Dear Colleagues:

A cross-functional team recently reviewed Penn’s policies to ensure the University’s compliance with federal laws and regulations on how individual service providers are classified, paid, and taxed. A pilot of the updated policies and procedures was conducted with the Perelman School of Medicine, School of Arts and Sciences, School of Design and Wharton.

Based on feedback from pilot participants, and following discussions with leadership and other stakeholders, these policies, procedures and processes have been finalized and are now available to the University community. More information, including the updated policies and documents, and background on the review process, may be found at www.hr.upenn.edu/isp

The most relevant points to be aware of include:

Classification of an individual service provider as either an employee or independent contractor must be completed prior to any agreement with the individual or performance of service.

The classification decisions will be made by the School/Center Human Resources Director and will be made based on information provided by the individual and an evaluation of the position and the services to be conducted. Beginning January 1, 2017 all individual service providers must go through the review process to determine their status. The tools located on the Individual Service Provider Classification website at http://www.hr.upenn.edu/isp will help you with this determination.

It is likely that under new guidelines issued by the US Department of Labor that individual service providers who have in the past been considered independent contractors will now be considered temporary, part-time, or full-time employees.

Guest speakers, artists, presenters, special lecturers and distinguished speakers at University functions who provide one-time or once-per-year services will use a special “limited engagement” process.

Agreements with independent contractors and limited engagement individuals must be documented in writing, via contract prior to the performance of services. 

Positions filled by individuals who are currently paid as independent contractors who have conducted work for the University on a regular or ongoing basis for one year or more are required to be evaluated for proper classification.

Training on these policy updates has been conducted for Business Administrators and others. BAs and School/Center HR Directors are aware of these changes and can be a resource if you have questions. Rollout of the changes is ongoing, with full implementation expected by July 1, 2017. This timeline allows Schools/Centers time to identify and resolve any issues while minimizing impact on work. 

We understand the role individual service providers can play in furthering research and enhancing the education of our students. At the same time, the University must be in compliance with federal, state, and local laws and regulations. The Internal Audit team will be performing reviews in the future to help ensure compliance. 

The financial consequences of non-compliance can be significant. More importantly, we must consider the reputational risk to the University. Penn is a responsible employer with a global reputation for excellence, and we each play a role in maintaining that reputation. 

We appreciate your attention to these matters and thank you for your support. 
 

—Jack Heuer, Vice President of Human Resources
—MaryFrances McCourt, Vice President for Finance and Treasurer