Independent Contractor (Consultant) Guidelines
The Palo Alto Veterans Institute for Research (PAVIR) procurement procedures may not be used in lieu of placing an individual on the payroll. An individual may only be retained for professional services as an independent contractor if a determination has been made that an employer-employee relationship does not exist.
Generally an employer-employee relationship exists when PAVIR has the right (whether or not it exercises the right) to supervise and control the manner of performance, as well as the result of the service.
An independent contractor relationship exists when PAVIR has the right to control or direct only the result of the work, not what will be done and how it will be done.
I. DEFINITION OF INDEPENDENT CONTRACTOR SERVICES:
Professional services performed by independent contractors are generally technical, or unique functions performed by individuals rather than partnerships, firms, or corporations. Examples of such services include technical writing or editing, intermittent advisement, non-routine data analysis, translation, and technical appraisals. Individuals who supervise other employees cannot serve as an independent contractor.
II. ENGAGING THE SERVICES OF AN INDEPENDENT CONTRACTOR:
The determination of an individual's status as an employee or independent contractor must be made prior to an engagement to perform professional services. As a general rule, individuals should be classified as independent contractors on an exception basis only.
The engagement of an independent contractor for professional services is generally covered by PAVIR's standard purchase order form and standard terms and conditions of purchase. Purchase orders/agreements for independent contractor services should not extend beyond one year (12 months) at a time and should not cross project years on funded projects.
Independent contractors must not begin services until review and approval by the Principal Investigator and PAVIR has been completed as evidenced by fully executed PAVIR Independent Contractor Agreement. Payment will not be made for work performed prior to the date of PAVIR CEO signature of the Independent Contractor Agreement.
III. VA EMPLOYEES:
An individual who is a VA paid employee cannot be retained as an independent contractor.
IV. PAVIR EMPLOYEES:
Generally, an individual who is a PAVIR employee or who has been a PAVIR employee in the past twelve months cannot be an independent contractor with PAVIR. For further information please contact Human Resources as there may be applicable exceptions.
V. TAX WITHHOLDING AND REPORTING:
PAVIR has no obligation to withhold income or FICA taxes on amounts paid to an independent contractor. However, if an independent contractor does not furnish a correct social security number, the backup withholding rules require that income tax be withheld at the current federal rate and highest state rate.
Payments made to individuals who do not reside in California, but are paid for services performed as an independent contractor in California may be subject to backup withholding at the current state rate.
If payments in the aggregate to an independent contractor total $600 or more during a calendar year, payments must be reported on Form 1099-MISC, Miscellaneous Income.
VI. FORMS TO BE COMPLETED:
The following forms must be completed and submitted to your PAVIR CGA prior to Engaging the Services of an Independent Contractor
- Independent Contractor (Consultant) Requisition
- A resume, curriculum vita, or similar supporting documentation.
VII. APPROVAL OF INDEPENDENT CONTRACTOR AND PAYMENT FOR SERVICES:
The following forms must be completed and submitted to your PAVIR CGA prior to Engaging the Services of an Independent Contractor if approved by PAVIR, PAVIR CGA will route an Independent Contractor Agreement for signature. Purchasing will request an IRS W-9 form from the contractor, generate a Purchase Order, and send fully executed copies of the agreement to you and your contractor. Services should not begin until you receive afully executed independent contractor agreement from PAVIR.
Payment will be made upon receipt of an invoice submitted by the independent contractor to PAVIR. All invoices must include the information listed on the Invoices must be prepared on the independent contractor’s letterhead and submitted to PAVIR Accounting preferably on a weekly basis, but no less than monthly. Independent Contractor Invoice Sample (See Appendix A). Each invoice must be signed by the Independent Contractor and approved by the Principal Investigator or his/her designee.
VIII. CHANGES TO AN EXISTING APPROVED AND CURRENT INDEPENDENT CONSULTANT AGREEMENT:
An existing and current Independent Contractor Agreement may be amended in writing. Amendments to Independent Consultant Agreement only become valid after fully executed.
Expired consulting agreements cannot be amended.
The presents of a current and valid Independent Contractor Agreement does not guarantee that an amendment will be approved by all parties. Each amendment will be reviewed for consistency with applicable rules, regulations and policies prior to execution.
A sample is provided below in Appendix B.