Procurement Services 109: Independent Contractor

Purpose

To assist departments in determining when a person is an employee or independent contractor

Reference

University of Alaska Procurement Manual (not available online) 

Definitions

Independent Contractor: An individual or organization contracted to perform a particular service and/or produce an agreed-upon outcome, where there is no right to specifically control and direct the manner in which the job is done.

Policy

The IRS, not the university, mandates Independent Contractor Determinations. The IRS begins with the premise that all non-incorporated individuals providing service to the university should be university employees.

Is the worker is subject to the direction or control of the university? Are the services provided of a nature that the university routinely hires employees to perform? If the answer to either question is yes, the individual does not qualify as an Independent Contractor under IRS rules. This is the case even if the individual provides the same services to other organizations as an Independent Contractor under IRS rules. These individuals must be paid as an employee, and income taxes deducted from their paycheck.
The IRS’s intention is to prevent any employer from avoiding tax collection, workers compensation and other benefits by designating persons Independent Contractors when the employer (the university) should otherwise hire employees to perform the service. Services that will likely fail to qualify the individual as an independent contractor are those contained within university job descriptions. Contact the campus Human Resources Department for assistance and clarification.
The university is subject to fines and penalties for failure to comply with these IRS regulations.
Independent Contractor Determinations may require the review and approval of the campus Risk Manager who shall assess the level of liability that may result from the contractor's activities. The Risk Manager shall specify appropriate types and levels of insurance that the contractor must have in place prior to start-up.
To initiate a contract with an individual, an independent contractor determination form must be submitted to Procurement Services. For additional information, refer to the IRS factors that should be considered as guidelines to determine the degree of control over the individual.
Click here to obtain an Independent Contractor's Status Determination Form.
Click here to review IRS 20 Common Law Factors for Classification of Personnel as Employees or Independent Contractors.

Effective: 10/25/2005