Individual Service Provider Classification

Individual Service Provider Classification FAQs

  • Is training available?

    Training on the new classification process is available through Knowledge Link. New sessions will be posted there as they are scheduled.

    Beginning in October 2016, this training was delivered to targeted groups, including Business Administrators, HR representatives, and others involved in the affected processes (e.g., payment of honoraria, securing services of independent contractors, etc.).

  • My School/Center wants to hire a former instructor who has established a consulting business. Can we hire this person as an independent contractor?

    In general, those who conduct activities that are considered integral to an institution’s core business should be classified as employees. For Penn, that means individuals who are responsible for instructing students, assigning grades, mentoring, coaching, etc., should be classified as employees, not independent contractors. This classification is made regardless of whether or not they have been employed by the University previously. 
  • Can we hire a former staff member as an independent contractor who has established a consulting business?

    Generally, an individual who has been previously employed by the University should be classified as an employee and not as an independent contractor. If a person has worked at the University previously, the employer/employee relationship was established. In similar cases, the courts have ruled that a school district that classified a teacher as an employee in one year is not allowed to treat the same worker, performing the same job, as an independent contractor in subsequent years. In this case, the school district initially exercised the degree of direction and control necessary to establish an employer/employee relationship, withheld taxes, maintained the right to evaluate performance, and provided the premises, tools, and materials to perform the job. The later designation of the worker as anything other than an employee was immaterial.

  • How is the process different if the services are performed outside the United States?

    The SPQ and SPE are required. However, Global Support Services (GSS) and/or Tax and International Operations (TIO) will provide guidance to the School/Center’s Human Resources in making the classification. The length and scope of services will be taken into consideration.  Additional guidance for the School/Center can be found in the Hiring Abroad Toolkit on the Global Support Services website. Please consider whether the individual is registered as an independent contractor in the foreign country to provide the services being requested. 
  • Does it matter if the service provider is a U.S. citizen/resident or a resident of the foreign country where the services will take place?

    The individual providing the services should be legally able to provide the services in the foreign jurisdiction. In the case of a U.S. person providing the services in a foreign country, the individual should be registered as an independent contractor and have the appropriate visas and/or work authorizations to be in the country providing the services. In the case of a foreign individual providing services in his/her “home” country, the individual should be registered as an independent contractor with the appropriate authorities. In the case of a third country national, the individual should be registered in the foreign country and have the appropriate visas/work authorizations to provide the services.
  • Is there a template agreement available?

    The Hiring Abroad Toolkit contains a template agreement for engaging a foreign independent contractor. Additionally, there may be some instances where a co-signed statement of work is acceptable. Please note that either the template agreement or co-signed statement of work must be executed by Purchasing Services.
  • How is a foreign independent contractor paid?

    In most instances, foreign vendors cannot be paid via Purchase Order, which is why the template agreement or co-signed statement of work is used.  The contractor will need to submit invoices, as well as the W-8BEN, and Certificate of Foreign Source Income, and will be paid via PDA.