2319.4 Procurement and Reporting of Independent Contractors

Independent Contractor 

An independent contractor is a worker who provides services to the University, and the University does not have the right to control the details of how the worker’s services are performed. An independent contractor is a non-employee, as determined by the University according to applicable laws and the procedures set forth below.

School or Center Representative

For the purposes of this policy, the school or center representative is the individual responsible for procuring services of a service provider. The school or center representative must be either a Business Administrator or Human Resources representative within the school or center.

Schools and Centers 

• The school or center representative identifies a need for service and ensures the individual service provider selected meets the guidelines and criteria set forth in this policy.
• The school or center representative must ensure that the individual service provider has been classified through the worker classification process as an independent contractor as outlined in the Procedural Guide for Independent Contractors and Limited Engagements.

• The school or center representative is responsible for ensuring a Purchase Order request is created for all purchases from the independent contractor, including service fees and any business and travel expenses included in the agreement. All payments, including payment for business and travel expenses, are tax reportable to the independent contractor and should be coded as such. Business and travel expenses should be included in the fee structure of the independent contractor.
• The schools or center representative is responsible for receipting independent contractor invoices as required by BEN Financials in accordance with University policies and procedures.
• The school or center representative is responsible for forwarding independent contractor contracts to Procurement Services for review and signature.

Corporate Tax, Compliance, and Payroll

• The Compliance Specialist will review incoming documentation and refer any inconsistencies or omissions to the school or center representative for review and resolution.
• The Compliance Specialist is responsible for determining whether the individual should be engaged as an employee or as an independent contractor based on the information provided in the completed Service Provider Questionnaire and Service Provider Evaluation Worksheet.
  • In the event the services are taking place outside the U.S., Global Support Services (GSS) will make the final classification decision.
• The Compliance Specialist is responsible for communicating the classification decision to the school or center representative.
• The Compliance Specialist is responsible for monitoring the BEN Helps Support Portal for incoming worker classification documents and providing assistance through gray areas.
• The Compliance Specialist is responsible for monitoring government compliance requirements regarding independent contractor determination and ensuring that any changes are communicated to the appropriate University department(s).
• The Payroll Tax Analyst is responsible for determining whether nonresident aliens to be engaged as independent contractors in the U.S. have the appropriate work authorization.

Procurement Services 

• Procurement Services is responsible for coordinating supplier setup for each independent contractor and performing necessary due diligence upon supplier setup.
• Procurement Services is responsible for executing most contracts and determining if the  University requires additional contract language or signatures.
• Procurement Services is responsible for notifying the school or center representative when they have added the independent contractor to the supplier database.

The determination that an individual is an employee or independent contractor must be made prior to any business commitment with the individual and prior to the individual’s performance of service. Early determination ensures proper worker classification, proper payment, and proper tax withholding and reporting. 

The Department of Labor and the Internal Revenue Service both define an independent contractor and employee. Improper classification of an employee as an independent contractor may subject the University to significant fines and penalties. It is imperative to apply federal and state standards in worker classification, and that each case is fully documented and auditable. 

When engaging with an individual service provider, the procedures outlined in the Procedural Guide for Independent Contractors and Limited Engagements must be adhered to.

Exclusions 

1. Current University, Health System, and any subsidiary faculty, staff, or students must be treated as employees regardless of the source of payment (University funds, grant) – i.e., no individual may receive both W-2 and 1099 income from the University. 
2. If a former employee is providing a service that is the same or similar to that of a current employee, they must be paid as an employee and not as an independent contractor. 
3. Any individual working as a tutor, whether or not they are currently on the University payroll, must be treated as an employee. 
4. Any individual conducting workshops, classes, or seminars on University premises for any University department must be treated as an employee unless it is for a Limited Engagement as outlined in Policy #2319.3 Limited Engagement Policy.
5. Any individual working as an academic coach or advisor must be treated as an employee.