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Independent Contractors

Independent Contractors. Target Audience. Campus staff responsible for RF Administration. Submit Questions to:. Email: studioa@hvcc.edu Phone: 888-313-4822 Or use the chat feature. Learning Objectives. Understand how to appropriately classify an independent contractor vs. an employee

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Independent Contractors

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  1. Independent Contractors

  2. Target Audience • Campus staff responsible for RF Administration

  3. Submit Questions to: Email: studioa@hvcc.edu Phone: 888-313-4822 Or use the chat feature

  4. Learning Objectives • Understand how to appropriately classify an independent contractor vs. an employee • Understand the process to engage an independent contractor • Understand the documentation and sponsor requirements

  5. Importance and Impact • Joint enforcement task force on employee misclassification • Initiated to facilitate better enforcement in IC/EE classification issues • Joint efforts between state agencies, DOL, Tax, Workers compensation, AG, • Recent MOU between NYS and US DOL in the fall

  6. Importance and Impact • Unpaid Wages • Federal and State withholding • UE taxes and insurance fraud penalties • WC and disability insurance premiums and penalties

  7. Importance and Impact • Unemployment claims • Workers comp or disability claims • Back wages in overtime • Employee Benefits • Back Taxes (FICA, Fed and State)

  8. Definitions • Employee: • An individual who performs services for you who is subject to your control regarding what will be done AND how it will be done • Independent Contractor: • An individual who performs services for you – but you control only the result of the work.

  9. Classification • Employee: Employer has the right to control what work is done and how the work is done • Right to control not only the result, but details and means by which work is done • Paid via salary and wages through payroll • Eligible for benefits

  10. Classification • Independent Contractor • Control only the result of the work, not the means in which it is done • Most common categories: • Consultant : An individual (or firm) possessing expertise in a particular field engaged to perform a specific task during a defined period of time for a stated fee.

  11. Classification • Most common categories • Lecturer: A person having specialized knowledge of a particular subject who is engaged to convey this knowledge by discourse to an audience in return for an established fee. • Technical service : A person or a firm rendering technical and professional service for a fee.

  12. Classification • Classification should be done when project budgets are determined • Classification is not dictated by sponsored budgets • If sponsor provides funds for IC, we are legally responsible for appropriate classification

  13. There are sponsor considerations to take into account when determining classification (employee, IC, subcontractor, vendor) • You can find more information illustrated in the podcast or video clip through the link on the RF website.

  14. Classification • Is the person in business for him or herself? • DBA • LLC • Sole Proprietor • 20 Factors • IRS Categories of Evidence

  15. Classification Behavioral • Does the employer have the right to direct and control how the work is done? • step by step instructions • Extensive training

  16. Classification IRS Categories Financial • Right to direct or control how the business aspects of the worker's activities are conducted • the extent to which the worker has unreimbursed business expenses • the extent of the worker's investment • the extent to which the worker makes services available to the relevant market • how the business pays the worker • the extent to which the worker can realize a profit or incur a loss

  17. Classification Type of Relationship • How the parties perceive the relationship • written contracts describing the relationship the parties intended to create. • whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. • the permanency of the relationship. • the extent to which services performed by the worker are a key aspect of the regular business of the company. • the right to discharge a worker and the right to terminate work without incurring a penalty

  18. Classification • Outside reviews • IRS or Department of Labor may review if an independent contractor files for: • unemployment compensation at the end of the contract, • Workers' Compensation benefits for an injury incurred during performance of the work, or • disability benefits for a non-work related injury or illness.

  19. Classification • Can’t be an IC and EE at the same time • Former EE can be classified as IC • IRS close review with 1099 and W2 in same calendar year

  20. Scenario • Anyone have one?

  21. Documentation • Documenting the IC

  22. Engaging Independent Contractors Required documentation when Independent Contractor is a person or sole proprietor: • Independent Contractor Services Form or campus equivalent form The Independent Contractor Services Form documents: • Criteria used for classification of person as an independent contractor • Citizenship status of the individual • Description of services and scheduled dates

  23. IC Required Documentation (cont.) • Documentation notifying the worker of his or her status as an independent contractor, i.e. either Working Relationship Form or Standard Independent Contractor Agreement • Independent Contractor must be notified of their status as an IC if fees & expenses received will be $600 or more

  24. Engaging Independent Contractors • The procurement instrument should outline the scope of work, term of the agreement, and maximum amount to be paid. The procurement instrument can be either: • RF Purchase Order (least preferred if high dollar) • Formal Contract (requires RF legal review) • RF Independent Contractor Standard Agreement

  25. Honorarium Payments • Usually paid to a lecturer or speaker when the speaking engagement is not extensive or the lecturer does not ask for compensation • Project director may offer to pay expenses plus an honorarium or just an honorarium • Honorariums to SUNY employees must comply with SUNY policy (no restrictions if non-SUNY service provider) • Honorariums cannot be paid to RF employees

  26. RF Bids & Proposals Requirements • Up to $50,000 - No requirement for solicitations of bids or proposals. Campuses should periodically review the pricing and quality of services of any suppliers that are used repeatedly. • $50,000 - $100,000 - Solicitation of bids or proposals required, and procurement requires selection from a minimum of three (3) written or verbal quotes. • $100,000 and above - Solicitation of written bids or proposals required, and procurement requires selection from a minimum of three (3) written bids or proposals.

  27. When Bids & Proposals are Not Required • Purchases made under NYS Contracts or Purchasing Consortiums (E&I) • Purchases up to $200k with certified small or MWBEs • Purchases that qualify as either Sole Source or Single Source procurements

  28. Single and Sole Source Procurements • Sole Source Procurements – purchases that qualify because the product or service procured is unique to one source or the requirements can only be met by one supplier or contractor. • Single Source Procurements – purchases that qualify because of limited circumstances that justify procurement without open competition. • Both Single and Sole Source Procurements require a completed Single/Sole Source Form which documents the detailed circumstances that exempt the procurement from competition.

  29. Single/Sole Source Form • Required for all purchase requisitions that exceed $50,000 where no competitive bids have been solicited (or are not available). • Requires fair and/or reasonableness of price analysis • Requires certification by PI or Campus OM or Designee that the procurement does not violate the RF’s Conflict of Interest Policy • Completed form should be maintained in campus purchasing records

  30. Documentation of Vendor Selection Process • The selection process for all competitive procurements should be documented with: • Names of vendors solicited • Amount bid by all vendors that submitted bids • Documentation of the evaluation process used including the reasons a vendor was selected (experience, technical qualifications, references, pricing, etc.)

  31. Payments to Independent Contractors • W-9 is required from the IC to provide their tax payer identification number and should be attached at the header level of the supplier record • IC should be coded with a “Contractor” classification type

  32. Payments to Independent Contractors • Payments to independent contractors for services should not be made until services have been completed (installments are acceptable) • Requests to reimburse IC’s for expenses not included in established fees and not receiving prior approval from project director should be questioned

  33. References • RF policies and procedures: • Guidelines for Vendor or Independent Contract Selection • Independent Contractors/Consultants • Engaging Independent Contractors • NAFTA and Visa Status (applies only to engaging the services of nonresident aliens as independent contractors) • Link to IRS video • Link to Aimee Video

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