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The following links will explain some of the benefits available to UC employees.

The relationship between the payee and the University must be determined first in order to process the payment correctly and comply with the taxing authorities. The following will explain the different between an employee and independent contractor.

Employee vs. Independent Contractors – Tax Treatment

A worker’s relationship with the University or hiring organization determines how compensation is taxed. It is very important to correctly determine whether the individuals providing services are employees or independent contractors. Generally, the University must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. The University does not generally have to withhold or pay any taxes on payments to independent contractors.

Before you can determine how to treat payments for services, you must first know the business relationship that exists between the University and the person performing the services. The person performing the services may be:

Employees – An employee is an individual who performs a service for the University and is working under the direction and control of the University or its employees. Direction and control can be implied to exist when the employer has the right to control the results as well as the means and methods of the worker.

Generally, the employer must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. Student employees are exempt from FICA.

Independent Contractors – An independent contractor is an individual engaged by the University to perform a specific function or task, and who is free to perform this function or task at the individual’s own discretion with regard to means and methods.

The University does not have to withhold or pay any taxes on payments to independent contractors. Departments must consult the Purchasing Department when engaging an independent contractor.

Definition of Payments for Services:  

  • Honorarium is an award granted in recognition of a special service or distinguished achievement. It is a monetary gift which DOES NOT require a service to be “paid.” A payment given to a professional person for services for which fees are not legally or traditionally required.
  • Lecture fee is a payment for a one time lecture or a series of lectures that occur in a span of two weeks or less.
  • Performance fee is made to an individual or group for professional services not directly related to an academic function.
  • Consulting Fee is a fee to one who gives professional advice or services generally considered an expert in their field.

Definition of Non-Service Payments:

  • Awards/Prizes
    • Fellowship/Scholarships are for the purpose of aiding study, training, or research.
    • Other Awards are payments for recognition for some special achievement, skill, knowledge, or renown in a certain area or are won from a contest.
    • Death Payments are payments to a beneficiary upon death of an employee.
    • Reimbursements are payments to compensate an individual for money spent for a UC business item. This includes travel expense.
    • Retirement Payments are paid to individuals upon qualified retirement.
    • Royalties are payments made for the use of property, especially a patent or copyrighted work.