Hiring a Consultant

Regardless of whether a business is run by an experienced management team or a sole proprietor just getting his feet wet in the commercial world, it may be necessary at times to hire a consultant to provide specialized advice. Fortunately, consultants come in every shape and color, and can be found for almost any area that your company lacks the necessary expertise.

For example, your business can hire a consultant to advise you on setting up your information technology system, on establishing an employee benefits plan that complies with the law, on putting in place proper accounting systems and controls, and on developing a marketing strategy designed to best reach your target audience.

One of the primary difficulties in hiring a consultant, versus a service provider or supplier, is that the arrangement is often vague and deliverables are hard to define. In many cases, it is also difficult to determine the impact a consultant’s advice actually has on your business results. For this reason, before hiring a consultant you should assess clearly why the consultant is being retained, what exactly you want him or her to do, and how you believe the relationship will help your business.

For example, hiring a management consultant without specifically designated tasks and deliverables could result in you paying a lot of money and generating nothing but endless meetings and vague advice. It can also result in disagreements over when and whether payment is due. This is not a good result for either your business or the consultant.

A major step in overcoming the problem of ill-defined duties and deliverables is to prepare a Consultancy Agreement that sets out as many specifics as possible. For example, the agreement can provide for the number of hours the consultant will spend on your project each week, how much time will be spent at company locations, the frequency of meetings with company management, reports that must be delivered and the contents of those reports, and the follow-up assistance that the consultant will provide in implementing the advice given.

In general, the terms of a Consultancy Agreement include the following:
  • Consulting services to be provided
  • Location of the services
  • Reports and other deliverables to be provided
  • Timetable for consulting services to be rendered
  • Minimum amount of time devoted to project
  • Payment terms, procedure and schedule
  • Statement that consultant is an independent contractor
  • Intellectual Property
  • Ownership of Work Product
  • Confidentiality
  • Non-competition
  • Liability for breach
  • Dispute resolution
  • Term and Termination

Because most consultants will have developed a body of work that they tap into for each client, the company and the consultant will have to discuss who will own any work product developed by the consultant. For example, if a consulting company is retained to provide advice on developing systems and controls software, it may adapt code it has already developed to the specific nature of the company’s business. In this case, the consultant will demand that it retains ownership of the developed code, while the company will require a license to use that code for its business purposes.

Another issue that must be considered is whether the consultant is allowed to work for competing businesses, which could lead to conflict of interest situations. In general, a consultant will not want to be limited in the customers it can work for, but may agree not to consult with directly competing customers for the term of the agreement. A related issue is whether the consultant has any ties to businesses that could lead to advice being tailored to benefit other clients. For example, a manufacturing design consultant with links to equipment suppliers may recommend purchases from his other clients. All such potential conflicts of interest should be disclosed, investigated and taken into account.

In addition, it must be kept in mind that a consultant is actually a form of self-employed service provider, and so both in the Consulting Agreement and in the manner that the relationship actually occurs, care must be taken that the consultant is not deemed to be an employee by relevant government agencies.

Remember, this means that while the company may specify the duties and deliverables of the consultant, the consultant should determine how those duties will be performed. Especially in consulting relationships, the courts and government will also look to the term of the agreement, where the duties will be performed and whether the consultant has other clients. If the company is the consultant’s only client, the consultant has an office at the company, and the agreement is long term, then there is a large risk the consultant will be deemed an employee.

If the consultant is considered and employee, then he or she will be entitled to employee benefits commensurate with comparable employees and will be entitled to all of the regulatory legal protections given employees. In addition, the company will be required to withhold taxes and make PRSI contributions. All of these requirements may be forced on the company retrospectively if it is deemed to have incorrectly classified an employee as a consultant.

In all of the preceding sections covering Employees, Service Providers and Consultants, as well as those covering Manufacturing, Distribution and Supply, protection of the company’s intellectual property rights has been a key concern. Because intellectual property is one of the principal assets of any company, we will now take a detailed look at the different forms of intellectual property, and how to protect them.

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