Personal and Service Contracts - NMU Purchasing

NMU may hire independent contractors via Standard or Limited Personal Services Contracts. This page helps determine contractor status and outlines the process.

Throughout this page:

• the initiating department, meaning the NMU department seeking to enter into a services contract with an external Contractor, is referred to as the “Requester.”
• the Purchasing Department is referred to as “Purchasing.”
• the person/company providing services is the “Contractor.”
• Standard and Limited Personal Services Contracts are the “Services Contracts.” 
• entry of contracts into the Banner system is performed by the Vendor Payables Department in the Office of the Controller (“VenPay”). 

In addition,  Requesters may want to review the full policy and more detailed procedure at the NMU Policy Document Management System. The full policy page also includes a helpful checklist for determining when a service relationship constitutes an employment relationship. 

1) Requester: Determine whether an independent contractor is appropriate. 

Only use an external Contractor when the required services are not available within the University. For example, if an event requires food service, the Requester must coordinate with the Northern Center's Catering Department rather than contracting externally. 

2) Requester: Determine whether the individual should be an employee. 

NMU employees (full-time, part-time, or temporary) may not be paid through Services Contracts. Human Resources will guide Requesters/departments through hiring temporary employees. If NMU controls the means and manner of the work and the individual functions as part of the regular workforce, a Services Contract is not appropriate. In these cases, the individual must be hired through standard employment processes or a temporary employee contract, guided by HR. 

Under Internal Revenue Service guidance (including Publication 15-A), the following factors generally indicate an employee relationship, regardless of how the arrangement is labeled:

• NMU controls how, when, and where the work is performed 
• NMU provides tools, equipment, or workspace 
• A fixed schedule or ongoing availability is required 
• The individual performs core or ongoing operational duties 
• Payment is recurring (hourly or salary-like) rather than project-based 
• The relationship is continuous rather than project-specific 
• The individual is restricted from working for others or treated as part of the internal team 

The Office of the Controller has provided a form for Requesters to assess whether the services indicate an employee relationship. Review this checklist attached as a form at the bottom of the Standard and Limited Personal Services Contract Policy page.

3) Requester: Confirm funding availability. 

Before completing any forms, check the org balance to confirm that sufficient funds are available to pay the Contractor.

4) Requester: Initiate the required forms. 

Limited Personal Service Contract -or-
Standard Personal Service Contract -and-
Transmittal Form -and-
IRS W-9 

Once it is determined that an independent contractor is appropriate, determine whether a Limited Personal Services Contract or a Standard Personal Services Contract is most appropriate. 

Use a Limited Personal Services Contract for short-term, one-time services, such as:

• One-time events (concerts, lectures) 
• Guest speakers or performers 
• Athletic officials 
• Professional trainers (for non-academic credit only)
• Evaluators

Use a Standard Personal Services Contract when:

• Services extend beyond 6 weeks 
• Insurance requirements are needed (for instance, when the services being provided involve risk)
• Multiple payments are planned (tied to deliverables, not hours worked) 
• Compensation depends on performance of contract terms to be detailed in an addendum

Then the Requester completes the NMU portions of the following documents:

• Limited Personal Service Contract -or-
  Standard Personal Service Contract -and-
  Transmittal Form 
  (the IRS W-9 is completed by the Contractor; NMU does not complete any portion of this form). 

Important Requirements:

• Contracts must be fully executed before services begin 
• Include complete service dates and clear descriptions of services 
• Limited Personal Services Contracts must include one total dollar fee amount (reimbursable expenses for lodging and travel reimbursement may be separate, but remember that air travel and hotel expenses are reimbursed at actual with appropriate receipts. You may detail the reimbursable expenses on the general terms and conditions page if the reimbursable expense details require extra space 
• Travel reimbursement terms must be specific. For example:
  • “Meal per diem of $59/day for two days plus actual airfare and lodging reimbursed up to $900 total. Receipts are required except for meal per diem -or 
  • “NMU will arrange and pay for airfare and hotel; no additional travel reimbursement without prior approval” 
• The Transmittal Form identifies payment details, funding source, and the authorizing signature.

5) Requester: Send the Services Contract draft and the link to the IRS W-9 to the Contractor.

At this stage, the Requester should have a draft Services Contract ready to send to the Contractor. If the contract has been modified or an addendum has been added, the Purchasing Department can, upon request, review the terms before the document is sent.

Send the partially completed Services Contract and the W-9 link (or W-8 for non-U.S. individuals) to the Contractor for signature. Do not send the Transmittal Form to the Contractor.

A W-9 must be completed the first time a Contractor does business with NMU. Although a new W-9 may not be strictly required for repeat engagements if a current form is already on file, obtaining an updated W-9 is recommended as a best practice and is required by the Purchasing Department for each Services Contract.

6) Requester: Submit complete forms to Purchasing for review, approval, and processing. 

After the W-9 and Services Contract have been completed and signed by the Contractor and the Transmittal Form has been signed by the Department Head (or org owner), all three documents are sent to Purchasing. Note that just the first page of the W-9 is required; there is no need to send copies of all the W-9 instruction pages. 

Preferred method is email to purchase@nmu.edu
If paper copies must be sent, use interoffice mail to Purchasing at the 136 Services Building 

7) Purchasing: Process and approve the Contract.

The Internal Revenue Service requires Contractor approvals before services are performed. Failure to do so may result in penalties. Purchasing will review the Services Contract and accompanying W-9 and Transmittal Form for:

• Appropriateness of Contractor vs. employee classification 
• Adequacy of service description and contract type 
• Insurance requirements (in consultation with Risk Management) 
• Presence of a W-9 
• Proper authorization signatures 
• Conflicts of interest (e.g., hiring oneself or relatives without required approvals) 
• Travel reimbursement clarity 

Processing typically takes 1–3 days once Purchasing receives the documents, but departments should allow up to 45 days from initial contact with the Contractor to the proposed service date to allow time to gather signatures from the Contractor, the Department Head, Purchasing, and to process the information on Banner and Concur. For urgent requests, contact Joe Ombrello.

Purchasing will copy the Requester on the email when submitting the completed forms to Vendor Payables for processing. Vendor Payables will establish the Contractor in Banner and Concur to enable payment after services are completed and to facilitate year-end IRS reporting.

8) Requester: Pay the Contractor.

Completion of the Services Contract does not automatically trigger payment to the Contractor. Payment must be initiated manually by the Requester, who is responsible for confirming that services have been completed and starting the payment process.

Once services are complete, the Requester (or the Requester’s department) initiates payment through Concur Invoice in MyNMU. Concur Invoice issues payment either by check to the address on file or by ACH to the bank account on file.

In rare cases where immediate payment is required, a check request may be submitted through Concur. If expedited payment is necessary, notify Purchasing so appropriate arrangements can be made.

If you have questions, please contact Joe Ombrello, Purchasing Director at (906) 227-2360 or purchase@nmu.edu.