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ROWAN UNIVERSITY POLICY  

Title: Independent

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Contractor Policy

Subject:

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Finance and Human Resources                                             

Policy No: FIN: 2016:01

Applies: University-Wide   

Issuing Authority: President

Responsible Officer: Senior Vice President for Finance and CFO

Adopted: 04/01/2006

Last Revision:

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 01/

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01/

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2018

Last Reviewed:

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 01/

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01/

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2018

I.   

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 PURPOSE

United States Federal and State law requires the University to properly classify its workers as either Employees or Independent Contractors. This policy identifies the steps, documents, and processes necessary to ensure proper classification of Independent Contractors.

II. 

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This policy defines the criteria to qualify as an Independent Contractor, and sets out how Independent Contractors must be paid in order for the University to remain compliant with the State and Federal Departments of Labor, the Internal Revenue Service (IRS) and other regulatory agencies.

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  ACCOUNTABILITY

At the direction of the President, the Senior Vice President for Finance and CFO shall implement this policy and the Executive Vice President, Senior Vice Presidents, Vice Presidents, Deans, Directors, Department Managers Service Requestors and Supervisors shall ensure compliance with this policy.

III. 

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 APPLICABILITY 

This policy applies to all Rowan University departments (Academic and Administrative) who wish to engage the services of an independent contractor Independent Contractor who is not an employee of the University; those who opt to engage the services of an independent contractor Independent Contractor must remain within the outlined margins of this policy.

IV.  DEFINITIONS  

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1. Employee- a worker who is hired through the Office of Human Resources (Human Resources) or the Office of the Provost (Provost), and paid under a W-2.
2. Independent Contractor - an individual or firm engaged in an established business, trade or profession who provides services to Rowan University and is be paid using a the fees are reported on the IRS Form 1099-MISC.  An independent contractor Independent Contractor is notan employee of the University; it an Independent Contractor  is a worker who: (a) is engaged in an independently established profession or business; (b) provides a service outside of the University's University’s usual course of business; and (c) is free from the University's University’s control or direction when providing services. The criteria for determining whether or not a worker is an independent contractor Independent Contractor is discussed in the policy section below.  

V. 

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 REFERENCES

1. IRS Regulations - Independent Contractor Defined 
2. State of New Jersey, Department of Labor - Employee or Independent Contractor 
3. IRS Regulations - U.S. Tax Withholding on Payments to Foreign Persons 
4. IRS Publication 15-A Employer's Supplemental Tax Guide 
5. Publication 15, Circular E, A – 2016 Employer's Tax Guide
6. Rowan University, Human Resources Department - Recruitment and Staffing
7. State of New Jersey, Department of Labor - Employee or Independent Contractor

VI.  POLICY

1. The University recognizes that departments often request the services of individuals who are not employees of the University, including independent contractorsconsultants, guest lecturers, entertainers, suppliers, and others. It is important to correctly distinguish the differences between an independent contractor Independent Contractor and an employee to ensure the appropriate compensation method and the applicable tax obligationobligations.
 
3. Payments to Independent Contractors are processed through Accounts Payable.  As such, as such an independent contractor Independent Contractor is not an employee of the University and is treated differently than an employee with respect to tax withholdings, employee benefits, and payment methods. Rowan employees are not considered Independent Contractors. Rowan employees are hired through Human Resources or the Office of the Provost, and paid through the Payroll Department. This policy strictly prohibits University employees from controlling and directing contractors about the services they are providing. The contractors are to work utilizing their
   1. Please note that the University may not control or direct an Independent Contractor; the Independent Contractor performs work utilizing his/her own methods, and the means by which the work is accomplished is not controlled by the employer.
 
4. 1. Rowan employees are not considered Independent Contractors. Rowan employees are hired either through Human Resources or the Provost and paid through Payroll Services.
5. An Independent Contractor is an individual who meets all of the following criteria:
   1. Renders a service to the University for a specified payment amount for a specified result;
   Is engaged
   1. Engages in an independently established profession or business (those who offer similar services to the general public on a consistent basis);
   2. Provides a service outside of the
   University's
   1. University’s usual course of business;
   2. Is not currently paid through
   University's
   1. University’s Payroll and has not been paid through Payroll within the current calendar year;
   2. Provides services through a written contract (namely, the University's Independent Contractor Service Agreement or another University-approved form of agreement
   , e.g
   1. .
   Speaker Agreement
   1. ) 
   2. Is free from University control or direction when providing services.
   Have
   1. Has clearly delineated, mutually agreed upon dates of service and/or agreed
   up
   1. upon service schedule for a set fee.
    
6. As a general rule, an individual can be hired as an independent contractor Independent Contractor only if all three of the following requirements are met:
   1. Minimal Direction: the worker is free from the
   employer's
   1. employer’s control or direction in the performance of
   their
   1. his/her work.
   2. Established Business or Trade: the worker is normally engaged in an independently established business or trade, which derives income from a number of clients including the University.
   3. Expertise: the work requires professional knowledge or professional expertise that is not generally available at the University.
    
