Engaging Independent Contractors

Effective Date:

December 28, 2016




Megan Moran

Basis for Procedure

Departments often engage the services of individuals who are not employees of the Research Foundation, including independent contractors, guest lecturers, entertainers, suppliers, and others. It is important to correctly classify independent contractors and employees to ensure appropriate compensation method and tax obligation.

This procedure sets out the criteria that define independent contractors and the required procedures to correctly classify and pay them.

Procedure Summary

The following two types of documentation are required when engaging an independent contractor who is a person or sole proprietor:


Classify the Worker

If the worker is a person or sole proprietor, he or she must be properly classified as either an independent contractor or an employee when establishing the work relationship. A person cannot simultaneously have an employee and an independent contractor relationship with the Research Foundation (RF).

Document Classifying Workers as Employees or Independent Contractors provides definitions of "employee" and "independent contractor" and describes the IRS "categories of evidence" and the twenty-factor "Common Law Test" used to classify workers.

When to classify

The classification must be done before payment is made, but should be done before the services are rendered.

Documenting the classification

The classification must be documented. The Independent Contractor Services Form or an equivalent operating location form can be used to document the classification.

Note: If the person or sole proprietor is providing an incidental service (such as a lecture), refer to the "Exceptions" block in this document.

Determine Citizenship Status

If the independent contractor is a person or sole proprietor, he or she must be classified as a U.S. citizen, resident alien, or nonresident alien so that the appropriate tax is withheld and reported. Classification of Aliens as Residents or Nonresidents for Tax Purposes provides definitions and describes the tests used to make the determination.

In addition, a nonresident alien must have the appropriate visa type or NAFTA status in order to be paid as an independent contractor. Visa and NAFTA Status provides information about the employability of different visa holders. Nonresident aliens who hold an F or J visa status have special conditions (e.g., may require written authorization from the designated school official). Refer to the Nonresident Alien section of the Personnel Operations Manual for specific conditions.

If it is determined that a person is a nonresident alien and will be either (a) providing incidental services in the United States, (b) only receiving reimbursement for expenses (not compensation), or (c) working outside the U.S., refer to the "Exceptions" block.

When to make the determination

The citizenship determination can be done at the time of engagement or before payment

Review and Certify Documentation

Project directors must submit documentation to the appropriate business office to demonstrate that


The operations manager or delegate must sign the form to certify that the classification is correct and the engagement is consistent with all sponsor, SUNY, and RF compliance requirements. Refer to How to Review a Request for Goods, Services, and Payment and Guidelines for Vendor or Independent Contractor Selection for compliance considerations.

Operating locations must establish a process for notifying the office responsible for payment that the classification and review of engagement has been completed and approved.

Notify Contractor of Status

What to Use

Independent contractors who are persons or sole proprietors who will be receiving fees and expenses in excess of $599.99 must be notified of their status as an independent contractor. The notification can be done through the standard independent contractor agreement (Independent Contractor Standard Agreement) or the Working Relationship Form (or an equivalent location-specific form) when the standard agreement is not required.

The Working Relationship Form contains information about the person’s status as an independent contractor (e.g., it explains that independent contractors are not eligible to file for or collect unemployment benefits). The form also provides space to describe the services, period of service, fees and expenses, payment schedules, technical and final reporting requirements, and other information about the engagement. Refer to the Forms and Originals page of the RF Web site for a sample Working Relationship Form.

If a location-specific form is developed, it must contain the same information as the Working Relationship Form, including the scope of work and the maximum dollar amount of compensation that can be paid for the services.


The form must be completed and sent to the independent contractor before payment when the standard agreement is not used and the fees and expenses are greater than $599.99. The form must be signed by the contractor and returned to the location when the fees and expenses are greater than $2,499.99 and the standard agreement is not used.

Note: This notification is not required when certain incidental lectures or services are provided. Refer to the "Exceptions" block for more information.

Engage the Contractor

A procurement instrument outlining the scope of work and maximum dollar amount to be paid is required when engaging an independent contractor. The instrument, either a purchase order, formal contract, or the Independent Contractor agreement must be provided to the contractor.

For persons and sole proprietors, the procurement instrument can be the same document used to notify the person of his or her status (see "Notify Contractor of Status" block). An Independent Contractor should not be engaged using a check request without a corresponding purchase order, contract, and/or Independent Contractor agreement.

Paying the Contractor

If the contractor is a . . .

then . . .

person, sole proprietor, or partnership

a miscellaneous income payment will be made. Refer to Overview of Miscellaneous Income Payments.

Also if an honorarium payment will be made, refer to Honoraria Policy for additional requirements that must be met.

corporation or other organization

an invoice will be processed through the Accounts Payable module. Refer to Invoice and Payment Process.


If it is determined that a person or sole proprietor is


If a lecturer is delivering a one-time lecture on a specific area of expertise, the person can be engaged without meeting documentation requirements. If, however, the speaking engagements are extensive and will take place over a longer period of time, the engaging process should conform to the documentation requirements described in this document.

It should also be noted that a lecturer with an ongoing working relationship may be considered an employee.


Lecturers providing an incidental lecture(s) without requesting compensation may be paid an honorarium. Specific rules apply to the payment of honoraria. Refer to Honoraria Policy.



Related Information

Classifying Workers as Employees or Independent Contractors

Classification of Aliens as Residents or Nonresidents for Tax Purposes

Visa and NAFTA Status

How to Review a Request for Goods, Services, and Payment

Guidelines for Vendor or Independent Contractor Selection

Overview of Miscellaneous Income Payments

Invoice and Payment Process

Honoraria Policy


Independent Contractor Services Form

Independent Contractor Standard Agreement

Working Relationship Form

Change History


Summary of Change

December 28, 2016

Fixed all broken links, updated to the new procedure template and revised the Basis for Procedure.

December 2, 2003

New document.



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