PROCEDURE TO ENGAGE AN INDEPENDENT CONTRACTOR
The Principle Investigator (PI) (party engaging contractor) takes the following steps at the time of negotiation and prior to any commitment to an Independent Contractor (IC).
Review the definition and classifications of an IC to determine if payment should be made as an employee or IC (see Definitions and Classification sections below). Contact Sponsored Programs for guidance.
Submit a completed Independent Contractor Services Form which includes the following to the Sponsored Programs Office:
- a detailed description of services to be provided
- statement detailing the selection process to choose the most qualified consultant
- a justification for reasonableness of cost
- A statement of work or list of deliverables
- Worksheet “Classifying Workers as Independent Contractors or Employees”
- If IC is also a SUNY or other NYS agency employee, a SUNY Addendum Form completed by the IC must be submitted
For contracts of $10,000 or more the PI should submit all of the above and in addition:
- a complete scope of work in place of a list of deliverables above
- confirmation of Certificate of Liability Insurance
Sponsored Programs will:
- Send IC a letter of agreement and W-9 form (Request for Taxpayer Identification Number and Certification).
- If over $10,000 SP will send a contract
- Upon receipt from the IC of a signed letter of agreement and W-9, SP will provide IC with a Purchase Order.
- Make payment to IC from a PI approved invoice.
If the Contractor is a foreign citizen:
- A W-8BEN form (Certificate of Income Tax Treaty Exemption) will be required in place of the W-9
- A W-7 form (Application for IRS Individual Taxpayer Identification Number) is required if contractor does not have a U.S. Taxpayer Identification number
- A copy of Visa is required
Independent Contractor: An individual who, under agreement, performs a service and who is subject to the controls of the other only in regard to the result achieved.
- Is not controlled in regards to the manner or means by which their services are performed.
- Services provided are typically task oriented, specific in nature, short in duration, or sought based on expertise.
- In general, an independent contractor performs work subject to the control and direction of the hiring organization only as to the RESULT of the work, and not as to the MEANS of performance.
- For compensation of services over $20,000, three quotes should be obtained. In some instances, a single (sole) source procurement may be justified, despite the fact that competition exists, because of limiting circumstances, e.g., experience or service of the contractor. Determination of qualification as a sole source cannot be made until documentation is submitted and reviewed by Sponsored Programs. A formal contract with a detailed Scope of Work will be completed
- In all cases, engagement of the contractor is not authorized until all required approvals from Sponsored Programs offices are obtained.
Compensation is paid at an agreed upon amount or rate, for a given task.
Employee: Generally speaking, an employee is subject to the control of the employer as to what work must be done and how the work must be done. It is not necessary that the employer actually direct or control the manner in which the services are performed; it is enough that the employer has the right to do so. Services performed are in the course of the general business of the employer, typically performed on-site for a long or indefinite period of time. Compensation is usually made on a time or task basis.
If an employee is misclassified as an independent contractor, there are potential penalties that could be assessed by the Internal Revenue Service (IRS) or New York State Department of Labor, by potential Workers' Compensation or unemployment claims, and by liability or malpractice suits.
The worksheet Classifying Workers as Independent Contractors or Employees was developed from IRS guidance Twenty Factors of the "Common Law Test" to assist in the classification process. If there are more than one or two “Yes” answers to these questions, the individual to be engaged most likely would be classified an employee.
SUNY and other NYS employees are permitted to be compensated as an independent contractor ONLY if ALL of the following criteria are met:
- The proposed contractor or lecturer is not a member of the Project Director’s own department.
- The work to be performed will be in addition to the employee’s normal obligation.
- Approval by the employee’s Department Chair and Dean, or Vice President is also required.
A SUNY employee must fill out and submit a SUNY Addendum Form and obtain the supervisor’s signature to indicate that these services will not interfere with their current State responsibilities.
Research Foundation employees are not eligible to perform services as an independent contractor. Work performed outside the normal obligation may qualify as extra service.
Payment for Services
In accordance with applicable federal regulations, payment for services should not be made until service has been completed. Upon completion of services, an invoice should be submitted by the Contractor.
Requests to reimburse contractors for related travel expenses, not accounted for in the established fee or rate, shall be named in advance in the contract or Independent Contractor Services Form, and require receipts and the appropriate Research Foundation requisition or travel form. Travel reimbursement payment without receipts is allowable if previously agreed upon, but is included in the consultant payment as taxable income.
When using per diem allowances, rates from the U.S. General Services Administration must be used for meals and lodging http://www.gsa.gov/portal/. Current IRS rates must be used for mileage.