Free Sample Consultants And Contractors Policy
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Sample Consultants And Contractors Policy


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Consultants and Contractors

Policy

Employer ABC requires departments that intend to use independent contractors to follow ABC approval and procedures before services are performed.  The ABC controller must approve consultant services.

Policy Rationale

Significant tax penalties exist for classifying an employee as an independent consultant or contractor and independent contractors can expose ABC to risks. Therefore, consistent standards will be applied to contracting and each contract will be fully documented.

Authorization Number

A number assigned by Finance to identify and reference an approved independent contractor.

Conflict of Commitment

An employee's external employment interferes with his or her ability to perform his or her ABC job.

Conflict of Interest

An employee or family member or associates has an existing or potential material or financial interest that:

·         Impairs or may impair the employee's independence and objectivity while performing ABC duties.

·         May receive a financial or material benefit from knowledge of confidential ABC information.

Sponsored Project Consultant

An independent contractor who provides specialized advice or professional expertise.

Sponsored Project Consulting Agreement

A written contract between ABC and an independent contractor to provide highly specialized advice or professional expertise for a specific project.

Employee

A person paid by ABC to perform a service.  ABC controls what needs to be done, how work is done and when and where it will be done.  An employee is not at risk for profit or loss as a result performing duties.

Employee Benefits

Benefits received by employees not received by independent contractors. Examples include Unemployment Insurance, Workers' Compensation, Disability Insurance, Health Insurance, and Life Insurance.

Independent Contractor or Consultant, Non-Sponsored Project

An individual hired to perform a specific service.  The individual sets his or her own hours and work time(s) and is responsible for all aspects of the job.  He or she is fully liable for all job related actions and does not receive employee benefits. ABC can require proof of insurance from independent contractors.

Nonresident Alien

An individual who is not a citizen of the United States of America and does not have a Green Card.

Purchase Order

A written document used to order goods or services from outside ABC.

Resident Alien

IRS term defining individuals who are not U.S. Citizens but have a "Green Card" or meet the "substantial presence test”.

Service Provider

An individual or entity paid by ABC to provide a service.

Service Recipient

The department of ABC receiving services.

Sponsored Project

A signed contract whereby ABC performs a certain level of work according to specified terms and conditions for a specific financial amount.

Subcontract

A signed contract between ABC and a third party often issued under a sponsored project to procure services for a long period (one+ years).

Subcontractor

An individual, business or other third party providing services under a sponsored project agreement.

Taxpayer Identification Number (TIN)

Social Security Number (SSN) or Federal Employer Identification Number (FEIN).

Process

When obtaining a contractor, three things must be considered.

Determination of Status

It must be determined whether or not the contractor will be an employee of ABC.  Proper classification ensures that ABC complies with the Fair Labor Standards Act, Immigration and Naturalization service regulations, statutes regarding income tax withholding, unemployment insurance taxes, Social Security, and Medicare taxes.

Procurement of Services

If the contractor is not an employee of ABC, following proper service procurement procedures ensures that all requirements have been met.

Risk Management and Insurance

Risk management and insurance concerns must be considered in order to avoid substantial liability and additional cost to ABC due to injuries, claims and the destruction of ABC property.

Procedures for Determining Status

Foreigners

Individuals who do not have Resident Alien status cannot work as independent contractors.

Determination Procedures are not Required

Certain types of payments may be processed without determining contractor status.  All of these payments are subject to IRS reporting via IRS Forms 1099 and 1042S.

If the contractor is incorporated this policy does not apply.

Certain professional firms do not require contractor approval: accounting firms, architectural firms, engineering firms, and law firms.  In these cases, departments do not contract directly for these services.

If an independent contractor performs the same service before the termination date of the contract, it is not necessary to repeat the independent contractor determination process.

Determining Status for Former Employees

If the contractor is a recent former employee, he or she is usually paid as an employee in these situations:

·         If he/she works exclusively for ABC.

·         If he/she regularly performs duties similar to those presently performed by other ABC employees.

In these cases, the employee must complete the appropriate sign-on procedures with Human Resources.

Conflicts of interest for former employees must be resolved prior to the procurement of services.

Determining Independent Contractor Status

The following factors are to be used to determine independent contractor status.  The situation does not have to meet all criteria for independent contractor status to be approved.

If the department determines that the situation does not qualify for independent contractor status, hire the individual as an employee through Human Resources

An independent contractor:

·         Determines how work is performed.

·         Assumes all expenses associated with the contract.

·         Is not required to work on ABC premises.

·         Abides by all conditions of the contract but is not instructed by ABC as to when, where, and how to work.

·         Supplies his/her own tools, materials, etc.

