What is a consultancy agreement?

Many businesses engage external advisers, specialists, or former employees to provide consultancy services — and the agreement governing that relationship is typically a consultancy agreement. While it shares some features with a contractor agreement, a consultancy arrangement has its own specific characteristics, and understanding what a consultancy agreement is helps founders structure these relationships correctly.

A consultancy agreement is a commercial contract between a business and an independent consultant — typically a senior individual with specialist expertise — governing the provision of advice, strategy, or other professional services. It sets out the scope of the engagement, the fee structure, any exclusivity arrangements, intellectual property ownership of work produced, confidentiality obligations, and how the relationship can be terminated. The consultant is engaged as an independent expert rather than as an employee or operational member of staff.

Consultancy agreements are commonly used for strategic advisory relationships, interim senior management, specialist project work, and engagements with former employees moving into an advisory capacity. The terms should reflect the independent nature of the relationship — including the absence of integration into the day-to-day management of the business. Our guide to consultancy agreements covers what to include and common issues to address when engaging a consultant.