Individual Service Provider Classification

Overview

Each individual service provider (“worker”) must be properly classified as an employee or independent contractor in accordance with federal and state tax and employment laws. Schools and centers that engage workers must submit the required documentation for the determination of each worker’s status before any services are performed or payment requests are processed. All individuals who perform services for the University are presumed to be employees unless the relationship satisfies Internal Revenue Service (IRS) standards for independent contractor status. The evaluation must be based upon IRS standards and not upon administrative ease, budget constraints, or funding guidelines.

What is an independent contractor?

• An independent contractor is a worker who provides services to the University, the details of which the University does not have the right to control. Independent contractors are sometimes called consultants, freelancers, self-employed, individuals, sole proprietors, and even entrepreneurs or business owners.
• An independent contractor is a non-employee, as determined by the University according to applicable laws and the procedures set forth below.
• As such, the individual is paid through accounts payable and not through Workday, is not entitled to employee benefits, is not covered by workers’ compensation, and their pay is usually not subject to income tax withholding.
• An independent contract is not a Penn employee, student, or faculty member.

Independent Contractors Policy and Procedures

Review the related financial policies (Series 2319)

• 2319 Payment to Individuals for Human Subject Fees, Honoraria, Limited Engagements and Independent Contractor Services
• 2319.1 Payment of Human Subject Fees
• 2319.2 Payment for Honoraria
• 2319.3 Limited Engagement Policy
• 2319.4 Procurement and Reporting of Independent Contractors

Review the Procedural Guide for guidance on how to engage independent contractors.

NOTE: Beginning January 1, 2024, all independent contractor and limited engagement forms will be sent to Corporate Tax, Compliance, and Payroll for review and final determination via a BEN Helps Support Ticket.

The Corporate Tax Department will return the signed forms with the determination to the department.

Forms:

• Service Provider Evaluation
• Service Provider Questionnaire
• Limited Engagement Agreement – U.S. Persons
• Limited Engagement Agreement – Services outside U.S. – Global
• Limited Engagement Agreement – Services within U.S. – Non-Resident Alien

**Independent Service Provider documentation and forms are updated regularly. Please use the forms listed above to ensure you are using the most recent version. Outdated forms will not be accepted.

Training

Individual Service Providers: Classification and Payment training available in Workday Learning

Anyone responsible for hiring employees or temporary workers, paying honoraria, or procuring the services of and paying independent contractors should attend this training.

See the latest training presentation here.