Accounting |Introduction |Receiving and Payment | Honorariums & Independent Contractors
Financial Procedures Manual: Receiving and Payment
Honorariums & Independent Contractors
Lecturers, guest speakers and performing artists providing up to $2,500 in services of a short duration (less than six consecutive days) may be paid through the honorarium process without a contract. When the amount to be paid is over $2,500, a contract is required. The Purchasing Office coordinates issuance of the contract.
1) Determining Status
When a someone's services are to be obtained through the honorarium or independent contractor process, it is necessary to ensure that an employee relationship is not in fact being created. This determination requires examination of a number of different factors regarding the work situation.
Internal Revenue Service rules dictate the situations under which persons must be hired as employees. A W-9 is required before an honorarium can be processed. Once the W-9 is processed, additional payments will not require a second submission of the W-9. The following questions establish guideposts to clarify the relationship between the University and the individual to determine if an employer/employee relationship exists.
- Does the worker provide the same or similar service to others?
Response: Members of a distinct trade, business, or profession who offer services to the public, but are not under control of those seeking benefit of their training or experience are generally independent contractors.
- How is the worker paid?
Response: An independent contractor usually receives one sum for the entire engagement, whether in a lump sum or installments.
- At what location will the services be performed?
Response: If work is done on premises other than those of the University, it may be indicative of an independent contractor relationship.
- Are materials supplied by the worker?
Response: Independent contractors are generally not provided with supplies and materials.
- Is a license, certificate, professional degree, or special skill required for this service?
Response: A person hired to do work not in the usual course (or specialization) of the University's business, may be an independent contractor.
- Will the worker receive close supervision or instruction?
Response: An employer/employee relationship usually exists when the University has the right to direct and control the individual in the way he/she works, both as to final results and as to the details of when, where, and how the work is to be done.
- Will training be provided to the worker?
Response: Normally, independent contractors are not trained, but rather hired for their expertise in a field.
- Will the worker be expected to follow daily or weekly schedules, etc. established by you (as opposed to complying with completion dates)?
Response: Normally, an employer/employee relationship exists for those persons who have established working hours and must perform certain tasks at certain times. They are paid a regular amount at stated intervals and can be discharged or have the right to terminate a relationship without incurring liability.
- Do you have the ability to direct or change the methods used by the worker?
Response: Generally, employees perform services for someone who has the right to control the desired result or direct the method of accomplishing those results. Conversely, an independent contractor usually works without direction or control and is only responsible for the completed job or result.
- Will the worker be working full time or nearly full time on this project?
Response: Generally, employees work full time for an employer, while independent contractors work when and for whom they choose.
- Does the worker have a significant investment (capital, equipment, licensing, etc.) in his/her business?
Response: Typically, employers provide employees with facilities, tools, materials and other equipment. When the worker invests in these assets, there is a tendency to indicate independent contractor status.
If the person is determined to be an independent contractor (based on the above), the services are of an academic nature, and the amount to be paid is less than $2,500 in a fiscal year and less than 5 consequtive days, the honorarium process can be used. When amount of honorarium will exceed $2,500 in a fiscal year, the recipient must sign a CONTRACT prior to rendering services (Call PURCHASING at 437-4570 for further details). All persons serving more than five days, regardless of organizational connection or amount, must be appointed through normal Personnel procedures and be placed on the payroll.
The University Honorarium Request Form must be submitted to the Accounting Office to initiate an honorarium payment. Following are key points regarding processing of the form:
- After completion, the form should be printed and distributed as follows:
The original copy should be sent to the Accounting Office, Management Services Center (MSC), Room 203.
A copy should be retained by the department making the request.
- Although it is not necessary to detail the types of expenses to be paid via honoraria, departments can limit the types of expenses to be paid. This can be done by specifying amounts in the "Breakdown of Expenses" portion of the form. Please note, however, if amounts are assigned to the Breakdown of Expenses categories, receipts will be needed to pay the honorarium and State maximum reimbursement rates will apply. This could result in payment delays and an inability to pay certain items if State rates are exceeded.
- A W-9 should be submitted to the Accounting Office (MSC 203) with the honorarium, if they have not received honorarium in the past.
- Honoraria are paid from an account's OTPS allocation. In most cases, checks are issued directly to the recipient as stipend and reimbursement of costs. If the toal honorarium is only to pay for travel costs, the vendors providing the services can be paid directly by the Univeristy.
5. Normally, the recipient of an honorarium will recieve a check in approximately three weeks.
Please note that honoraria can be used only in specific cases. Honoraria cannot be used to pay a person on a State payroll or students, regardless of term or amount to be paid.
Here is a link for information about paying Honoraria to non-US Citizens.