Procedures for Independent Contractors

Independent Contractor Agreement pdf Word
W-9 Form (Request for Taxpayer Identification Number Verification)
Standard Services Invoice pdf Word

NEW: VENDOR PAYMENTS CAN NOW BE DONE VIA DIRECT DEPOSIT. DOWN LOAD "VENDOR DIRECT DEPOSIT FORM" BELOW, COMPLETE FORM AND ATTACH TO THE SSI OR INDEPENDENT CONTRACTOR AGREEMENT FORM.

• Definitions- Independent Contractor vs. Employee
• Documentation and Reimbursement
• Exclusions
• Preparing a Personal Services Classification Analysis
• Preparing the Independent Contractor Agreement for Individuals
• Preparing a Standard Services Invoice
• Preparing a Check Request Form
• Purpose of this Document
• Special Considerations
• Vendor Direct Deposit Form
• Vendor Disclosure Statement

Purpose

The purpose of this documents is to outline the policies and procedures related to independent contractors doing business as individuals rather than companies.

Standard Services Invoice ($1-$4,999)

If the following criteria are met then you may use the Standard Services Invoice (SSI) procedure outlined below:

• The services performed were less than $5,000 in total for the entire project.
• The time frame to complete the entire project was less than 6 months.
• The services performed were by an individual (not a partnership, corporation, or other organization).
• Payment is to be made in one lump sum after completion of work.

Independent Contractor Agreement

If the SSI criteria are not met and payment is to an individual between the amounts of $5,000-$25,000 then you must follow the Independent Contractor procedure outlined below.

Independent Contractor over $25,000

If the total dollar amount paid to the independent contractor will be $25,000 or greater, even though the payment will be made to an individual, then the purchasing procedures related to competitive pricing and bidding must be followed. Contact the Purchasing Office at 351-2288 for further clarification.

Be prepared to give a general description of the service you require as well as a more detailed description of the product or result of the work performed by the independent contractor, information about the length of time the service must be provided, and qualification criteria the independent contractor must meet. Purchasing procedures define reasonable time for notice and response by qualified respondents; in the case of a formal bid the minimum solicitation time is 14 days and for a request for proposal the minimum solicitation time is 30 days.

Companies

When payments are made to a company, the normal purchasing procedures related to competitive pricing and bidding should be followed and payment will be made on a PO or DPO depending on the dollar limit.

Definitions

A careful evaluation must be made when classifying an individual as an independent contractor rather than an employee. An erroneous classification of an individual as an independent contractor when in fact the person is an employee could result in legal action being initiated by the Internal Revenue Service for violation of the Wage and Hour Laws relative to the withholding of taxes. In questionable situations, it is best to classify the individual as an employee.

Independent Contractor - An individual who is responsible to the University for the results of certain work but is not subject to the University’s controls to the means and methods of accomplishing those results. Some examples of independent contractors are: entertainment performers, guest speakers, officials for athletic events and consultants.

Briefly, an independent contractor generally:

1. Has a place of business and a business listing in a directory when the services are offered to the public.
2. Selects the clients and is free to work for one or more during any given interval.
3. Determines the time and place work will be performed.
4. Provides the tools and materials needed to perform the work.
5. Does not participate directly or indirectly in the benefit programs of the University.
6. May agree to perform specific services for a fixed price and generally does not receive regular amounts at stated intervals or is not reimbursed for business expenses.
   

Employee - An individual who is subject to the will and control of the employer not only as to what shall be done but how it shall be done. It is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if the employer has the right to do so.

Some of the usual characteristics of an employee are:

1. The right to terminate the relationship with the employer at any time.
2. The furnishing of tools and a place to work by the employer.

Refer to Preparing a Personal Services Classification Analysis for a complete list of questions to be answered for determination of the proper classification between independent contractor and employee.

Documentation And Reimbursement

Download the Personal Services Classification Analysis (Word)

The Personal Services Classification Analysis form is completed in consultation with the contractor in order to determine the status of the person. If it is determined that the person is an independent contractor, the Independent Contractor Agreement for Individuals form must be prepared and the appropriate signatures secured.

The completed Independent Contractor Agreement and the Personal Services Classification Analysis form are submitted to the Accounts Payable Office at least two weeks before any work is done. The Accounts Payable Office will review the contractor agreement and the analysis form and will acquire all other signatures required and then initial the contractor agreement. Both forms will be returned to the Department after review.

If after review it is determined that the worker is not an independent contractor the Department will be contacted and a different means of payment will be discussed.

When requesting payment, the original forms are attached to a completed check request form (see Preparing a Check Request Form) and submitted to the Accounts Payable Office.

Multiple Payments

If partial payments are to be made, the original forms are attached to the first check request. Subsequent check requests should have copies of both forms attached with an original signature certifying the work was done satisfactorily on the bottom of the contract for each multiple payment request. Also indicate on page two of the agreement the amount of payment being made and how much has been paid on previously submitted payment requests.

Exclusions

Materials purchased or services provided by firms or businesses are to be paid through the purchasing procedures. The following categories of individuals are not considered independent contractors and therefore are paid through the Human Resources department.

