Obtaining Independent Contractors and/or Lecturer Services

Exactly what does and does not constitute an independent contractor relationship can sometimes be a little tricky to determine. In general, an independent contractor should work with minimal direction, at his own time, and in his own way. The more you direct or lay constraints and restrictions on an individual, the less likely that individual is to be judged a consultant rather than an employee. Research Foundation IRS Twenty Factors of the Common Law Test, is used to help you to determine if what you are proposing is a consultancy. If you have to answer "no" to more than one or two of these questions, then the individual you plan to hire most likely belongs on the Research Foundation payroll and should not be hired as an independent contractor.

Bear in mind that classifying a worker as an independent contractor rather than as an employee may appear to result in financial savings and less paperwork. However, if the employee is misclassified as an independent contractor, these perceived advantages are offset by the potential penalties that could be assessed by the Internal Revenue Service. Therefore, to claim an individual or firm as a consultant, thus avoiding the withholding process, is a very questionable practice which we must prevent.

Definitions

Definitions of the most frequently used categories of independent contractors follow. However, the overall definition of an independent contractor is "a worker subject to the control and direction of the organization for which services are performed only as to the RESULT of the work and not as to the MEANS."

1. Consultant/independent contractor is an individual or firm possessing expertise in a particular field that is engaged to give advice or perform a specific task in return for an established fee.
   
2. Incidental Lecturer: an individual having specialized knowledge on a particular subject who is engaged to convey this knowledge by delivering a lecture on a specific area of expertise. The individual must be classified as an independent contractor. It should also be noted that a lecturer with an ongoing working relationship may be considered an employee.
   
3. Technical Service: an individual or firm rendering technical and professional service for a fee. Note: in general, individuals, as opposed to corporations, rendering technical services are employees.

Selection Process

Selection of consultants and determination of appropriate fees are the responsibility of the Project Director who must consider the policies of the Sponsor, the Internal Revenue Service, the Research Foundation, and the College. All of the following requirements must be met.

1. Documentary evidence that the services to be performed are essential and cannot be provided by persons receiving salary support or other compensation under the grant for their services. Note: an individual who is already on Research Foundation Payroll, regardless of the account from which they are paid, is not eligible to perform services as an independent contractor.

2. Evidence that a selection process was employed resulting in the selection of the most qualified consultant. The selection process must fall within these guidelines and limits set forth for the procurement of services, sponsor regulations, and funds available.

3. The Project Director may NOT enter into any agreements with consultants that are motivated by potential gain or which give even the appearance of an apparent conflict of interest. A copy of the Research Foundation Conflict of Interest Policy should be provided to each potential consultant during the selection process.

4. Documentation that the charge to the sponsored program is reasonable, taking into consideration the qualifications of the consultant, the level of fees charged by other consultants in the specific area of expertise, and the nature of services rendered. The policies are subject to sponsor regulations.

5. Evidence that the independent contractor has been correctly classified, that the IRS regulations have been applied, and that the independent contractor's status should not be that of an employee, vendor contract, or sub recipient.

6. Travel expenses, including lodging or subsistence costs provided under the agreement with the consultant, may be reimbursed. Such travel expenses may be included as part of the consultant fee or paid separately if substantiated by receipts.

7. When the sponsor is an agency of the Federal government, consultant fees may not be paid to Federal employees without prior written sponsor approval.

8. A W-9 is required for all individuals who are paid as independent contractors.

Services of SUNY Faculty and Staff

Payments to academic and professional employees of SUNY for services performed as an independent contractor are permitted, only if ALL of the following criteria are met.

1. Such services fall within the definition of independent contractors as previously stated.

2. The proposed independent contractor or lecturer is not a member of the Project Director's own department.

3. The work to be performed will be in addition to the employee's normal obligation.

4. Such an engagement is allowable and conforms to any limitations that may be imposed by sponsor policy.

5. The processes for selection of external consultants are followed and rates of reimbursement are consistent with those charged by other recognized independent contractors in the field.

6. The approval of the faculty/staff members Department Chair and Dean, as well as the Vice President for Academic Affairs is also required.

Submitting the Forms

Research Foundation Independent Contractor form, or in the case of services to be provided by SUNY Faculty or Staff, a Campus Consultant Service form, is used to document and request payment for services rendered to a project by an independent contractor. A resume of the contractor should also be provided. The Research Foundation Operations Manager (or designee) will review the request and, if appropriate, generate a purchase order for the services. Since an independent contractor or lecturer arrangement does not involve an employee/employer relationship, a Working Relationship form which clarifies the individual's non-employee status will be generated. The contractor must sign the Working Relationship Form before payment for the contracted services will be authorized. Note that if the contractor is to receive $10,000.00 or more for the services they are to provide, a formal written agreement will be required.

Payments in Excess of $10,000.00

Contract Requirements:

A contract is required for independent contractor charges of $10,000.00 or more. The contract should be fully executed PRIOR to the services actually being rendered.

To generate this contract, the project director should submit the Independent Contractor Agreement Instructions form to the Purchasing office. Research Foundation will process the contract and mail along with the purchase order to the contractor for signature. When the fully executed contract is received from the consultant, the purchasing department will sign and forward a copy to the project director and back to the contractor.

In some instances, sponsor approval is also required. When this is the case, documentation of sponsor approval should be provided before the contract is fully executed.

Lead Time

It usually takes about two to three weeks for the Research Foundation Purchasing Department to approve the consultancy, generate the purchase order, and fully execute the contract. Therefore, we recommend that requests for procurement of consultant services be submitted at least 15 working days prior to the date that the services are needed.

Bid Requirements

Research Foundation procurement policy requires that when the amount of the goods and services to be provided by the independent contractor are between $10,000.00 and $25,000.00 that three verbal or written price quotes be obtained. For payments to independent contractors in excess of $25,000.00 three written bids are required.

Payment Documentation and Requirements

Payments to independent contractors are made through the vendor payment process. Requests for payments must be supported by an appropriate invoice for services performed. The Project Director must approve the payment and certify that the services were satisfactorily rendered. Signing and returning the gold copy of the purchase order provides this certification. Partial payments to Independent Contractor may be made with an invoice approved by the Project Director.

Incidental Lecturer Services

If it is determined that a person or sole proprietor will be providing incidental lecturers (as defined by the IRS), then the project director can hire the individual, filling out the correct paperwork, which would include the Independent Contractor form, (or in the case of BSC faculty a Campus Consultant Services form) , a completed Working Relationship form, and a completed W-9 (if not already on file at the Research Foundation). An invoice from the lecturer detailing the services that were rendered and the dates they were performed is also necessary. Payments are through the vendor payment process.

Changes to Independent Contractors, vendor contracts and sub recipient agreements

For services under $10,000.00, submit a completed Purchase Order Change Notice to increase, decrease, or cancel the purchase order with the consultant. For payments in excess of $10,000.00 when a formal agreement is in place, changes to the original agreement can only be processed after an amendment to the contract has been executed.