This section describes guidelines
to determine when a payment to-an individual, other than
an employee, who rendered a service to the State meets the
non-employee definition. Individuals who meet non-employee
definition are paid by voucher and those who are determined
to be an 'employee' must be paid via the payroll process.
This procedure does not apply to payments to individuals
for reimbursement of expenses. Reimbursements of expenses
are covered in other sections of this manual.
Federal Social Security Act
Section 115 of the State Finance Law
Section 112 of the State Finance Law
GUIDELINES TO DETERMINE A NON-EMPLOYEE
Payments by-voucher should only
be made to an individual when it can be determined that
the individual acts as an independent contractor in providing
the service. The following general description is provided
to agencies in determining if a voucher can be used to
pay an- individual:
An independent contractor is
one who agrees to do a specific piece of work for a lump
sum or its equivalent, who has control of himself and
his helpers as to when, within a reasonable time, he shall
begin and finish the work; as to the method, means or
procedure of accomplishing it; and who is not subject
to discharge because he does the work as to method and
detail in one way rather than another. Often he furnishes
his own tools and supplies.
1. Each agency is responsible for determining if payments
to individuals through the voucher processing system clearly
meet the tests of "independent contractor".
2. Each agency is responsible for developing adequate
documentation to support the fact that a voucher payment
to an individual meets the "independent contract"
test. The rationale justifying this determination may
be required before a voucher will be paid. If the actual
facts of the situation establish that an employer/employee
relationship exists, the individual will be treated as
an employee even though the agency may have submitted
a contract; payments then will have to be made on the
State payroll system.
3. If the payment for services to be rendered by an independent
contractor will exceed $5,000 within a fiscal year, a
contract should be entered into and submitted for review
and prior approval.
4. Contracts are not necessary in those cases where payment
is based on a state-wide approved fee schedule (e.g.,
medical fee schedule or stenographic services rate schedule).
When a contract is not feasible or practical because of
special circumstances, this should be discussed and cleared
with the department.
5. Each agency is responsible for establishing whether
an individual to whom a voucher payment is planned is,
or has been, on the payroll of the State at any time during
the current calendar year. The State encompasses any department,
board, commission, etc, that has its payroll processed
by OSC. The legislature, its commissions, and the judicary
are included as the State.
Generally, if an individual is-an employee of the State
and provides services to another department, board, etc,
of the State, he/she must be paid for these services as
an employee. The extra service procedures of the State
payroll system provides a method of making these payments.
Payments to employees who provide
a product or lease property or equipment to the State
are not governed by these extra service provisions. These
payments can be made in the State voucher payment system.
Agencies should be aware of the appearance of conflict
of interest in dealing with State employees who provide
goods or lease equipment or services.
Payments to individuals for
an honorarium, either for services rendered or in lieu
of expenses, are governed by this section. In most instances,
an honorarium payment meets the independent contractor
definition and can be paid on the voucher processing system.
PROCESSING VOUCHERS FOR NON-EMPLOYEES
Processing vouchers for payment
to individuals that comply with this Section can be made
in accordance with the existing procedures as outlined
in the User Procedure Manual, Volume III, Encumbrances
and Expenditures, Section 7. In all instances, payment
to individuals require the individuals social security
number to be entered in the payee identification block
and a 'N' entered in the 1099 code block of the voucher.
The State is required to report
to the Federal government all payments made to individuals
during the calendar year. The Federal government can assess
a fine against the State for each individual reported
without a social security number or an employee with an
incorrect social security number. The Federal government
receives the State's payroll records and voucher payment
records, so it is important that agencies comply fully
with the intent of this Section.