2.5 Personal Service Contracts (REVISED 3/05/2024)

Administrative Responsibility: Associate Vice President for Business Services / Procurement

PURPOSE

The Personal Service Contract (PSC) and PSC Checklist are University documents approved by the Office of General Counsel, with terms and conditions that are not subject to modification. The PSC is used to contract for professional services with individuals, acting as independent contractors, who are not WSU employees or would otherwise present a conflict of interest.^[1] It is not used for services provided by corporations, partnerships, companies, or other business entities. Nor is it used to pay individuals who should be classified as employees as described in the following policy section.

SCOPE

This policy covers all individuals providing professional services, acting as independent contractors, who are not WSU employees and would otherwise present a conflict of interest.

DEFINITIONS

The following are terms and definitions of some commonly used terms in the procurement cycle:

Independent Contractor	An independent contractor is a self-employed person or entity contracted to perform work for—or provide services to—another entity as a non-employee.
Personal Service Contracts	A contract under which the personnel rendering the services are not subject, either by the contract's terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the University and its employees.
Personal Service Checklist	A form that, when completed, provides information that assists the University in determining whether the individual performing the service will be classified for tax purposes as an employee of the University or as an Independent Contractor.
WayneBuy	The University eProcurement & Requisitioning System used for the placement of all regular purchase orders and payment of invoices submitted by Departments through the direct payment request (DRP) process.

POLICY

Any individual who receives compensation for services from the University must be either an independent contractor or an employee. If the individual is an employee, he or she must be assigned to the payroll in accordance with University policies and procedures. Departments that are hiring individuals who provide professional services must complete a PSC and a PSC Checklist. Once fully approved and signed by all parties, the Department must then submit a WayneBuy Requisition with the fully executed PSC to the Procurement & Strategic Sourcing (Procurement) Department.

Any individual who performs services, and is subject to the will and control of the University, both as to what is to be done and how it should be done, must be treated as an employee for purposes of federal payroll taxes. It does not matter that the University permits the individual considerable discretion and freedom of action, so long as the University has the legal right to control both the method and result of the services. It also does not matter whether the individual is employed full-time or part- time, or where the employee performs the work.

Generally, an independent contractor is a person or entity who performs services that the payer has the right to direct or control the result of the work, and not what will be done or how it will be done. An independent contractor can be an individual, partnership, and incorporated or unincorporated company. An independent contractor is someone who is in business for themselves and generates a profit or loss; offers their services to the general public; and should be responsible for the payment of their own business expenses. However, use of a Personal Services Contract is limited to situations where the University is contracting with an individual acting as an independent contractor.

The Internal Revenue Service has identified a set of factors that it relies on to measure the degree of control and independence. The questions fall into three main categories: Behavioral, Financial, and Type of Relationship. These questions are contained in the Personal Service Checklist, and must be completed with the assistance of your HR Consultant. This checklist and the PSC are available online on the Procurement website at procurement.wayne.edu, under the Forms link.

When a worker who should be treated as an employee is improperly retained as an independent contractor, whether through the Personal Service Contract or the honorarium process, the University is exposed to possible legal and financial liability for failure to:

Withhold payroll and social security taxes in accordance with federal, state, and local laws;
Report wages paid to the Michigan Unemployment Insurance Agency (UIA), in accordance with Michigan law;
Properly account for the payment of employer unemployment taxes;
Properly pay fringe benefits to which an individual may be entitled.

Any financial liabilities (fines and penalties) associated with improper use of the Personal Service Contract will be borne within the University by the budgetary resources of the respective Vice President.

In order to properly initiate a PSC, the scope of work, length of time to perform the service, and qualifications of the individual performing the service must be determined, and become integral components of the agreement. Individuals qualified to perform the service must submit proposals with cost schedules. It is the responsibility of the requesting unit to ensure that all individuals under consideration for the performance of a given service to the University are treated in a fair and impartial manner.

Payment for the personal professional services of individuals who are not employees of the University must be pursuant to a completely executed PSC contract. Work covered by a PSC should not commence until the appropriate PSC and the PSC Checklist have been fully executed by the appropriate university personnel. The University will not pay for services rendered prior to the execution of the PSC and the PSC Checklist.

This PSC and PSC Checklist may both be signed by PDF digital signatures, facsimile signatures or other forms of electronic delivery of an image file reflecting the execution hereof, and, if so signed: (i) may be relied on by each party as if the document was a manually signed original and (ii) will be binding on each party for all purposes. The checklist must be signed by the authorized University official (or officer at same level as University official) who will sign the Personal Services Contract.

