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Independent Contractor

 

What is an independent contractor?

  • An independent contractor (IC) is someone who runs his or her own business. Independent contractors are sometimes called consultants, freelancers, self-employed, individuals, sole proprietors and even entrepreneurs or business owners.

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What criteria is used in deciding whether someone is an employee or an independent contractor?
The IRS looks at a number of factors when determining whether you are an employee or an independent contractor. The agency is more likely to classify someone as an independent contractor if they:

  • Are free from control over the way he/she works both as to the final results and the details of when, where, and how the work is to be done
  • Furnish the tools and materials needed to do the work
  • Are paid by the job, rather than by the hour
  • Work for more than one business at a time
  • Invest in their own equipment and place of business
  • Pay their own business and traveling expenses
  • Hire and pay assistants, and
  • Set their own working hours
  • Is not a current employee of the college performing work related to their regular work assignment

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What are the New Hampshire Dept of Labor Criteria to Establish Independent Contractor Status?

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Once it is determined that a person is an Independent Contractor, what do we need to do to pay them?

  • The IC will need to complete and sign/date the Consultant/Independent Contractor Service Agreement (also known as the Independent Contractor form). This form also needs to be approved by the department, the PI and OSP if PTAEO (grant) related. The department will need to create a purchase request eForm and attach the Agreement with any other supporting documentation, route to approvers. Following approval, the Form will be routed to Procurement Services for review and approval.  Once approved, the Independent Contractor may be notified to begin work. Based on the Agreement, the Independent Contractor may submit invoices to Invoice@Dartmouth.edu for Payment processing.

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Does an Independent Contractor really need to sign a written Independent Contractor agreements?

  • YES! Using a written agreement helps to avoid later disputes by providing a written description of the services the IC is to perform, when they are to be performed, and how much the IC will be paid. A written IC agreement can also help establish that a worker is an independent contractor.

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Where can I find a copy of the Consultant/Independent Contractor Service Agreement Form (also known as the Independent Contractor form)?

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When is the Consultant/Independent Contractor Service Agreement Form required?

  • The Consultant/Independent Contractor Service Agreement Form is required when hiring external individuals to perform a service.

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Why is the Consultant/Independent Contractor Service Agreement Form required prior to hiring external individuals?

  • The Consultant/Independent Contractor Service Agreement Form is a written agreement. Using the agreement avoids later disputes by providing a written description of the services the Independent Contractor will perform, when they are to be performed, and how much the Independent Contractor will be paid.  The Consultant/Independent Contractor Service Agreement Form also helps to establish that a worker is an independent contractor. Although an agreement won't conclusively prove that a worker is an Independent Contractor, it will help show the IRS and other agencies that you and the worker intended to create a hiring company-independent contractor relationship, not an employer-employee relationship. IRS training materials state that where all the other factors are evenly balanced, a written Independent Contractor agreement may tip the scale to the Independent Contractor side.

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What is a Statement of Work (SOW)?

  • A Statement of Work is a document that describes the terms and objectives of a project or service contract, including the scope of work required to meet the objectives, costs, deliverables, timeliness, and other expectations.

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When is a Statement of Work (SOW) appropriate?

  • A Statement of Work is appropriate when the description and expectations cannot adequately be detailed on the Consultant/Independent Contractor Service Agreement Form under the nature of services.

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What are the Terms for an Independent Contractor?

  • The standard terms and conditions are applied when setting up an Independent Contractor in the system.  For example, the payment terms will default to Net 30.  If the Independent Contractor requires different terms and conditions, they should submit a New Supplier Classification form.

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What happens if services are performed prior to having submitted a Consultant/Independent Contractor Service Agreement Form?

  • Payment must be paid for services performed. This puts the department, the institution, and the Independent Contractor at several risks. If work is performed prior to the Consultant/Independent Contractor Service Agreement Form being submitted, regardless of how service was performed the individual must be paid. If work is performed prior to completion of the Consultant/Independent Contractor Service Agreement Form being completed and it is determined that the individual is an employee, it puts the institution at risk of having to pay back taxes and penalties for misclassifying an employee.

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If work has already been performed and the Independent Contractor has provided an invoice, can the Consultant/Independent Contractor Service Agreement Form be attached to the Payment Request eForm?

  • No, the Consultant/Independent Contractor Service Agreement Form needs to be submitted on the Purchase Request eForm for review and approved by Procurement Services.  The invoice should be submitted separately using the Payment Request eForm.

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Can a Consultant/Independent Contractor Service Agreement Form be submitted by one department and used by other departments/divisions/institutionally?

  • Each department should initiate their own Consultant/Independent Contractor Service Agreement Form for services, since the scope and expectations of the service may vary.

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Is it possible to have an institutional agreement with an Independent Contractor that all departments can utilize?

  • No, since this is the nature of services/Statement of Work and agreement with the Independent Contractor for the goods/services to be provided it is unique to each department.  Even if the Independent Contractor is utilized by several departments there needs to be a specific nature of services/Statement of Work outlined for legal purposes.

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Can a Consultant/Independent Contractor Service Agreement Form be submitted for multiple chart strings and/or project funds within a department?

  • Yes, if the objectives of a project or service align with the original Consultant/Independent Contractor Service Agreement Form there is no need to submit multiple Consultant/Independent Contractor Service Agreement Forms.

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For those contractors already established in the system do they still need to fill out and sign page 3 with all the certifications?

  • Page 3 should be completed each time a new Consultant/Independent Contactor Service Agreement Form is completed.  At a minimum, this is required annually with continued service.

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If I am hiring a Consultant/Independent Contractor and the annual aggregate amount will be $10,000 or greater, do I need a sole source document?

  • Yes, this is required with our institutional sole source, competitive bid policy.

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What if I do not know the chart string that the Consultant/Independent Contractor Service Agreement Form is going to be charged to?

  • It is not necessary to know the chart string being used when completing the Consultant/Independent Contractor Service Agreement Form and submitting it through the Purchase Request eForm.  The department may use any departmental string during the submission Purchase Request.  The chart string will need to be known once a Payment Request eForm is submitted.
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Do I need to submit a new Consultant/Independent Contractor Service Agreement Form for approval to OSP for each grant?

  • No, this is not necessary, if the project objectives on the Consultant/Independent Contractor Service Agreement Form align with the project objectives of the grant.

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Who completes the Consultant/Independent Contractor Service Agreement Form?

  • Completion is a joint effort between the Department and the Independent Contractor.
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Does the address on the Consultant/Independent Contractor Service Agreement Form, like name, need to match what is on the W-9?

  • No. A vendor may have different addresses for the business and what is used for tax reporting.
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Why does the Independent Contractor Addendum come after the agreement, instead of being first?

  • It is recommended that the Independent Contractor Addendum be reviewed prior to completing the Consultant/Independent Contractor Service Agreement Form but is considered a supporting document.
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Are regular written or oral reports required to be submitted to Dartmouth College? Who verifies this is happening?

  • The Department is responsible for staying in contact with the individual to ensure that work is being completed.
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Is the individual performing their services as a separate company with a Fed Tax ID? Couldn't this person be operating under their SSN?  If answering "No", does this disqualify them?

  • An EIN and SSN are both considered Federal Tax ID's.  If an Individual has an EIN and SSN, they should supply one but not both.
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Does the individual really need to provide the service for other clients besides Dartmouth?

  • Yes, they should be willing to provide services to other clients.
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Last Updated: 10/23/18