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In business, vendor vs contractor are often used interchangeably, but in fact, they are different. This leads to confusion when distinguishing each role and responsibilities. So, what is the difference between a vendor and a contractor?

To better understand the key differences between contractor vs vendor, follow ERA, your Global  HR expert with 15+ experience, and check the article below.

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See more: What Is Contingent Worker Meaning? In-Depth Explanation by HR Expert

Duties Of Vendors

To know the difference between a vendor and a contractor, you need to understand the duties of vendors first, which are:

  • Provide the products or services to clients following the terms on agreed-upon purchase orders, contracts, or agreements.
  • Ensure their goods or services meet clients’ quality standards. This can involve implementing quality control measures, conducting inspections, and adhering to industry standards.
  • Deliver products or services to their clients within the agreed-upon timeframe. 
  • Providing excellent customer service, addressing client concerns promptly, and resolving issues effectively to ensure client satisfaction and retention.
  • Accurately bill clients for products or services, such as generating invoices, tracking payments, and resolving billing discrepancies on time.
  • Comply with relevant laws, regulations, and industry standards governing their business operations. This includes product safety, data privacy, intellectual property rights, and other legal obligations related to selling goods or services.
difference between vendor and contractor

Who Are Contractors?

Contractors are individuals or companies hired by another entity to perform specific tasks or provide specific services for a predetermined period under a contractual agreement. Business owners hire them for various purposes, including construction, maintenance, consulting, or specialized services. 

Contractors typically work on a project basis and are paid hourly, daily, or based on any forms outlined in the contract. 

Duties of Contractors

As a contractor, you must:

  • Thoroughly understand the requirements of the project or services they are contracted to deliver, such as reviewing project specifications, blueprints, plans, or other relevant documents.
  • Responsible for planning the work execution requested. For example, they must estimate create project timelines, set milestones, and coordinate resources.
  • Oversee the allocation and management of project resources, including labor, materials, equipment, and subcontractors, if applicable. 
  • Responsible for carrying out the work outlined in the contract according to the agreed-upon specifications, quality standards, and timelines.
  • Ensure that the work performed meets the quality standards specified in the contract and any relevant regulations or industry standards.
independent contractor vs vendor

However, if you are self-employed and struggling with local and international payments for independent contractors, consult ERA’s global Employer of record (EOR) expert. Our EOR service ensures full compliance with federal, state, and local employment laws, regardless of your employees’ location.

Now that you know the definitions for each term, let’s move to the key difference between vendor and contractor, as below.

3 Key Differences Between Vendor vs Contractor

Many business owners and workers often misunderstand the difference between vendor vs contractor. To help you overcome this situation, we have researched and given out 3 key points below:

Nature of RelationshipTransactional. Offer products or services directly to clients.Contractual. Hired to perform specific tasks or services under a contract.
Scope of WorkProvide goods or services as part of the sales process.Perform tasks or services outlined in a contract or agreement.
Relationship DurationMay be ongoing, but individual transactions are discrete.Can be typically project-based and ends upon completion of the contracted work.

Nature Of Relationship

Vendors typically sell products or services to clients through selling-and-buying transactions. They may cater to various industry needs and preferences.

Conversely, contractors establish contractual relationships with entities that require specific tasks or services. They must fulfill the client’s requirements specified in the contract. 

Contractors are accountable for delivering the agreed-upon services within the contractual framework, and both parties agree to the terms outlined in the contract.

difference between a vendor and a contractor

Scope Of Work

Vendors offer goods or services to clients as part of the sales process. They fulfill client orders, deliver products, or provide services as per the client’s requirements. They may engage in activities like manufacturing products, sourcing materials, providing support services, or delivering digital products like software licenses. 

Besides, contractors perform specific tasks or services outlined in a contract or agreement, with clear objectives and deliverables.

vendors vs contractors

Relationship Duration

The way vendors and clients interact is usually through individual transactions, which can happen repeatedly over time. 

Although vendors may have several dealings with the same clients, each transaction is separate, and it doesn’t necessarily mean a long-term commitment between the parties. 

Conversely, the relationship between contractors and clients is typically project-based and ends when the work is delivered as expected. The working duration is contingent upon the completion of the contracted tasks and may vary depending on the nature of the project and the client’s ongoing needs.

what is the difference between a vendor and a contractor

See more: Difference Between 1099 and W2: What Should Employers Know?

Final Thoughts

How do you think it is hard to distinguish between vendor vs contractor?

In short, a vendor offers goods and services to consumers, while a contractor is assigned particular tasks in the scope of work.

Hopefully, ERA experts have helped you learn about contractor and vendor differences. If you want more insightful and expert tips for your HR operation, follow ERA! 

Frequently Asked Questions

What Is The Difference Between Vendor And Employee?

An employee is someone hired by a business or organization to perform work under the direction and control of the employer. In contrast, a vendor is an external entity or individual that provides goods or services to another entity under the terms of a contract or agreement. 

What Is The Difference Between Vendor And Outsource?

Vendor management occurs when a company seeks, evaluates, hires, and obtains services from various vendors to ensure they deliver on time. When a company outsources, it entrusts control of a particular function to an outside party.

What Is An Outsourced Vendor?

An outsourced vendor, also commonly referred to as a third-party provider or supplier, is a company or individual that provides products or services to another company under a contractual agreement. This practice, known as outsourcing, involves a business hiring an external party to perform tasks, handle operations, or provide services that are either difficult to manage internally or outside the company’s core competencies.

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