Individual Service Provider Classification

Overview

The Individual Service Provider (ISP) Classification Process applies to workers who perform services for the university and are individuals, sole proprietors, or single-member LLCs. Corporations, limited partnerships, and multi-member LLCs automatically qualify for independent contractor status and can bypass the classification process.

Schools and Centers (S/Cs) that engage individuals must make an initial worker classification and then submit documentation for the Procurement Contracting team to review and, if appropriate, approve the initial classification before the individual performs services. When reviewing the documentation, Procurement Contracting looks at the facts and circumstances of each case to determine whether the individual meets the IRS guidelines for independent contractor status.

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 self-employed individual hired to perform specific services under a contract.
• An independent contractor is not an employee.  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.

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

Agreement Templates:

• 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 Contractor Agreement (Standard)
• Independent Contractor Agreement – Global (Services outside of the US)

More Information

For more information about the ISP process and available resources, visit the ISP page on BEN Helps. This content is intended for Penn employees and requires a PennKey for access.

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.