2319.4 Procurement and Reporting of Independent Contractors

Independent Contractor 

An independent contractor is an individual who provides services to the University, where the University controls only the final outcome of the work, not the methods or processes used to complete it. The determination of independent-contractor status is made by the University in accordance with applicable laws and the procedures outlined 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.

Schools and Centers 

• The school or center representative identifies a need for service and ensures the individual service provider selected meets the appropriate guidelines and criteria

• • IRS’ Worker Classification 101

• The school or center representative should understand classification guidelines to inform initial classification decisions. In cases where a classification decision requires assistance, the school or center representative should consult with Procurement Services.

• 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 school 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.

Procurement Services 

• Procurement Services will review incoming New Supplier Requests to ensure accurate classification of the payee.
• Procurement Services is responsible for ensuring that Global Support Services (GSS) reviews classifications in the event the services are taking place outside the U.S.
  • GSS will make the final classification decision on applicable payees.
• Procurement Services is responsible for ensuring that school or center representatives are aware of any changes to initial classification decisions.
• Procurement Services is responsible for monitoring the BEN Helps Support Portal for incoming Limited Engagement Agreements for review, approval, with consultation when appropriate from GSS and Payroll, and return to School/Center
• Procurement Services is responsible for engaging with Corporate Tax, Compliance, & Payroll, Office of General Counsel and Human Resources to understand government compliance requirements regarding independent contractor determination to ensure that any changes are communicated to the appropriate University department(s).
• 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.

Corporate Tax, Compliance, and Payroll

• Corporate Tax, Compliance, and Payroll is responsible for verifying whether nonresident aliens to be engaged as independent contractors in the U.S. have the appropriate work authorization, based on information provided by the school or center representative and the individual service provider.

The determination that an individual is an independent contractor or employee should 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, Internal Revenue Service, and state regulators offer guidelines on classifying an independent contractor and employee. While these federal and state regulations provide guidelines for determining worker classification, they do not always yield a clear or definitive answer for every situation. The classification of individuals as employees or independent contractors should apply reasonable judgment based on the full body of applicable criteria.

Accordingly, the University recognizes that some engagements will involve factors that point in different directions. In such cases, administrators are expected to make classification decisions in consultation with Procurement Services, based on the preponderance of evidence, good-faith interpretation of regulatory guidance, and a balanced consideration of legal, financial, and operational risk to the University.

Procurement Services serves as the final authority on the classification of individual service providers and the determination of payment eligibility. Classification decisions and exceptions are made using a risk-based approach that balances the operational needs of the University with applicable legal requirements, institutional policies, and risk mitigation standards.

To ensure informed and responsible decision-making, Procurement Services may consult with:

• The Tax Office
• The Office of General Counsel
• Global Support Services
• Human Resources

All exceptions to classification criteria must be reviewed and approved by Procurement Services prior to payment.