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Employees of a State Agency Performing Service for Another Department or Agency Policy

The reporting entity (employer) is the agency or group of agencies using a single EIN. Below are some suggestions for how to pay individuals performing services for other departments or State agencies:

If an individual is hired and performing services under an employee/employer agreement; then, the individual should be treated as an employee and paid through the payroll system. Any income earned by the employee should be reported at calendar year end on a Form W-2.

If the individual is performing a function not usually associated with their employment, and the function is performed outside of their normal work hours and place of employment, the agency may pay the employee on an accounting voucher. An example follows:

Example: A full-time accountant for Facility Services builds custom cabinets for clients after his regular work hours. Facility Services contracts with the employee to build a special display cabinet. The employee charges $700 for the labor. The agency can pay the employee under a personal services contract as an independent contractor.

If the employee of one State agency contracts to do similar work for another State agency (with a different EIN), the second agency should apply the "20 Common Law Factors" to determine the individual's employment status. Professional Service Contracts are covered in the State Personnel Manual.

Example: If UNC Greensboro hires a UNC Chapel Hill professor to teach a weekend seminar, UNC-G may have to add the UNC Chapel Hill professor to its payroll. The decision as to the professor's employee/ non employee status is determined by applying the IRS "20 Common Law Factors".