5.5 Determination of Status - Employee vs. Independent Contractor
IRS regulations make it imperative that the University System of Georgia provides guidelines for determining whether certain personal service arrangements create an employer/employee or an independent contractor relationship. This has significance in that the institution is responsible for the payment and/or withholding of federal and state unemployment taxes, FICA, and income taxes for those individuals where an employee/employer relationship exists. Independent contractors are responsible for their own liabilities.
5.5.1 Factors in Determining Whether a Person is considered an Employee or Independent Contractor un
|Instructions||Compliance with time, place, and manner||Controls the time, place, and manner|
|Training||Employer provides||Contractor provides|
|Integration||Service as a part of Business||Not a part of Business|
|Service Rendered Personally||Service rendered personally||May be delegated or contracted|
|Hiring, Supervising, and Paying Assistants||Employer provides||Contractor provides|
|Continuing Relationship||Ongoing, repetitive||Sporadic, uncertain of future benefit|
|Hours of Work||Employer sets||Contractor sets|
|Full-Time Required||Restricted to primary employer||Services offered to others|
|Premises||Employer provides||Contractor provides|
|Order of Sequence||Employer sets sequence of work||Contractor controls when work is performed|
|Oral/Written Reports||Employer requires on a periodic basis||Not required to submit oral or written reports except as part of contract|
|Payment by the Hour, Week, Month, or Completion||Periodic payments||Payment upon commission basis|
|Business/Travel Expense||Employer provides||Payment on job basis – included as part of contract|
|Furnishing Tools/Materials||Employer provides||Contractor provides|
|Significant Investment||Very little of own capital||Provides own capital|
|Profit/Loss||Not realized||Realizes own profit/loss|
|Working for More than One Firm at a Time||Limited primarily to employer||Offers services to others|
|Offering Services to General Public||Limited primarily to employer||Offers services to general public|
|Right to Discharge||May be terminated||Remedies under contract law|
|Right to Terminate||Employer has very limited liability in termination||Remedies under contract law|
5.5.2 Continuing Education
The majority of cases where this “determination of status’ is involved would be in those situations involving continuing education classes. In general, the following table will dictate whether or not a person is to be classified as an employee or an independent contractor.
|DURATION OF COURSE||STATUS|
|Short Course (less than two weeks, i.e., conference/workshop)||Independent contractor unless otherwise dictated by the twenty factors listed in Section 5.5.1|
|Non-Credit Course (two weeks or more, but less than a semester)||USG Employee|
|Credit Course (semester)||USG Employee|
5.5.3 Additional Compensation for University System of Georgia Employees
BoR Policy Manual Section 22.214.171.124 “Research, Saturday Classes and Off-Campus Continuing Education” covers the conditions that must be met before additional compensation can be paid a University System employee. Institution employees who are paid for continuing education services must be paid via normal institutional payroll processes.
GA Law (Code Section 45-10-25) “Exceptions to prohibitions on transactions with State agencies” is specific as to the types of services that can be utilized between University System units and in each instance an agreement between the presidents of the institutions must be consummated.
Note: Please review Section 5.3, Employee Pay for additional information.
5.5.4 Independent Contractors
Independent contractors are all other individuals who are not University System employees. A contract must be in force that covers substantially the following:
Statement that individual is responsible for all federal and state unemployment taxes, FICA, and income taxes.
Responsible for their liability insurance.
Statement that they do not consider themselves to be an employee of the institution, the University System, or State of Georgia.
Starting and completion dates of the program.
Responsible for their own professional development.
Will not require that office space be provided.
Will not be performing “extra work” for the institution.
Generally, compensation based upon completion of contract and not on an hourly basis.
Subject to contract remedies under contract law.