PSCs for $50,000 or more must comply with the Competitive Bid Process. (Refer to APPM Section 2.4), and University Policy 04-6, Contract Signatories

I. If contract to be awarded is less than $50,000:

PROCEDURES

Responsibility	Action
Department	Determine scope of work to be performed Obtain proposals, bids or quotes as appropriate. Select vendor and determine cost. Complete the Personal Services Contract Checklist. Email checklist to HR Region email assigned to area for assistance with determination of Independent Contractor or Employee status.
HR Client Services	HR Consultant (HRC): Review and consult with department on appropriate classification. For employee classification, HRC and Talent Management Consultant: Contact department for next steps. For independent contractor classification, HRC: Send the signed checklist back to department. (Follow procedure outlined below)
Department	Prepare Personal Services Contract and have the contractor sign the PSC. Forward the PSC to proper University office for contract signature. (For signature authority see University Policy 04-6). After signature of appropriate administrative officer, return documents to the Originator. Generate a Requisition using the WayneBuy PSC form, attach the signed PSC and approved PSC Checklist, and complete. For new Vendors, rcomplete a Individual Payee Create, Update or Reactivation Request form in WayneBuy, and submit to Procurement. Completion of the form includes providing the individual’s name, email address, any physical address or phone if known.
Procurement	Review all documents for appropriateness/completion (e.g. HR signature on Checklist, bid waiver, signatures, quotations, etc.) If denied, return or reject Requisition online in WayneBuy and notify department of the rejection and reason. If approved, approve the Requisition. University Policy 04-6 indicates the appropriate level of Procurement approval. WayneBuy will systemically issue a Purchase Order. Send completed purchase order with a copy of the executed contract to the independent contractor.
Department	If the request is rejected for any reason, review the explanation provided by Procurement. If appropriate, correct and resubmit the Requisition and PSC via WayneBuy.
Note	A Process Flow Chart is available on the Procurement website that outlines the above process at procurement.wayne.edu, under the Forms link.

II. If contract to be awarded is $50,000 or more:

Responsibility	Action
Department	Determine scope of work to be performed. Obtain quotations from qualified individuals. Contact Procurement for support as needed (see APPM 2.4 Goods, Equipment and Services for $50,000 or more). Complete the Personal Services Contract Checklist. Email checklist to HR Region email assigned to S/C/D for assistance with determination of Independent Contractor or Employee status (refer to HR Client Services Contact list for email information). If this contract is for a highly specialized service where a public bid would not be appropriate, or in the case of an emergency, bid waiver approval may be requested from the Associate Vice President of Procurement. A Bid Waiver Request form is available on Procurement's website. Then obtain approval following the steps below: Document the circumstances in a request for Bid Waiver Request form. Submit the request for bid waiver to the Dean/Director for approval or denial. Upon approval, proceed to step (c); if denied, return to requestor. Submit to the Vice President of the Division for approval or denial of the request for bid waiver. Upon approval, proceed to step (d); if denied, return to requestor. Submit to Procurement for approval or denial of the request for bid waiver. If bid process was performed, select winning contractor and determine cost.
HR Client Services	HR Consultant (HRC): Review and consult with department on appropriate classification. For employee classification, HRC and Talent Management Consultant: Contact department for next steps. For independent contractor classification, HRC: Send the signed checklist back to department. (Follow procedure outlined below)
Department	Prepare Personal Services Contract and have the contractor sign the PSC. Forward the PSC to proper University office for contract signature. (For signature authority see University Policy 04-6). After signature of appropriate administrative officer, return documents to the Originator. Generate a Requisition using the WayneBuy PSC form, attach the signed PSC and approved PSC Checklist, and complete. For new Vendors, complete a Individual Payee Create, Update or Reactivation Request form in WayneBuy, and submit to Procurement. Completion of the form includes providing the individual’s name, email address, any physical address or phone if known.
Procurement	Review all documents for appropriateness/completion (e.g. HR signature on PSC checklist, bid waiver, signatures, quotations, etc.). If denied, return or reject online in WayneBuy and notify department of the rejection and reason. If approved, approve the Requisition. University Policy 04-6 indicates the appropriate level of Procurement approval. WayneBuy will systemically issue a Purchase Order. Send completed purchase order with a copy of the executed contract to the independent contractor.
Department	If contract is rejected for any reason, review the explanation provided by Procurement. If appropriate, correct and resubmit the Requisition and PSC via WayneBuy.
Note	A Process Flow Chart is available on the Procurement website that outlines the above process at procurement.wayne.edu, under the Forms lin.

APPENDICES

N / A

RELATED UNIVERSITY/BOARD POLICIES

Effective Date: Prior to 2000

Revised Date: 6/27/2024

Reviewed Date: 3/05/2024

To be reviewed, at minimum, every three years and/or revised as needed by: Associate Vice President for Business Services / Procurement

Next Review By Date: 3/05/2027

SUPERSEDES POLICY

N / A

HISTORICAL DATES

11/02/2015, 1/31/2014, 01/01/2013, 04/01/2012, 09/01/2010, 08/01/2009

Policies and Procedures

APPM Administrative Policies and Procedures Manual