Independent Contractors

Overview of Independent Contractors

There are special financial parameters for involving independent contractors in research as they are paid through contractual agreements.

About Consultants

Consultants are assumed to be Independent Contractors with defined tasks and benchmarks.  They may not have a continuing involvement in a project and should not require significant supervision.  Consultants are neither employees nor Fellows. They are paid through contractual agreements in which the services they provide are detailed.  Since their relationship to a project is contractual, the selection of specific consultants is governed by processes more like the purchase of goods and services than the process by which employees are hired, or Fellows appointed.

Consultants understand the following conditions describing their relationship with The Research Foundation of the State University of New York:

  1. Not eligible to file for, or collect unemployment benefits,
  2. Not eligible for Worker’s Compensation coverage,
  3. Solely responsible for complying with all federal, state and local requirements regarding reporting and paying taxes,
  4. Required to assign all right, title, and interest in the data or material produced as a result of project activities to The Research Foundation of the State of New York, and prohibited from publishing, permitting to be published, or distributing any information concerning the results or conclusions of the data or material produced during or towards project activities.  These are considered “works for hire” and as such are the property of The Research Foundation of the State of New York.
  5. Able to retain ownership of intellectual property included in the deliverables to the extent that s/he will have independently developed the intellectual property without Research Foundation financial support.  With respect to such property, s/he agrees to grant The Research Foundation of the State of New York a royalty fee, non-exclusive license to use such intellectual property for purposes consistent with The Research Foundation’s obligations under the grant or contract that funds this project.
  6. His/her engagement as an Independent Contractor with The Research Foundation may be canceled by the Foundation upon 30-days written notice.

The IRS uses a series of 20 Factors of the “Common Law Test”  to determine whether an individual or group of individuals meets the legal requirement to be considered a consultant.  For additional information on this topic, see the Quickguide for using Consultants/Independent Consultants.

NON-RESIDENT ALIEN CONSULTANT/LECTURER

Recent changes in IRS regulations governing payments and related income tax withholding to non-resident aliens has caused an additional administrative burden to be placed on campus departments.

Care must be taken to ensure that non-resident aliens are eligible to receive payments for work performed in this country (based on Immigration and Naturalization Service regulations) and that if eligible for payment, can legally be exempt from the 30% federal withholding tax.

If you are planning such an engagement and are not familiar with these requirements, it is important that you contact your Grants Specialist prior to engaging the consultant.  Certain essential documents can only be obtained when the consultant/lecturer first enters the United States.

Related Link: Independent Contractor/Lecturer Services form. 

If you would like additional information please contact your Grants Management Specialist at 632-9038.

For matters pertaining to non-resident aliens, please contact Susan Gasparo, Phone (631) 632-1954

THE TWENTY FACTORS OF THE "COMMON LAW TEST"

All of the following factors must be considered in determining whether an employment relationship exists:

  1. Compliance with instructions
    Employees must comply with another person's instructions on when, where, and how the work is performed. In a true independent contractor relationship, the only control to which the contractor is subject is the result. 
  2. Training required
    Independent contractors are not normally trained but rather are hired for their expertise in a field. 
  3. Integration of services into business operations
    Employees' services are usually a vital part of the daily operation of an employer's operation.
  4. Services rendered personally
    Employees personally render the services, while contractors may delegate such work to others.
  5. Hiring, supervising and paying assistants
    Usually individuals who perform all these functions are treated as independent contractors. 
  6. Continuing relationship
    Employees are usually hired for an ongoing period, while a contractor's work ends when the job ends. 
  7. Set hours of work
    Employees usually must adhere to a work schedule established by the employer. 
  8. Full-time required 
    Generally, employees work full-time for an employer, while independent contractors work when and for whom they choose. 
  9. Performing work on the employer's premise
    Those working at the employer's site may be viewed as employees. 
  10. Services performed in order or sequence set
    Persons told to perform work in a certain sequence generally are considered employees. 
  11. Oral or written reports
    Employees are more likely to be required to submit regular reports to the employer. 
  12. Payment by hour, week, month
    Typically, employees are paid on a regular basis, while independent contractors are compensated by the job or on a lump-sum or straight commission basis. 
  13. Payment of business and/or travel expenses
    Employer payments of a person's work-related travel expenses generally indicates employee status. 
  14. Furnishing of tools and materials
    Employees, not individual contractors, are generally provided with supplies. 
  15. Significant investment
    Individuals who have a significant personal investment in the facilities they use for work are normally independent contractors. 
  16. Realization of profit or loss
    Unlike employees, independent contractors realize a profit or loss based on their success in performing a service. 
  17. Working for more than one firm at a time
    Individuals who perform services for a number of employers are usually independent contractors. 
  18. Making services available to the general public
    Individuals who regularly make their services available to the general public are usually treated as independent contractors.
  19. Right to discharge
    Employees can be fired, while independent contractors cannot be discharged if they fulfill contract specifications. 
  20. Right to terminate relationship without incurring liability
    An employee can terminate his employment relationship with his employer at any time, whereas an independent contractor may be liable for breach of contract for leaving work unfinished. 

Stephanie Ammann
Assistant Director, Sponsored Project Expenditure
Phone: 631-632-9071
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