Why Understanding the Difference Matters for UK Contractors

Whether you're considering a shift in your contracting career or aiming to take on more responsibility within a client organisation, you've likely come across roles that involve either management or leadership. While these two terms are often used interchangeably, they involve very different approaches—and understanding the difference could have a significant impact on your professional growth, especially as a contractor or consultant.

At IR35 Rules, we believe that understanding how leadership and management differ is key to thriving in project-based work. Whether you operate inside or outside IR35, developing both skillsets can enhance your value to clients and help you stand out in a competitive market.

What Does a Manager Do?

Managers are responsible for the day-to-day running of a business or team. Their role is to ensure work is completed on time, deadlines are met and budgets are followed. They focus on structure, efficiency and carrying out an existing plan.Common responsibilities include:

• Assigning resources
• Monitoring project milestones
• Reporting on performance
• Resolving operational issues
• Managing workload and timekeeping

Managers keep everything moving smoothly, ensuring client expectations are met and deliverables are completed as agreed. In a contracting environment, they’re often the people you work with most closely to define tasks, review progress and approve completed work.

What Does a Leader Do?

Leadership centres on influence, vision and driving change. Leaders look at the bigger picture — setting long-term direction, motivating teams and inspiring improvement. Leadership isn’t tied to a job title; it’s a way of thinking and behaving.Leaders typically:

• Inspire and motivate others
• Communicate a clear vision or direction
• Build trust and foster collaboration
• Support talent development and growth
• Encourage innovation and adaptability

For contractors, leadership might mean mentoring juniors, improving processes, or helping a team navigate a challenging delivery. You don’t need to be permanent staff to lead — you simply need to step up when it matters.

Managers vs Leaders:

• Focus on processes and control / Focus on people and inspiration
• Maintain systems and structure / Challenge the status quo
• Work to short-term goals / Work toward long-term vision
• Authority comes from position / Influence comes from behaviour
• Monitor tasks and outputs / Empower others to take ownership

Both roles matter. Managers ensure consistency and delivery. Leaders drive engagement and change.

Why This Difference Matters for Contractors

Contracting is results-driven. To secure higher-value or longer-term contracts, you need to bring more than technical skill. Clients increasingly look for interim professionals who can take initiative, drive progress and influence outcomes. Leadership ability is often what sets top contractors apart.

Impact on your team
Even if you’re not officially managing staff, you can still influence how a team works. Contractors who bring clarity, energy and direction often become the person clients turn to — and remember when it’s time to renew or extend a contract.

Influence Beyond IR35 Status

Your IR35 position doesn’t restrict your ability to lead. Even contractors working inside IR35 can demonstrate leadership, particularly in projects involving transformation or advisory responsibilities. In some cases, acting as an independent leader — rather than an integrated team manager — may support an outside IR35 argument, depending on control and autonomy.

Skills That Open New Doors

Managers excel at organisation and execution. Leaders excel at strategy, communication and vision. Developing both skillsets makes you far more versatile and opens doors to programme management, consultancy and interim leadership roles.

Becoming a Well-Rounded Contractor

Knowing when to manage and when to lead is a major advantage. Clients want reliable delivery, but they also value contractors who can think ahead, influence others and add value beyond their immediate task list. Here’s how to apply this:

• Inside IR35: You can still guide decisions, shape culture and improve outcomes without crossing into employee-like control.
• Outside IR35: Leadership strengthens your independence and positions you as an expert rather than a doer.
• Seeking progression: Build both skillsets — management for delivery, leadership for impact.

Can I Be a Manager as a Contractor and Still Stay Outside IR35?

A common concern among senior contractors is whether managing people or projects automatically means falling inside IR35. It doesn’t — but it depends on the nature of your role and how you work within the client organisation.

You Can Be a Manager as a Contractor — With the Right Approach

Acting as a manager does not automatically breach IR35. Many contractors are hired precisely because of their experience leading teams or delivering large programmes. What matters is the level of control, autonomy and integration.To remain outside IR35, it helps if:

• You’re not line-managing permanent employees (e.g. approving leave or appraisals)
• You work without direct supervision
• You decide how work is completed, not just what gets done
• You’re responsible for outcomes, not part of the internal hierarchy
• You use your own tools, processes or intellectual property

What Can Put You at Risk of Falling Inside IR35?

