Contracts: Standard and Limited Personal Services Contract Policy - NMU Policies and Requirements

Northern Michigan University often supplements the current work force by hiring individuals to provide services to NMU through Personal or Limited Personal Services contracts. Personal and Limited Personal Services contracts are administered through the Purchasing department; beginning July 2024 Risk Management is no longer the administrator of these. Still, the following provides important information to help you determine whether you are hiring an employee or an independent Contractor.  It also provides the timeline for the process of submitting a Personal Services contract request. 

For these instructions, the department initiating the contract is called the “Requester.” 
The functions of the Purchasing department are labeled “Purchasing.” 
The person or company providing services is the “Contractor.”
The work of entering the contract to the Banner system is done by the Vendor Payables department in the Controller office.  

1) Requester: Determine if the services must be hired through an independent Contractor.  

Only hire an independent Contractor if the services you are considering are not provided on campus.  For example, if you are having an event which requires food, you must coordinate with the Northern Center Catering services for such support.

Also, you are not allowed to contract with any person already employed by NMU (full-time, part-time, temporary labor) without guidance from Human Resources. The Purchasing Director will consult with Human Resources if it appears that this is an employment contract, typically through a temporary employee process, rather than a service contract. 

As a guide, if the University is directing the means and manner of the work and relying on the individual as part of its regular workforce, a Services contract is inappropriate, then the individual should be hired through standard employment processes. If these factors are present, the arrangement likely meets the definition of an employee under Internal Revenue Service guidance (notably IRS Publication 15-A), regardless of how the contract is labeled:

• Controls how, when, and where the work is performed, rather than just the final result 
• Provides tools, equipment, or a regular workspace 
• Sets a fixed schedule or requires ongoing availability 
• Integrates the individual into regular operations (e.g., performing core, ongoing duties similar to staff) 
• Pays on a recurring basis (hourly/salary-like) rather than by project or deliverable 
• Expects a continuing relationship rather than a defined, limited project 
• Limits the individual’s ability to work for others or treats them as part of the internal team  

The Office of the Controller has developed a form to help determine if the Services Contract may be used, or if the terms of service actually indicate employment. 

2) Requester: Determine if there are enough funds in the account

Prior to completing forms, ensure there is appropriate funding accounted for hiring the independent Contractor. Check the org code and applicable account code available balance. 

3) Requester: Complete the NMU portions of the forms

Once it has been decided to hire an independent Contractor, the next step is to complete the required documents. NMU uses three documents which are available through Printing Services and are also attached below:

Limited Personal Service Contract – or - 
Standard Personal Service Contract
Plus the Transmittal Form

Note that the IRS W-9 Form is required, but NMU does not complete any portion of this required form. The required W-9 form must be completed the first time the Contractor does business with the University. It does not have to be completed with subsequent contracts with the same Contractor, but could be provided every time as a precaution. The required IRS form is available on the IRS website. If the Contractor is not a United States citizen, a W-8 form is used instead. 

Use the Limited Personal Services contract when the contract is for things like:

• a one-time event (like a concert or a lecture)
• individual performers or speakers
• athletic officials
• professional trainers (for non-academic credit only)
• evaluators  

Use the Standard Personal Services contract format in the following situations: 

• When the period services are being provided exceeds 6 weeks
• When the services being provided involve risk which will necessitate an insurance requirement to be inserted in the contract form or
• When multiple payments are planned (again, ensure that this is not an employee relationship. It is legitimate to pay multiple payments when they are tied to completion of phases of work, and not to number of hours worked)
• When the payment amount is to be determined based on performance of the terms of the contract.

The Transmittal Form arranges how the Contractor will be paid, what NMU org code the payment will be drawn from, and the signature of the department authorizing the payment. It should accompany each Limited and Standard Personal Service Contract when the forms are submitted to Purchasing.

It is crucial that these documents are completed and approved before the work is done. Include the dates of the entire period in which services will be rendered to NMU and the type of services to be provided. When completing the compensation portion on the Limited Personal Service Contract, there can be only a single dollar amount listed on the document.  This amount must encompass all fees to be paid for the entire project or program. Reimbursable expenses must be shown separately on these forms. Both the fee and expected reimbursable expenses must be shown on the Transmittal Form. 

4) Requester: Check additional terms with the Purchasing Department

If there are no addendums or additional clauses added to the standard contract templates, you likely do not need to pre-review the contracts with Purchasing. However, if there is an addendum or additional terms, it is best to check with Purchasing before sending the documents to the Contractor. 

5) Requester: Send the draft forms to the Contractor. 

The Contractor signs the Standard or Limited Personal Services Contract, and completes the W-9. 

6) Requester: Send the signed forms to Purchasing. 

Once the Transmittal form has been signed by the authorized person (typically the department head) and the Limited or Personal Services Contract has been reviewed and signed by the Contractor, send them, along with the completed W-9 to the Purchasing department to be approved and signed by a University representative. 

