University of Saskatchewan

Financial Services Division (FSD)

Employment vs.Contracted Services Guidelines

Overview

The purpose of these guidelines and the board-of-governors-approved policy (found at http://www.usask.ca/university_secretary/policies/index.php) is to ensure that:

In an attempt to streamline processing, the university has classified the payments into different groupings and provided a definition of an honorarium (see Procedure 1.) and created simplified procedures for two other payment types that occur frequently at the university … “guest lecturer/speaker” and “academic reviewer” remuneration (see Procedure 2.).

Departments with frequent recurring arrangements for a particular type of service can arrange, via Purchasing Services, to have a contract template approved through Corporate Administration (see Procedure 3.).  Departments can use the template to formalize these recurring arrangements. 

For all other situations, departments begin by answering the questions in the “Employment vs. Contracted Services Questionnaire” (see Procedure 4.). 

A)   If an individual, or owner of a non-incorporated business, is a current University of Saskatchewan employee complete Section A of the Questionnaire and contact your Human Resources Analyst before proceeding any further. Typically, employees of the University of Saskatchewan working outside their home department/unit, regardless of whether the work is consistent with normal duties, will be considered to have an employment relationship with the university.

B)   If an individual, or owner of a non-incorporated business, is not a current employee, start answering the Questionnaire at Section B.  The answers you provide in Section B will determine whether or not you can proceed to Section C.

If you are able to proceed to Section C, the answers to the Section C questions will help determine the status of the proposed arrangement.  These questions are the same questions that the Canada Revenue Agency (CRA) will ask if there is a dispute between an individual, or owner of a non-incorporated business, and the university regarding the arrangement. Again, if the analysis of the answers indicates employment, you must follow the university’s hiring procedures.  If the analysis indicates that the arrangement is a contracted service, you must follow the university’s procurement procedures.

Scope

These guidelines apply to all departments of the University of Saskatchewan, regardless of the source of funding, when arranging with an individual, or an owner of a non-incorporated business, to supply services to the university, other than for the situations described below

1. If the service is in contravention of the contracting-out provisions of any existing collective agreements, the arrangement must be set up as an employment relationship.
2. If the department chooses to hire the individual as a full-time, part-time or casual employee, the arrangement must be set up as an employment relationship.

Service contracts with incorporated businesses are subject to normal university procurement policies and procedures. Further guidance is provided on the Financial Service Division’s website under the Contracting for Services Guideline.

Procedures

    1. Honorarium

      An honorarium is a payment for services for which fees are not legally required. Often there is no expectation of remuneration (i.e. the service would likely be provided whether or not there is payment).  An honorarium payment:

      • must not be for work that is in contravention of the contracting out provisions of any existing collective agreements and
      • should be infrequent and one-time in nature and
      • must be no greater than $1,000.

      Examples of payments which might meet the criteria of an honorarium include payments to elders, research subjects (Research Participants Funding Requisition ), note takers for students with disabilities, etc.

      Note: For current employees, there will be few, if any, payments that meet the definition of an honorarium.  To report over time, extra hours and other one-time payments to employees, you will need to use the current payroll related processes for reporting these types of activities.

      Honorarium payments are processed on the Honorarium Requisition form.  A T4A will be issued to individuals for all honorarium payments.

    2. Guest Lecturer/Speaker and/or Academic Reviewer Remuneration

      Guest lecturer/speaker remuneration - an amount paid to an individual, or owner of a non-incorporated business, with expertise in a particular field, engaged to give one or a few lectures for the university (rather than as a substitute for a regular instructor).  A guest lecturer/speaker has no ongoing responsibility to the participants (e.g. grading).         

      Academic reviewer remuneration - an amount paid to an individual, or owner of a non-incorporated business, with expertise in a particular field, engaged to perform a review of a department/college/unit or program and to issue a report of their findings.  Reviewers, because there is a limited choice of individuals qualified to perform these reviews, are considered to be ‘sole source’ suppliers.

