Compensatory payments do not include amounts paid to an individual to aid in the pursuit of studies. Such payments made with no expectation of past, present, or future services would be classified as scholarship/fellowship.
Compensation is an amount paid to an individual in an exchange for services. Labeling a payment made in exchange for services a fee or stipend does not change the nature of payment.
Compensatory payments include wages, salaries, professional fees, and other payments made for services performed and may be classified as:
- Dependent compensation: Amounts paid to an employee from an employer as salary or wages.
- Independent compensation: Amounts paid for services provided by a third party that has the right to control how the work is done. (i.e., payments made to an independent contractor or entity)
Refer to Policy 9.12 Independent Contractor Services for guidelines for determining whether a compensatory payment may qualify for independent compensation treatment. If the individual does not qualify as an independent contractor, the individual must be hired as an employee and paid through Payroll.