Importance of Determining Compensatory or Non-compensatory Payments

It is important to identify whether or not payments to an individual are paid as compensatory or non-compensatory payments:
  • Non-compensatory recipients are not employees. They are not providing a service for or on behalf of Duke.
  • From a compliance perspective, employees and payees must be handled separately since reporting and withholding requirements are different between the two groups.
  • The type of payment determines whether a foreign national recipient requires a Social Security number or an Individual Taxpayer Identification number (ITIN).
  • The IRS can impose fines for misclassifying compensation as non-compensation.

To determine whether or not a payment is compensatory or non-compensatory, we have a quick reference (pdf) that can be reviewed.

Below are a few examples of acceptable and unacceptable non-compensatory payments:

Acceptable Unacceptable
A Duke student receives financial support to do research solely for her thesis that is needed for her degree.  The research is not for, nor does it provide a benefit to a faculty member. A faculty member is working on a project and pays a student to assist with the research.  The student participation is not a degree requirement.  If the student was not assisting with the research, the faculty member would have to hire someone else to do the work or do it herself.
A student is paid a stipend to participate in a conference directly related to their graduate studies. No work is performed. A student is paid a stipend to attend a faculty member’s conference, arrange seating, mail invitations, and provide chauffeur service to/from hotels.
As part of a degree program, a Duke student is paid to participate in a educational enrichment opportunity requiring no services at an outside organization where he will focus on learning research techniques.  He will not be providing a service to the outside organization, but is in a learning role. A student is paid as an intern in a Duke department or with a partner institution for providing research assistance.  There is no program designed to train students as part of their degree requirements.  The student is providing a needed service.