      Note: A current University of Saskatchewan employee cannot be paid as a guest lecturer/speaker or academic reviewer.

      To requisition a payment for:

      1. a guest lecturer/speaker, departments must submit a Service Income Requisition and attach a memo, signed by the department head/dean, describing the nature of the speaking engagement including the dates, times and subject matter.
      2. an academic reviewer, departments must submit a Service Income Requisition and attach a memo, signed by the department head/dean, describing the nature of the review and including reference to the required report that will set forth the findings of the review. 
    1. Recurring Engagement

      In the case where the same, or a different individual, or owner of a non-incoporated business, is engaged again under the same terms and conditions as a previous engagement, for which an Employment versus Contracted Services Questionnaire was already completed, complete the Recurring Engagement/Approved Contract Template Certification Page.

    2. Complete "Employment vs. Contracted Services Questionnaire"

      The “Employment vs. Contracted Services Questionnaire” (referred to hereafter as the ‘Questionnaire’) provides assistance in determining the income tax status of a prospective service provider by determining if the services are employment or can be established through an agreement to retain an independent contractor (e.g. consultant, self-employed individual). For additional information, see Appendix A – Employment vs. Contracted Services - Determining Factors.

      The Questionnaire only needs to be completed once per engagement, even where the period of the engagement covers more than one calendar year. However, if the terms of the engagement change, a new Questionnaire must be completed.

      After the first two pages of the questionnaire have been completed and the department has signed the “By, or on behalf of, the department head:” section of the Certification Page, if the estimated value of the work engagement is $1,000 or more, the Questionnaire, including the signed Certification Page is to be forwarded to Purchasing Services to review the department’s determination. 

      Note: For work engagements estimated at less than $1,000, that were determined to be a contracted service with an individual, departments will need to submit a copy of the signed Certification Page of the Questionnaire to Payroll, along with the Service Income Requisition when requisitioning a payment (see 7. To Facilitate Payment Processing).

      a)    If Purchasing Services agrees with the department’s determination, Purchasing Services will indicate so on the Certification Page of the Questionnaire and return it to the department for filing. 
      b)     If the department cannot make the determination, or if Purchasing Services (in consultation with Human Resources) does not agree with the department’s determination, Purchasing Services will forward the Questionnaire to the Manager, Taxation for a final decision.

      If the individual, or owner of the non-incorporated business, providing the service disagrees with the university’s determination, he or she may request a ruling from the CRA (Canada Revenue Agency) (refer to the CRA’s Form – CPT1 on the website: http://www.cra-arc.gc.ca/E/pbg/tf/cpt1/README.html.)  Where the individual, or owner of the non-incorporated business, has obtained a CRA ruling, the ruling will be binding.
    3. Employment

      If it is determined, upon completion of the Questionnaire, that the services should be secured through an employment relationship, normal hiring procedures apply.  Further guidance is provided on the Human Resources’ website at http://working.usask.ca/.  Please contact your Human Resources Analyst if you have any questions (http://working.usask.ca/contact/index.php).
    4. Contracted Services

      If it is determined, upon completion of the Questionnaire, that the services can be secured under a contract to retain an independent contractor, normal procurement policies and procedures apply based on the value of the services being provided.  Further guidance is provided on the Financial Service Division’s website under the Contracting for Services Guideline.

      A purchase requisition must be created, when contracting with a non-incorporated business, so Purchasing Services can set up a purchase order.

      Purchase requisitions/purchase orders are not issued when contracting with an individual.

      Note: Where university resources are provided/consumed/used to carry out the services, the university should charge the independent contractor a reasonable amount for these services. Generally, the amount will be based on the usual rates and charges set by the university (e.g. for space rental details/fees, contact Facilities Management Division – Space Planning; for telephone usage rates, contact Information Technology Services (ITS) – Telephone Services).  

      Payments made to Canadian residents will be reported on a T4A, which is mailed out by the end of February of the following calendar year. 