7. How to identify and engage an Independent Contractor (IC):
   1. The following procedure is a brief summary of substantial component of this policy, and includes all the steps a manager Service Requestor must take in order to properly identify and engage an Independent Contractor. At any time during this process, the manager should consult with the Office of Human Resources if they need help determining whether or not to hire the service provider as an Independent Contractor or as an Employee.:
      1. The Service Requestor sends a Certification for Determination of Independent Contractor Status(Certification) to the potential Service Provider to
      2. The manager sends a Service Provider Questionnaire and W9 to the potential service provider to complete and return with supporting documentation.
      3. The manager then completes the Independent Contractor Determination Checklist using the information provided in the Service Provider Questionnaire.
      4. After completing the Independent Contractor Checklist, if the form still indicates the service provider is an Independent Contractor, the manager may enter a requisition in Banner.
      5. Forward copies of the Service Provider Questionnaire and Independent Contractor Checklist along with requisition number to the Office of Contracting and Procurement.
      6. On the other hand, if the form indicates the provider should be treated as an Employee, or if a determination could not be made, the manager should contact the Office of Human Resources for further assistance.
      The Service Provider Questionnaire and Profile and Independent ContractorIndependent Contractor Determination Checklist are tools that can help you make these determinations. This guidance pertains to the hiring of an individual performing a service in the United States
      1. Once the Certification is returned, the Service Requestor reviews document and signs       Section 4. 
      2. The Service Requestor forwards completed Certification to Human Resources (independentcontractor@rowan.edu).
      3. Human Resources will review the submitted documentation for evaluation and determination of whether the Service Provider should be identified as an employee or as an Independent Contractor.
   2. If Human Resources determines the Service Provider to be an employee, Human Resources will notify via email the Service Requestor  who will complete the SpecialAssignment Contract. The Service Requestor obtains the following completed documents and forwards them to Human Resources:  
      1. IRS Form W-4;
      2. Direct Deposit Form;
      3. Completed I9 form; and
      4. Copy of social security card.
   3. In special situations, a current University employee or student may provide a service outside the scope of their normal position responsibilities. In these cases, the employee should still be paid through Payroll using one of the following two forms:either the Special Assignment Contract (Salary Voucher)
   4. Adjunct Contract
    
8. The Criteria for Identifying Independent Contractors
   1. United States Federal and State law requires the University to properly classify its workers as either Employees or Independent Contractors. This policy and the accompanying checklist identify the steps, documents, and processes necessary to ensure proper classification of Independent Contractors.
    
9. Paying Foreign Nationals and International Parties as Independent Contractors
   1. To ensure compliance with IRS regulations, prior to engaging a foreign national for services, the University must analyze the foreign party's eligibility to work in the U.S. as well as their residency status for tax purposes. We encourage you to review the IRS website on "U.S. Tax Withholding on Payments to Foreign Persons" to help plan engagements.

VII.  ATTACHMENTS

1. Attachment 1 – Individual Responsibilities and Procedures for Classifying Independent Contractor Agreement
2. Attachment 2 – Hire & Pay an Independent Contractor- Step by Step Summary

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ATTACHMENT 2
HIRE & PAY AN INDEPENDENT CONTRACTOR
STEP BY STEP SUMMARY

1. Hiring Manager sends a Service Provider Questionnaire (SPQ) and W9 to the potential service provider to complete and return with supporting documentation.

1. Hiring Manager completes the Independent Contractor Determination (ICD) Checklist based on information received and collected from the Service Provider Questionnaire (SPQ).
     
2. If the service provider qualifies as an independent contractor, the Hiring Manager sends an Independent Contractor Agreement (ICA) or other approved form of agreement to the service provider for completion.
     
3. On the other hand, if the form indicates the provider should be treated as an employee, or if a determination could not be made, the manager should contact the Office of Human Resources for assistance.
     
4. Hiring Manager creates a requisition in Banner, and scans attachment of the SPQ, ICD Checklist, ICA, and W-9/W-8 to requisitions@rowan.edu.
     
5. Independent contractor performs service and sends invoice or ICA to Accounts Payable.
     
6. Hiring Manager receives authorization request through Banner and authorizes payment
   1. or the Adjunct Contract.
   2. If Human Resources determines the Service Provider to be an Independent Contractor
      1. Human Resources will notify the Service Requestor of the decision via email.
      2. The Service Requestor will create a requisition in Banner.
      3. If there is no vendor identification number for the Independent Contractor, one will need to be established through the Office of Contracting and Procurement.  The Service Provider will need to submit both a Business Registration Certificate (BRC) and IRS Form W-9 or IRS Form W-8. For more information on establishing a vendor, please see https://sites.rowan.edu/procurement/vendors/index.html
      4. The Service Requestor will forward to the Service Provider the Independent Contractor Service Agreement for completion.
      5. Upon receipt of the completed Service Agreement, the Service Requestor will complete a Contract Approval Cover Sheet.
      6. Once all documents are received (including the email notification from Human Resources), the Service Provider will email them to contracts@rowan.edu
      7. All Independent Contractors are responsible for forwarding invoices to invoices@rowan.edu with a copy to the Service Requestor.  If a contractor is unable to provide an invoice, they are responsible for completing and certifying the Independent Contractor Request for PaymentForm.
   3.  Paying Foreign Nationals and International Parties as Independent Contractors.
      1. To ensure compliance with IRS regulations, prior to engaging a foreign national for services, the University must analyze the foreign party’s eligibility to work in the United States as well as the individual’s residency status for tax purposes.
      2. Please review the IRS   https://www.irs.gov/forms-pubs/about-form-w8“U.S. Tax Withholding on Payments to Foreign Persons” to help plan engagements. Submission of a W8 form may be required.
      3. Please review the Payroll website for more information on Foreign Tax Benefits
   1. 1. .