The primary difference between an employee and an independent contractor is the level of control asserted by the University of Nebraska System. If the University of Nebraska System has the right to direct or control work, the individual is an employee.
If the University of Nebraska System classifies an employee as an independent contractor without a reasonable basis for doing so, the University of Nebraska System may be held liable for employment taxes for that worker, plus interest and penalties, by the Internal Revenue Service.
The Employee vs Independent Contractor Checklist should be used to determine if a person performing work for the University of Nebraska - Lincoln should be paid as an employee or independent contractor. Human Resources recommends that this checklist be used prior to hiring an individual or an independent contractor. A copy of this form should retained in the department's employee or independent contractor's folder.
Determination Questions
If the answer to any of these questions is YES, the person should be considered an employee:
- Is the person currently a UNL employee?
- Has an offer of employment been extended?
- Has the person been a UNL employee within the past 12 months in the same or similar capacity?
- Will the department/unit provide the individual with specific instructions regarding performance of the required work rather than rely on the individual's expertise?
- Will the University set the number of hours and/or days of the week that the individual is required to work, as opposed to allowing the individual to set their own schedule?
- Will the individual submit a time sheet?
- Will the University provide an office for the individual?
- Will the University provide training for the work?
- Will the individual use University tools or equipment?
- Will the individual be instructed on whom to assist with the work?
- Will the individual be told where to purchase supplies?
- Will the individual be eligible for UNL benefits?
Other considerations
- Does the individual make his/her services available to the relevant market?
An independent contractor is generally free to seek out other business opportunities. They advertise, have a business location and available to work in the market.
- How often will the individual be paid?
An independent contractor is usually paid a flat fee.
- To what extent will the individual be reimbursed business expenses?
An independent contractor may incur business expenses that will not be reimbursed by the University.
Taxes
| Employee | Independent Contractor |
|---|---|
| Employer reports payments made to employee on Form W-2 | Employer reports payments made to person on Form 1099-Misc |
| UNL withholds payroll taxes, pays unemployment taxes and Social Security | Service provider is responsible for paying own employment taxes |
Resources
The Employee vs Independent Contractor Checklist should be used to determine if a person performing work for the University of Nebraska - Lincoln should be paid as an employee or independent contractor. Human Resources recommends that this checklist be used prior to hiring an individual or as an independent contractor. A copy of this form should retained in the department's employee or independent contractor's folder.
The University of Nebraska's federal tax webpage also provides information about determination and taxation. Scroll down to review the section titled "Worker Classification - Employee vs. Independent Contractor."
If you need assistance making a determination, contact Payroll Services payroll@unl.edu or IANR Finance & Personnel ianrhr@unl.edu.