Standard Operating Procedure
The purpose of this Standard Operating Procedure (SOP) is to provide departments with an understanding of University policy concerning the employment or contract status of individuals that render professional services to the University.
The University retains people through many different programs and authorities. One area of interest is the distinction between an "employee" and an "independent contractor". It is important to correctly determine whether an individual is an employee of the University or an independent contractor prior to the beginning of the work in order to handle all subsequent personnel actions including pay, statutory deductions (State and Federal taxes, retirement contributions, and Social Security), benefits eligibility, and compliance with workers' compensation, wage-hour, and other relevant laws. This SOP provides guidance to identify the appropriate employee or independent contractor classification of such individuals.
In general, IRS guidelines provide that an employer/employee relationship exists if the University needs the services of someone and has the right to control and direct both the result of the services and the means by which the result is achieved. It is the extent of the direction and control exercised over the worker that determines whether or not he or she is an employee and that employment taxes should be withheld. Three main categories and patterns of behavior and financial control are typical. These are:
- Behavioral Control: Facts which illustrate whether there is a right to direct or control how the worker performs the specific task for which he/she is hired (i.e., providing instructions or training);
- Financial Control: Facts which illustrate whether there is a right to direct or control how the business aspects of the worker's activities are conducted (i.e., significant investment, unreimbursed expenses such as rent and utilities, advertising, wages of assistants, licensing, insurance, supplies, etc.);
- Relationship of Parties: Facts which illustrate how the parties perceive their relationship (i.e., employee benefits, intent of the parties, written contracts, permanency, discharge/termination, integration into regular business activities).
This Standard Operating Procedure applies to all employee/ contractor situations, but does not apply to guest speakers, honoraria or *corporations.
The department must determine Independent Contractor vs. Employee (Worker Classification) status in advance of making an employment or contracting commitment. The department must avoid any arrangement (such as designating a true employee as an independent contractor) which has the effect of circumventing or violating University policy, State or Federal personnel policy or law.
For sponsored accounts, documentation of the process of selection of an individual is the responsibility of the principal investigator. For all other budgets, documentation of the process of selection of an individual is the responsibility of the department head.
Independent Contractor vs. Employee (Worker Classification) Determination Procedure:
Whenever the department requires services
to be performed by an individual, the department will:
Limitation on Contracting with Former University Employees:
An exception is made if the services he or she will perform for the University as an independent contractor are substantially different from those services that he or she performed for the University or any other State agency as an employee within the past 12 months. For this purpose, substantially different shall mean that the expertise used and duties performed as an independent contractor may not be related or similar to that which the individual performed as an employee.
Limitation on Contracting with Foreign Individuals to Perform Services Outside of the United States:
University departments are not permitted to contract with non-United States persons for services to be performed outside the United States. See the FAQ for more detail.
Contracting and Payment
Step 2A: For Services Agreements valued at $10,000 or less, submit a fully executed Services Agreement (Short-Form Domestic) and the results of the 20-Factor Test through the PantherExpress System Services Agreement Specialty Form;
Step 2B: For Services Agreements greater than $10,000, submit a Contract Entry Form, Schedule-A-Scope of Services, and the results of the 20-Factor Test through the PantherExpress System Services Agreement Specialty Form.
Step 3: After a purchase order number has been generated as a result of the Services Agreement Specialty Form in the PantherExpress System, process the service provider's invoice through the "create invoice" process in the PantherExpress System.
Additional forms that are required for Permanent Residents and TN VISA holders are as follows:
Travel expenses guidelines are as follows:
In the event that the Payment Processing Department receives a payment request with minor documentation deficiencies:
If you have questions about this SOP, please send an inquiry to PantherExpress Customer Service.
* Corporations will have Tax Identification Numbers (TIN) in contrast to individuals who will have Social Security Numbers (SSN). If necessary, this information can be confirmed by requesting a completed IRS form W-9 from the corporation or individual or by contacting Payment Processing at 412-624-0004 (for corporations or individuals already in the PRISM vendor database).