Paper versions can be sent to the Purchasing Department, 136 Services Building
Electronic /scanned versions can be emailed to Purchasing - purchase@nmu.edu

7) Purchasing: Process the Contract, Transmittal Form, and W-9

The IRS requires all independent Contractor requests to be approved prior to services being rendered to the organization.  Failure to approve such requests in advance may result in a fine levied against NMU for each contract approved after the fact.  NMU Purchasing will conduct the following review: 

• Purchasing no longer determines that the department has enough money to pay for the contract. For large contracts, Purchasing may email the department head an email that says something like: We are processing the service contract for VENDOR NAME. “This proposed payment is larger than typical service contracts, so we want to note that Purchasing no longer verifies available balances on organization codes prior to processing contracts. Organization code owners are responsible for ensuring that sufficient budget is available at the time of purchase.” 
• Purchasing will review the service to be provided and contact the Risk Manager if it seems as though additional insurance will be necessary or if the University must obtain proof of insurance from the Contractor. 
• Purchasing will review to ensure that a W-9 has been collected from the Contractor, meaning that the Contractor has been paid by the University in the past. For consistency, we have been requiring a W-9 for every contract. However, if we have had one executed within the last year we technically do not need a new one to process the contract. Use your discretion. We can use the K drive, the service contract table or Banner itself or Concur to check. 
• Ensure proper signature of the requestor on the transmittal form (a person authorized to approve spending money in the organization number that will be charged). We will not always have a list of proper authorities, but we will not check further when a department head signs for an account that looks like it is for their department. We will send it back if faculty, a TOP or administrative aide signs the transmittal form. We will also check more carefully that the department head is supportive of the contract. 
• Check to ensure that the service is not for something that the University can do for itself, or to pay a business that could be a conflict of interest. People are not allowed to hire themselves or close relatives on a service contract without VP approval. VPs must get Presidential approval for affiliated services. 
• Review travel reimbursement costs. Good examples of an email to a department that does not adequately describe travel reimbursement could be: 

“You indicate that a per diem and travel costs will be paid; however, this information is insufficient to process the contract. We understand that Contractors prefer to split the fees received from actual expenses reimbursed because it gives them a tax benefit. However, please specify the allowable travel expenses. For example: a meal per diem of $59 per day; hotel reimbursement and airfare will be reimbursed for actual expense not to exceed $900 total; mileage to and from campus reimbursed at $0.725 per mile, not to exceed $500; We anticipate reimbursement for two travel days and one day on campus, for a maximum of four per diem days and two hotel nights.” Or, for instance, “NMU will arrange and pay for hotel accommodations on Monday, June 2, and Tuesday, June 3. In addition, NMU will book and pay for round-trip airfare from Chicago, IL to Marquette, departing June 2 and returning June 3. No additional travel costs will be reimbursed without prior written approval.” Or, Compensation: Fee of $500 Reimbursable expenses: two days meal per diem of $59/day, totaling $118.  

• Ensure that there is a signature of the Contractor.  The Requester/contracting department will obtain this signature, and not the Purchasing department. NMU prefers to sign after the Contractor has signed. Depending on the location of the Contractor, the request may have to be mailed to and from the Contractor for signature prior to submitting the request; faxed signatures and email signatures are allowed for personal service contracts. 
• In certain cases where the contract has aspects of employer/employee relationship, such as an hourly wage indicated, Purchasing will contact Human Resources (Julane) for their review and approval.  The process takes between 1 and 3 days. 
• Review that the type of contract is correct. Review any addendum, especially when insurance is mentioned. 
• Enter the contract to the Service Contract table
• Scan the completed documents. 
• Save the scanned document in the K drive
• Send the scanned documents to venpay@nmu.edu and the Requester. Use this specific subject line: Vendor name – Co##### 
• For the text of the email, indicate to the Requester that the contract is signed and submitted to venpay, and that they (the Requester/initiating department) are responsible for paying the Contractor upon completion of the service through Concur. 

8) Vendor Payables: Complete the process to set up the Contractor on the Banner and Concur systems.

Vendor Payables inputs the information shown on the W-9 and the Services Contracts to Banner and the Concur Invoice Processing system. This ensures that the Requester can pay the Contractor in a timely manner and that the IRS will receive the required year-end tax reporting forms. 

9) Requester: Send payment to the Contractor. 

After services have been received, the Requester uses Concur Invoice to pay the Contractor. The Requester should calendar a task to ensure that the Contractor is paid within 7 days of when the services were completed.  

The requestor is responsible for ensuring that the contracted services have been completed.  Sign on to Concur Invoice through the Employee services tab of MyNMU.  Instructions for using Concur are available through the Vendor Payable department within the Office of the Controller. 

In the rare case where the Contractor will be paid immediately following the service, process a check request through Concur.  If short-term notice arrangements have to be made, immediately contact Joe Ombrello (906-227-2360).