Washington State University
BUSINESS POLICIES AND PROCEDURES MANUAL

PERSONNEL
60.01
Revised 10-09
Human Resource Services
335-4521

Determining Pay Status--Employee or Contractor

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EMPLOYEE OR CONTRACTOR

Administrators use the following guidelines when considering whether a service should be provided by an employee or an independent contractor.

Coordinating Offices

Employees

Human Resource Services coordinates employment activities.

Independent Contractors

WSU's Division of Purchasing coordinates activities related to independent contractors.

Both Employees and Independent Contractors

Payroll Services provides assistance in determining proper pay status, as well as the appropriate taxation method for all types of payments.

Types of Payee Relationships

The choice of payee relationship is based upon the right to control the method of work.

Employee

An employee is under the direction and control of the employer. The employer not only controls what is done, but also the method by which it is done.

The employer has the right to discharge or terminate an employee.

See "Determining Payee Status" below for other factors used to determine if an employee/employer relationship exists.

Independent Contractor

An independent contractor:

Determining Payee Status

Several factors are used to determine payee status. Among these factors are two relationship tests, the common law test and the ABC test, which focus on the employer's right to control.

For additional information on this topic, see the Payment Decision Tree webpages on the Payroll Services website at:

http://www.wsu.edu/payroll/

The Common Law Test

According to the Common Law Test, an employer/employee relationship exists when the worker is subject to the employer's will and control concerning what needs to be done and how it should be done. The employer must have sufficient control of, or the right to control, the work being done in order to establish an employee/employer relationship. (Sec. 530, 1986 Tax Reform Act)

IRS Factors

According to the Internal Revenue Service (IRS), three categories of facts are considered when determining payee status:

(Employer's Supplemental Tax Guide, IRS Publication 15-A)

To view IRS Publication 15-A, go to the IRS website at:

http://www.irs.gov/

Behavioral Control Facts

Behavioral control facts show whether or not the business has the right to direct and control how the worker performs the tasks. These facts include the type and degree of the following:

Generally, an employee is subject to the business' instructions about when, where, and how to work. The key consideration is whether the business has retained the legal right to control both the results and the method of the work or services.

An employee may be trained to perform tasks in a certain manner. An independent contractor usually uses his or her own methods.

Financial Control Facts

Financial control facts show whether or not the business has a right to control the business aspects of the worker's job. These facts include:

Type of Relationship Facts

Facts that show the type of relationship include:

It is more likely the business will have the right to direct and control the worker's activities if the worker provides services that are a key aspect of regular business activity.

The ABC Test

The ABC Test states that a paid service is employment, unless:

(Bureau of National Affairs Payroll Administration Guide 101-1651)

EMPLOYMENT PROCEDURES

WSU employment includes:

Faculty

For a faculty position, refer to the following BPPM sections:

Administrative Professional

For an administrative professional (AP) position, refer to the following BPPM sections:

Human Resource Services reviews the duties of these positions. See 60.02.

Graduate Assistants

For a graduate assistant position, refer to the following procedures:

Civil Service / Collective Bargaining Unit

For a civil service position or a position covered by a collective bargaining unit agreement, refer to the following BPPM sections:

Temporary Employment

See 60.26 and 60.27 for procedures related to temporary and student employment.

INDEPENDENT CONTRACTOR PROCEDURES

See 70.50.