1. Continuing Education faculty.
2. Individuals who are considered employees of the University in another capacity.
3. A former employee who has been called back to train a new employee in their former position.
4. A contractor who is performing the same tasks an employee would perform.
   

Special Considerations

Students Employed by the University - Students employed by the University (work-study, hourly, GA or TA) cannot be paid as independent contractors. Example: A Graduate Assistant in the College of Education plays in a musical combo for a reception on campus. Contact Student Employment to determine the payment method for the additional services performed by these individuals.

Former Employees of the University - Individuals cannot be paid as independent contractors and employees in the same calendar year. Therefore, if you will be paying an individual for services who is not a current UNC employee, but was paid as an employee at any time during the current calendar year, they cannot be paid as an independent contractor. Contact Student Employment or Human Resources to determine the appropriate payment method.

How to Complete the Personal Services Classification Analysis

The Personal Services Classification Analysis is a series of 20 questions designed to assist you in determining whether the individual you will be paying for services will be acting in the capacity of an employee vs. an independent contractor.

For a copy of the form and a detailed definition of each question see Instructions for Preparing the Personal Services Classification Anaysis.

The 20 questions on this analysis are taken from the Social Security Administration internal procedures manual. They are general guidelines intended to aid in classifying workers as employees or independent contractors and are not intended to compel a particular conclusion. 

The weight given to these factors is not always constant.  Their degree of importance may vary somewhat depending on the work being performed. 

Some of the questions will not apply to particular services.  Judgment and discretion should be used in applying these guidelines. 

When completing the Personal Services Classification Analysis, indicate the contractor's name on the first page. Page two is to be signed by the project director, department head or Dean.

How to Complete the Independent Contractor Agreement

Download the Independent Contractor Agreement

1. Fill in the date the agreement is being made.
2. Fill in the name and address of the contractor, as it should appear on the check and the 1099 tax form.
3. Complete the performance section giving a complete a description of the service(s) to be provided.
4. Indicate where the services will be performed. If any services will be performed outside of Colorado or the United States, please attach the Vendor Disclosure Statement.
5. Note the beginning and ending dates of service.
6. Indicate the dates and description of deliverables. Be specific. Do not use “Contractors Choice” (or similar terms) for the above information.
7. Note the contract amount and documentation of fair pricing if needed.
8. Indicate the specific payment dates and payment amounts.
9. Enter the FOAPAL(s) to be charged.
10. Enter the Department Name responsible for the contract.
11. The person authorized on the FOAPAL should sign and date the proper line.
12. The contractor should sign and date on the proper line and include address and phone number.
13. Have the contractor complete form W-9 and attach to the contract. CAUTION: Contracts with Non-Resident Aliens, i.e., individuals who are not citizens of the US, will require additional IRS forms to be completed before payments can be made.
14. Send the completed, signed contract and attachments to Accounts Payable BEFORE THE CONTRACTOR BEGINS WORK. Accounts Payable will obtain signatures from the Grants and Human Resources departments and approval from the State Controller designee.

After the contract is approved, it will be returned to the department. When service is complete or payments are required, the person authorized on the FOAPAL will sign and date on the appropriate line, attach the check request, and submit the completed and approved documents to Accounts Payable.

Questions should be directed to Terri Thomas, 1-1836.

How to Complete a Standard Services Invoice (SSI)

Download the SSI Form

1. Fill in details of the services performed.
2. Fill in the following:

• Place service was provided
• Service begining and ending dates
• Lump sum payment amount
• University department name
• Department contact name and phone number
• University FOAPAL(s)

3. The person authorized on the FOAPAL should sign and date the proper line.
4. Check the box that applies (Dept will pick up check or mail to provider).
5. Have the service provider fill out his/her name, address and phone number.
6. Have the service provider sign and date the proper line.
7. Complete the Verification of Non-Employee Status information (Page 3).
8. Have the contractor complete form W-9 and attach to the contract. CAUTION: Contracts with Non-Resident Aliens, i.e., individuals who are not citizens of the U.S., will require additional IRS forms to be completed before payments can be made.
9. Send the check request, SSI, and W-9 to Accounts Payable for payment. It should be submitted for payment after the services are complete unless the Department will deliver the check to the service provider upon completion of the work.

Questions should be directed to Terri Thomas, 1-1836.

How to Complete a Check Request Form

Download a Check Request Form

1. Date - Enter the date the document is being prepared.
2. Department Name - Enter the name of the department that is responsible for the payment.
3. Originator Name and Phone # - Enter the name and phone number of the person who is to be called if there is a question or problem concerning the payment.
4. Authorized Signature - Only a person who is authorized on the FOAPAL being charged can sign. If more than one FOAPAL is being charged there must be an authorized signature for each account.
5. Bear Number Identification # - Enter the bear number, if known, of the person being paid.
6. Vendor & Address - Enter contractor's name and a complete address.
7. FOAPAL - Enter the FOAPAL(s) to be charged.
8. Amount - Enter the total amount to be charged to the FOAPAL on that line.
9. Check Stub Information - This is the information that is printed on the check stub for the contractor. Please be concise and use meaningful abbreviations.