It is expected that Northwestern activities will be carried out to the maximum extent possible by using the services of regular and temporary employees. However, independent contractors or consultants may be used when necessary services cannot be provided adequately by regular and temporary employees within the scope of their employment or in emergency temporary circumstances.
Two determinations must be made before engaging a person in work for which Northwestern is to pay the person:
|U.S. Citizen or Permanent Resident||Foreign National without Permanent U.S. Residence|
|Employee||Engaged as an employee and paid through Payroll||Engaged as an employee and paid through Payroll|
|Independent Contractor||Engaged as a contractor and paid through Accounts Payable||Engaged as a contractor and paid through Payroll to apply the required taxation|
Proper classification of individuals is critical to appropriately process and make payments for services. Under the United States Internal Revenue Service (IRS) and other agency guidelines, Northwestern has certain responsibilities. Independent contractor payments must be tracked for taxable income reporting on Form 1099, and employee payments are subject to employment taxes and are reportable on Form W-2. In addition, employees may be eligible for benefits. Errors in employee/non-employee classification may lead to significant fines and penalties due to lack of appropriate income reporting, tax withholding, or provision of benefits.
An employee depends on an employer for income on a continuing basis and performs services that can be controlled and supervised by Northwestern. Additionally, any individual who has been paid on Northwestern payroll in the current calendar year is treated as an employee, even if the relationship might otherwise qualify as that of an independent contractor.
An independent contractor relationship may exist when both: Northwestern has the right to control or direct only the result of the work, and Northwestern does not direct what will be done or how the work will be performed.
The final determination of an individual's relationship will be made by the HR Compensation division after submission of the Independent Contractor Questionnaire (ICQ) . The assessment of the work characteristics will conclude with one of the following results:
If the supervisor or the department expect to assert employer controls, the individual is to be engaged as an employee and paid according to the provisions for employees. For nonresidents, the individual's visa must qualify for employment in the determination of eligibility to work. Refer to your department's HR contact to initiate employee paperwork.
If the work will be free from employer controls, the individual may be engaged as a contractor and paid according to the provisions for engaging independent contractors. Refer to the Independent Contractor Payment Procedures to initiate payment.
If the work is free from employer controls and the individuals already a Northwestern employee, the individual is to be engaged and paid according to the provisions for engaging employees as consultants. Such payments should be processed as an Additional Pay Request.
If the result of the assessment is unclear, the individual will be hired and paid as an employee to ensure tax compliance. Refer to your department's HR contact to initiate employee paperwork.
Persons other than regular Northwestern employees may be used as contractors and paid from Northwestern funds only if all of the following conditions are met:
Persons who are regular employees of Northwestern may be used as consultants, and Northwestern funds may be charged for their activities, only if all of the following conditions are met: