Life Sciences Focus: Using Consultants

Many start-ups, scale-ups, SMEs and mid-size businesses choose to engage consultants rather than recruit employees. After all, this approach can offer some clear advantages for start-ups and growing companies, including:

• Global talent access: enables companies to access specialised expertise across different jurisdictions without establishing local entities; 
• Operational flexibility: enables companies to scale resources up or down based on project needs and funding cycles; and
• Cost efficiencies:  gives access to expertise without the overhead of permanent headcount, particularly valuable for companies with limited budgets.

However, this approach does not come without risk. This article highlights practical considerations to help both clients and consultants identify and mitigate those risks.

Commercial risk, such as ownership of intellectual property, protection of confidential information and liability, can be addressed contractually; however, there is one simple but fundamental risk that shouldn’t be overlooked: labelling someone a consultant does not make them one.

If the working relationship resembles an employment relationship in practice, local employment laws may apply, potentially resulting in:

• Retrospective tax and social security liabilities; 
• Statutory employment rights; and
• Fines or penalties for non-compliance.

This is particularly important for clients engaging consultants across multiple jurisdictions, as misclassification can be costly and complex.

While there is no one single definitive test that can be applied across all jurisdictions to determine that a consultancy is genuine, there are a number of common, key factors, including:

Control & Autonomy 

• A genuine consultant has the autonomy to determine how they will perform the services.
• Risk arises in the degree to which the client controls and directs the methods, processes and day-to-day activities of the individual and how they are conducted.

Working Arrangements

• A genuine consultant focuses on deliverables and outcomes with control over when and where they perform the services.
• Risk arises in the degree to which the client requires fixed hours or availability, regular attendance and integration into the business structure.

Financial Independence

• A genuine consultant has multiple clients and is a separate business entity with its own business risks.
• Risk arises where a consultant is financially dependent on a single client and/or if they are paid as an individual.

Equipment & Resources 

• A genuine consultant provides their own equipment, resources and bears both the cost and responsibility for them.
• Risk arises where a client provides equipment and resources for the individual’s use.
• In the context of Life Sciences: If there is a legitimate need for a consultant to work within the client’s environment, for example, due to data sensitivity, security or regulatory requirements, this does not automatically indicate employment if properly structured and documented. 

Commercial Terms

• A genuine consultant invoices for their fees on the basis of services and deliverables in accordance with agreed payment terms, maintains professional indemnity insurance and can subcontract to a substitute if needed.
• Risk arises in the degree to which the individual receives salary-like regular payments or any form of employee benefits, must perform the services personally and/or is required to adhere to company policies applicable to employees.
• In the context of Life Sciences: If, given the nature of the services, the consultant has been contracted to perform the services on the basis of niche expertise, qualifications and/or experience and a client wishes to be able to vet and approve a subcontracted substitute, this does not automatically indicate employment if properly structured and documented.
• Note: The lack of appropriate insurance, particularly if engaging a consultant as an individual, is a major red flag that can have serious, wide-reaching consequences for the client!

Professional Identity

• A genuine consultant is clearly identified as an external consultant, including in communications.
• Risk arises where the individual appears to be an employee to the outside world, including clients, regulators and business partners.

Engaging consultants can be a flexible, cost-effective way for life sciences companies to access specialist expertise, especially when operating across multiple jurisdictions. However, misclassification risks should not be underestimated. Local employment laws vary, and getting it wrong can expose your business to unexpected liabilities, employment claims and reputational harm.

Robust, well-drafted templates are a simple but powerful tool to protect your business. They ensure clear terms on intellectual property, confidentiality, data protection and genuine independent contractor status. Importantly, they also enable non-legal teams to prepare agreements with confidence, reducing the risk of unintentional exposure or inconsistencies.

Practical steps such as using ‘front-loaded’ templates that lock down legal terms, template suites reflecting jurisdictional and contracting nuances with simple flow-chart guidance on which template to use, and version control and workflows leveraging SharePoint, can save time and money, and reduce risks.

Above all, keeping it simple and usable sets you up to scale effectively, maintain oversight and build trust with partners, investors and regulators as your business grows.