An engagement agreement is a written agreement in which one party contracts to provide goods or services to another party in exchange for compensation. Such agreements are very similar to employment agreements.

If ABC Corporation engages Mr. Smith to be its CFO, the agreement is essentially an employment agreement. Both include:

Smith’s compensation, including benefits (health, 401K, etc);
Smith’s services to be provided to ABC;
The term of Smith’s employment and the agreement;
Termination of the agreement by either party;
Non-competition; and
Smith’s ability to bind ABC, act on its behalf

There is another scenario where the engagement agreement is more commonly found, and where it is more easily differentiated from the employment agreement. This scenario is where a business hires another business or individual as an independent contractor. Consider ABC hiring XYZ Accountants to be ABC’s financial advisors. Here, there are differences between the agreements.

XYZ performs services for ABC, but as independent contractor, not as employee;
XYZ is compensated but receives none or fewer of other benefits available to ABC employees;
XYZ likely has no authority to bind ABC on ABC’s behalf, unless ABC granted this right;

Perhaps the defining characteristic is the independent contractor status of the party being engaged. Typically, such party is being asked to perform a service that a normal employee cannot. This service could be nearly anything, from legal and accounting services to artistic and entertainment ones.

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