment for your company. A consultant is usually an expert in his own field who will assist in providing specialized solutions for a temporary period.

In the best interest of both of the company and the consultant, the agreement needs to be secured by a written contract laying out the basic and specific foundation for future collaboration. The consultancy agreement will not only protect the interests in data protection and intellectual property matters but it also acts as an aid as a proof if there arises any dispute or court case or proceedings.

Is consultant an employee of the company?

The consultant is an independent contractor and cannot be considered as an employee of the company thus making him ineligible to receive the same benefits as an employee on the rolls. A consultant is hired on a set of exclusive terms and conditions.

Are consultants on contract basis eligible for benefits offered by the company to its employees?

In most cases, one will not qualify as they are not an employee of the company. This will be detailed in the agreement made by you with the employer. The benefits like provident fund etc. may not be in reach.

Benefits/advantages of Hiring a Consultant

There are very few main reasons why you would hire a consultant for assistance:

  • Outside perspective and analysis

    In situations where one wants to improve an aspect of the business, an independent opinion can be productively critical. A consultant can help guide into the direction for success

  • Specialized knowledge

    A consultant can provide more in depth insights into a specific difficult area.

  • Cost savings

    As an employer, one will have an obligation to pay for added employment benefits, For outside consultants, this is not required.

  • Flexibility

    The term of work designated to a consultant is usually for a fixed period only and there are no long-term obligations after your contract expires.

When to Use such agreement?

  • When the company is engaging the services of a specialist for a specific project or task.
  • When a company is willing to appoint a person as a consultant on a self-employed basis but does not want to consider him on the company payroll (employee).
  • If any individual is taking up a temporary task or project with a company/firm.
  • When you want to draft an elaborate yet simplified agreement for appointing a consultant.

What Has to Be Covered in A Consultancy Agreement?

  • Area of work and specialization
  • Liabilities of the parties
  • Term of contract and remuneration details
  • Confidentiality and data protection clauses

What Does A Consultancy Agreement Usually Cover?

To ensure that there is a smooth relationship and working from beginning to end between both parties, the following terms should be incorporated into any consultancy contract:

  • The Parties Involved in contract
  • Rights and Obligations of Both Parties
  • Confidentiality and non-disclosure agreements
  • Duration of the contract
  • Payment

What Can A Consultant Help You With?

A consultant helps to estimate the strengths and weaknesses in the business and works with the goal of improving your processes and brand. They have specialized experience in a particular area.

Frequently Asked Questions


A consultancy agreement is a form of legal document which is required when a company appoints any outside or an external consultancy firm or a consultant for a specified period of time.

The consultancy agreement helps to protect the data of the company along with the intellectual property matters. It is also considered as an aid of proof in case if any dispute arises between the parties to the agreement during the course of employment.

The parties to the consultancy agreement are the company and the consultant or the consultancy firm.

A consultant agreement is considered to be a kind of service agreement.

All consultants work as an independent contractor, thus cannot be considered as an employee of the company. Any consultant hired for work has exclusive anset of terms and conditions to work for.

Any consultancy agreement must mention the time frame of the project on which the consultant is set to work, hours to work along with the deliverables of the project and the manners in which the business will pay to the consultant for the services rendered.

No, a consultant cannot enjoy the similar benefits as of the employee of the company. This is because a consultant is hired for a fixed term to work on a project and can be removed once the work is completed.

The consultants are beneficial for the company as the company gets an outside perspective and direction for betterment in a project. All consultant hired have expertise in their field, which helps the business of any company.

Yes, every agreement is comprised of a confidentiality clause which obligates both the parties for non-disclosure of any information related to the company or business.

Any consultancy agreement can be terminated when there is a breach of agreement by either of the parties.

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