(Updated Aug. 1, 2023)
The taxation of compensation is determined by the worker's relationship with the university or hiring organization.
Employees
- An individual who provides services to the university and operates under the direction and control of the university or its employees.
- The existence of direction and control is typically inferred when the employer retains the authority to oversee the work's outcome and the worker's mods and procedures.
In general, employers are responsible for the following:
Independent Contractors
- An individual the university hires to carry out a particular function or task.
- Independent contractors are free to exercise their judgment and discretion in performing the assigned function or task, including the methods and procedures used to accomplish it.
Note: The university does not have to withhold or pay any taxes on payments to independent contractors (IRS Treasury Regulation 31.3401(c)-1(b)).
Collective Bargaining Agreements and AB 5 place further restrictions on when the University can engage with an individual as an Independent Contractor and not hire them as an employee.
Departments are required to utilize the Independent Contractor Pre-Hire worksheet when evaluating a candidate as an independent contractor.
- The form must be completed by the requesting department AND submitted to UC Merced Human Resources for a final determination on whether the individual can be hired as an independent contractor.