3.60 A. Independent Contractors

The Internal Revenue Service has identified specific characteristics of an independent contractor.  IMRF recommends before you identify an employee as an independent contractor, you file IRS Form SS-8 with the IRS. The IRS will then make an official determination regarding the position. Contact the IRS at www.irs.gov or 1-800-829-1040 for more information about IRS Form SS-8 (Exhibit 3D) .

A person performing services for you as an independent contractor is not an employee. Please note: if a member retired under the IMRF Early Retirement Incentive (ERI), that member cannot return to work for an IMRF employer, even as an independent contractor. Severe financial penalties apply if an ERI retiree returns to work for an IMRF employer, including work as an independent contractor. See Paragraph 5.20 C. 16.

The most important tests of whether a person is an employee or an independent contractor are:

  1. Whether the person is under your work direction and control as to the time and manner of work performance, and

  2. Whether the person offers services to others during the same period and his/her business can experience a loss.

However, other facts must be considered and each situation judged upon the particular facts involved. The following guidelines are offered to help you make individual determinations:

Indicates an Employee

Indicates an Independent Contractor

Works prescribed hours

Sets own work hours

Works at your office or premises

Works in own office or premises

Does not generally offer services to the public

Generally offers services to public

You furnish tools, equipment

Furnishes own tools and equipment

You furnish assistants

Furnishes own assistants

Paid a salary or hourly wage

Paid on a per job basis

You furnish fringe benefits, such as paid sick days, group medical and life insurance, etc.

Does not participate in fringe benefits offered employees.

You carry liability insurance

Carries own liability insurance

You provide unemployment insurance and workers' compensation



You cannot create an independent contractor relationship by merely designating a person an independent contractor. If you retain control over when and how a person works, that person remains an employee, even though you may enter into a contract which states that the person is an independent contractor. The actual working arrangements control, not the name given or the provisions of a written agreement.

Employers who attempt to avoid IMRF contributions by designating certain employees independent contractors or consultants, without changing the working conditions to give the employees the necessary independence of independent contractors, are subject to assessment for retroactive contributions. We caution you to carefully examine the classification of any persons who work a substantial time for you and are not classified as employees.

Public officials (such as clerks, treasurers, etc.), whether elected or appointed, are considered employees for IMRF purposes.

Related Topics