Consulting for Your Former Employer: The Easy Engagement With the Fragile Facts

Updated August 7, 2026. Quick answer: going back to the company you just left is the most common consulting engagement there is, and it is the one whose facts most resemble employment. The things that make it easy — you know the systems, they know you, the work is the work you already did — are the same facts the classification test looks at. That does not make it improper; it makes it worth structuring deliberately. And the negotiation is unusually favourable to you, for a reason most people never use.

The tests, applied to this exact case

The IRS asks whether the payer controls “what the worker does and how the worker does his or her job”, whether it controls “the business aspects of the worker’s job”, and whether “the relationship continue[s]” and the work is “a key aspect of the business.” Read those against the default version of this arrangement:

• You keep your old email address and appear in the internal directory.
• You attend the same recurring meetings, at the same times.
• You report to the person you reported to as an employee.
• The engagement has no defined end and no defined deliverable — it is your old job at fewer hours.

Every one of those points the same way, and together they describe an employee. The version that reads as consulting looks different in ways that are mostly administrative: a defined scope with an end, your own equipment and email, your own hours, an invoice against a deliverable, and the freedom to take other clients — ideally, actually taking one.

The exposure is not symmetrical. The IRS states the employer’s: “If you classify an employee as an independent contractor and you have no reasonable basis for doing so, then you may be held liable for employment taxes for that worker.” Your side of a reclassification is different and usually messier — deductions taken, a retirement plan funded on self-employment income, an entity formed — all resting on a status that changed retroactively.

The negotiation nobody runs

Here is the asymmetry worth using. Your former employer is not buying an unknown consultant’s time. It is buying continuity of knowledge it is about to lose, usually at short notice, usually because a handover was compressed. The replacement cost is not another contractor’s rate; it is the cost of the institutional knowledge walking out.

What that supports, in practice: a rate set from the arithmetic rather than from your old salary (the arithmetic is here, and the number surprises people), a minimum engagement or retainer rather than ad-hoc hours, and a defined scope — which serves both the price and the classification at the same time.

The one thing not to concede is the open-ended arrangement, because it is worse on every axis at once: it prices badly, it never ends, it crowds out the pipeline, and it is the version that looks least like consulting.

Before you sign: the benefits question

Returning to a former employer can interact with what you are drawing from them, and the answer is plan-specific rather than general. Ask, in writing, before the engagement starts: whether returning in any capacity affects a pension already in payment, whether retiree health cover is conditioned on not working for the company, and whether a separation agreement or severance carries a re-engagement clause.

We are not going to tell you what your plan says, because plans differ and this is exactly the kind of claim that should not be made generically. If a pension is involved, the pension cluster covers the decisions around it. If you are under full retirement age and drawing Social Security, the consulting income itself is earnings — and the withheld months are not lost.

Sources and limits

Classification language and the employer-liability sentence quoted 2026-08-07 from the IRS’s Independent contractor or employee page. The bulleted characterisations above are our reading of how the IRS’s own categories apply to this arrangement — they are not IRS examples, and we are not aware of IRS guidance addressed specifically to former-employee engagements. Pension, retiree-health and severance interactions are governed by plan documents and contracts, not by tax law, and are not covered here. The general transition is on the spine page. General information, not tax or legal advice.