·         Cannot be discharged if contract conditions are fulfilled.

·         Can hire others to help complete the work.  Any decision to hire help is solely up to the contractor and does not impact his/her compensation.

·         Supplies the equipment and place to perform the service.

·         Can realize a profit or suffer a loss as a result of his/her services.

·         Cannot terminate the contract without incurring a liability.

·         Does not provide services that become part of the normal business operations of ABC.

·         Can work for whom and for as many employers as he/she chooses and is not obligated to work full-time for any one employer.

·         Makes his/her own hours.  He/she may be required to work within certain hours but is not required to be present at any specific time.

·         Is paid a fixed fee.

·         Does not have a continuing relationship with ABC.

·         Utilizes his/her own methods to perform the work.

Requesting Approval of Independent Contractor Status

Departments must obtain approval of contractor status before service(s) begin.  Commitments shall not be made until approval is received and an agreement, subcontract, or contract has been negotiated.

·         Submit the following information to the enter department here:

o    Employer ABC Request for Contractor Approval form.

o    Information justifying contractor status and listing any potential conflicts of interest.

o    A copy of the Green Card if the contractor is not a U.S. citizen.

·         Requests will be evaluated by enter position here and a determination will be made regarding contractor status.

If approved, an Authorization Approval Form will be returned to the department.  The form will contain an authorization number and the contract’s termination date.

If not approved, a Denied Authorization Request Form will be returned to the department.  The department can hire the individual as an employee.

Procedures for Procuring Services

General Contracting Requirements

Departments will normally help ABC administer a contract.

·         Sponsored Contracts:

o    If the contractor is a consultant or a subcontractor under a sponsored project, the contract is a consulting agreement or a subcontract, both of which are issued by SPO.

·         Standard Contractor Agreement:

o    Use the standard Independent Contractor Agreement.

o    Any proposed changes to the contract by either ABC or the contractor must be forwarded to ABC Legal Counsel and Risk Management before changes are made.

Subcontracts and Consulting Agreements

The Sponsored Programs Office (SPO) approves contractor status for subcontractors and sponsored project consultants.

Services shall not be obtained until the department receives approval of contractor status and a consulting agreement or subcontract has been negotiated.

·         Forward the following forms to SPO for contractor status approval:

o    Employer ABC Request for Contractor Approval form.

o    Employer ABC Request for Consultant Services form.

o    A copy of the Green Card if the contractor is not a U.S. citizen.

·         SPO will determine if contractor status is approved.  If so, it will forward the contract in the form of a consulting agreement to the contractor.

·         Upon receipt of the signed contract, SPO will finalize the contract and provide copies for to the contractor. The consultant can then begin work.  Requests to modify or cancel consulting agreements must be directed to SPO.

·         Declined requests are returned to the department.  The department has the option to hire the individual as an employee through Human Resources.

Risk Management and Insurance

Liability Insurance

All contractors are required to submit proof of liability insurance before a contract is signed, even in cases where the services are not usually considered to be high risk.

The Risk Management Officer will tell the department what proof of insurance is required.  The Standard Contractor Agreement outlines the minimum proof of insurance requirements.  The department must obtain the documentation from the contractor.

Any proposed changes to the contract by either ABC or the contractor must be forwarded to ABC Legal Counsel and Risk Management before changes are made.

ABC Tax and Insurance Responsibilities

ABC must report all contractor compensation on the appropriate IRS form(s) and document(s).

Any specifically negotiated business expenses (i.e. in addition to compensation outlined in the contract) are billed to ABC through the contractor's invoice.  No ABC document or form can be used to reimburse a contractor’s expenses.

ABC does not provide insurance coverage or employee benefits to contractors or withhold federal, state, or other applicable taxes from payments to contractors.

Government Inquiries

All inquiries made by the IRS or any other government or taxing agencies are handled by Finance.  Any inquiries made directly to departments must be directed to Finance.

Responsibilities

Department

Comply with the provisions of this policy, communicate this policy to contractors, perform initial evaluation of status, submit all Requests for Contractor Approval form to enter department here, submit conflicts of interest information to enter department here, verify that a formal contract between the contractor and ABC has been signed before services are provided and verify that insurance requirements have been met.

Contractor

Comply with this policy Include contractor approval number and termination date on all invoices.

Risk Management Office

Receive, review, and maintain proof of insurance required by the Contractor Agreement and negotiate any exceptions to insurance coverage and/or changes to the contract.

Sponsored Programs Office

Review requests for contractor approval for an SPO consulting agreement or SPO subcontract and draft and execute consulting agreements or subcontracts for the SPO.

Finance

Review requests for contractor approval (except those under the SPO).


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