Introduction

It is important that the appropriate contracting and payment processes be used for individuals providing services to the University.  Except for performers (see Process for Performance Agreement) providing services to the University are to be paid either as an independent contractor/consultant or as an employee.  There is the potential for significant tax penalties for the University if the improper method is used.  The Independent Contractor/Consultant process includes a request form initiated by departments which is used to assist in making the proper determination based on Internal Revenue Service criteria.   

 For proposed contracts with business entities (e.g., sole proprietorships, partnerships, corporations) where payments will be associated with an employer identification number (EIN) rather than an individual’s social security number, (see Professional Services Agreements.)

Note:  A fully executed contract in the case of an independent contractor must be in place before the work begins.   Likewise, for a potential employee, arrangements are to be made for the hiring before the employee begins work.

 Description (For graphic, see Process Flowchart)

 Step 1 – Originating department furnishes information regarding the proposed services on the Independent Contractor Request form.  While doing so and depending on the information, it may become evident that the individual should be providing the services as a University employee.  If so, the department will contact Human Resource Services (HR) to begin the process to hire the individual and work on the form can be discontinued.  If not, the department sends the completed form with the department head’s signature to Business Services, 210 Parker Hall.

 Step 2 – Business Services reviews the information on the form and, in consultation with HR, determines if the individual should be considered an independent contractor or an employee.  If an employee, Business Services returns the form to the originating department with explanation.  If an independent contractor, Business Services routes to either the Vice Provost for Research or Vice Provost of Academic Affairs, depending on proposed funding source, for review and approval.  If approval is not given, originating department is notified.

 Step 3 – Upon approval of appropriate Vice Provost, Business Services prepares the contract document and submits, as required, to UM General Counsel’s Office for review.

Step 4 – Following approval by General Counsel’s Office, the final version of the contract is signed by the Vice Chancellor for Administrative Services or alternate authorized individual and two original documents are sent to originating department.

 Step 5 – Originating department sends/gives two originals of the contact to the individual contractor/consultant for his/her review and signature on both.

 Step 6 – Individual contractor/consultant returns one fully executed contract to originating department which retains it according to the University’s record retention policies as the University’s official copy.  If grant or contract funds are used for payment for the services, the originating department sends one photocopy of the fully executed contract to the campus Sponsored Programs Office.  Originating department supplies a photocopy with voucher for payment.

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