      Where the independent contractor is a non-resident of Canada, tax will be withheld in respect of services performed in Canada, based on CRA guidelines, unless a waiver form is approved by CRA prior to submission of the payment request. In all cases, a T4A-NR will be issued and mailed out by the end of February of the following calendar year.
    5. To Facilitate Payment Processing:

      If the contract to retain an independent contractor is:

      1)    with an non-incorporated business, departments must:

      a)    create a purchase requisition in UniFi, thus enabling Purchasing Services to set up a purchase order (PO).
      b)    enter receiving information in UniFi.
      c)    submit the service provider’s invoice to Payment Services, referencing the PO number.

      2)    with an individual, departments must submit:

      a)    a Service Income Requisition form to Payroll and
      b)    a copy of the Certification Page on page 4 of the Questionnaire or a copy of the Recurring Engagement/Approved Contract Template – Certification Page and
      c)    the service provider’s invoice.

      Note: The account code normally used for these payments is:  70403 - Externally Contracted Services – Other. 

    Contacts

    For assistance in determining the relationship:

    Employment relationships - Human Resources - 966-6270
    Contractual relationships - Purchasing Services - 966-6704
    Honorariums - Payroll - 966-8328


    Appendix A

    Employment vs. Contracted Services - Determining Factors

    Many factors determine whether a relationship is employment or a contracted service. No single factor is determinative; rather, the whole arrangement must be considered.  Often, the Canada Revenue Agency (CRA) will scrutinize arrangements with current and former employees more closely.

    1. An independent contractor (e.g. a consultant, self-employed individual) often assumes additional costs and risks and has fewer legal protections than an employee.
    2. Independent contractors generally are not provided with employee benefits, such as vacations, pension contributions, and employment insurance.
    3. CRA considers the following factors:  
      • the level of control/supervision the university has over the individual
      • whether or not the individual provides the tools and equipment
      • whether the individual can subcontract the work or hire assistants
      • the degree of financial risk taken by the individual
      • the degree of responsibility for investment and management held by the individual
      • the individual’s opportunity for profit
      • other factors, such as the intention of the parties

        For further details, refer to the CRA’s guide “RC4110 – Employee or Self-Employed?” at: http://www.cra-arc.gc.ca/E/pub/tg/rc4110/README.html

    4. The department is entitled to control the end result of the product or service acquired regardless of which arrangement is selected, although, generally, the department cannot direct when and how the work is carried out if an independent contractor arrangement is selected.

    5. The intention of the parties is a relevant factor; however, the underlying reality must support this intention.  For example, if it is the intention of the parties to enter into an independent contractual arrangement, normally, the department must accept that the individual is not required to obtain permission to leave for personal appointments or to hire or sub-contract for assistants, etc.

    6. If the department has concerns with the degree of independence normally retained by an independent contractor, the arrangement could be set up as an employment relationship.  Equally, an employment arrangement should be established where the individual is unwilling to commit to the financial risk, investment and other responsibilities normally assumed by an independent contractor (e.g. training, capital investment, business practices such as issuance of invoices, payment of expenditures, establishing a Workers’ Compensation Board (WCB) account, etc.).
    7. Generally, the duration of the work engagement is not a relevant factor.  However, if the term of the engagement is ongoing, and/or is more in the nature of a permanent arrangement, the CRA may consider this as one factor in support of employment.

    8. Where the work performed by the independent contractor is similar to work carried out by a current or former university employee, the department must be satisfied that the two arrangements are sufficiently different to justify the independent contractor determination.  Please contact your Human Resources Analyst with any questions you may have in making this determination (http://working.usask.ca/contact/index.php).
    VersionsDocument NameHelp
    Agreement for Services Valued Up To $5,000.00 CAD - Template V.B.2.11.09
    Cheque Requisition/Reimbursement Claim
    Recurring Engagement / Approved Contract Template - Certification Page  
    Employment versus Contracted Services - Questionnaire  
    Honorarium Requisition  
    Job Information Form (JIF) - Human Resources  
    Service Income Requisition