Things that may indicate employee-like working include:

• Reporting to a manager as though you’re part of the permanent staff
• Taking part in internal HR processes
• Undergoing regular performance reviews
• Being given set hours or detailed task-level instructions

Why Developing as a Leader Can Help You Stay Outside IR35

Leadership often aligns more closely with independent, project-focused work — which can support an outside IR35 determination.

Here’s why

Leadership is about outcomes, not supervision. Leaders are brought in to solve problems and shape direction. When you define your own methods and focus on delivering results, your working style looks more like genuine self-employment.

Leadership relies on influence, not authority
Leaders guide and mentor, rather than formally managing staff. This supports autonomy without embedding you in the client’s organisational structure.

Leadership highlights external expertise
Clients hire leaders for fresh insight and specialist capability. This reinforces your independence as a contractor in business on your own account.

Leadership strengthens your commercial position
Clients will pay more for someone who can take ownership and deliver independently, which also helps distance your role from employee-type control.

The strongest contractors don’t just manage — they lead. Whether you’re delivering a specific workstream or shaping a wider business change, knowing when to step into each mode sets you apart.

At IR35 Rules, we help contractors with more than just tax guidance. Our goal is to support you in building a career that thrives — with the skills, confidence and independence needed to win better contracts, develop stronger client relationships and grow your long-term prospects.

FAQ's

Do you need to manage your contractors closely?

If you're hiring contractors, the level of oversight can affect IR35 status. Close supervision and control (e.g. telling them how to do their work, setting strict hours, or managing them like an employee) may indicate an inside IR35 relationship. Contractors working outside IR35 should operate independently, managing their own time, methods, and workload, with minimal day-to-day supervision.

How do you manage consultants and contractors effectively?

Instead of "managing" contractors in the traditional employee sense, focus on setting clear deliverables, timelines, and outcomes. Treat them as external experts delivering a service. Good communication, regular check-ins, and agreed milestones are key—but avoid imposing rigid controls that mirror employment.

Is a project manager a contractor for HMRC contractor registration?

A project manager can be a contractor if they work through their own limited company or an umbrella company. HMRC does not define contractors by job title alone—what matters is the working arrangement and whether it reflects employment or self-employment under IR35 rules. A project manager who takes on fixed-term projects and operates independently could fall outside IR35, but it depends on the specific contract terms and working practices.

Should a contractor manage staff or personnel under IR35?

Generally, no. If a contractor is managing permanent staff, approving holiday, conducting appraisals, or acting as a line manager, this could point towards an employment-like relationship, which raises red flags for IR35 compliance. While contractors may lead projects or coordinate teams, they should avoid assuming responsibilities typically associated with HR or internal people management.

Do contractors have 1-to-1s with managers?

Occasional 1-to-1s for progress updates or project alignment are fine. However, if a contractor is attending regular performance reviews or line management meetings (as if they were a staff member), it could suggest they are being treated like an employee—potentially triggering IR35 risks.

Can a contractor be a line manager in the UK?

From a legal standpoint, yes—a contractor can be placed in a line management position. But from an IR35 perspective, this is risky. Acting as a line manager, especially if managing client staff, could indicate the contractor is integrated into the business and subject to direction and control. This could push them inside IR35 unless it's carefully structured and justified.

Can a contractor display leadership without becoming an employee?

Absolutely. Contractors can lead projects, influence direction, and act as strategic advisors—all while maintaining independence. Leadership is about influence and outcomes, not hierarchy. As long as the contractor isn't being managed or controlled like staff, demonstrating leadership is not only acceptable, but often expected in senior contracting roles.

Can managing people make a contractor fall inside IR35?

Yes—if the management responsibilities mirror those of an employee, such as direct line management of client staff, involvement in HR processes, or taking orders from a manager. However, leading a team of other contractors or project-based coordination can be acceptable if there's clear independence and autonomy.

Can a contractor be held responsible for a team's performance?

They can be accountable for the delivery of a defined outcome or project, but not for ongoing staff performance like an employee manager would be. The contract should focus on deliverables, not on managing people directly.

What are signs of leadership that don't breach IR35 rules?

Examples include:

1.    Proposing process improvements

2.    Mentoring junior team members (without formal appraisals or authority)

3.    Facilitating collaboration across departments

4.    Taking ownership of project outcomes

5.    Advising clients at a strategic level

These demonstrate value and influence, not control or employment.

Can leadership affect my IR35 status?

Yes,how you lead matters. Leading a team independently, under your own direction, and being contracted for results can support an outside IR35 position. But if you're managed like a staff member and your leadership is exercised under tight control, this could point toward being inside IR35.