You have the correct principles in your procedure.  Your internal mechanism
has to be tailored to the needs of your other HR and payroll systems.  Note
that payment of a traineeship or fellowship should result in a 1099
(without withholding unless the payee requests it) for tax purposes, while
an employee receives a W-2 (the difference between "income" and "wage
income" under tax regulations).

A confusion is the careless way individuals speak of "fellow", "post-doc",
etc.  Be sure that your internal documentation and business practices
explicitly differentiate.  For federal funds, the program announcement and
the award make the differentiation clear.  Explicitly, NIH research grants
(R-xx) do not support fellowships/traineeships), while other grants (e.g.,
K-XX and T-xx)  support fellowships/traineeships.  For other external
funds, you may have to probe a little to determine the difference.  For
internal funds, you must be sure that the differentiation is quite
explicit.  Note that fewer and fewer institutions have internal funds for
fellowships/traineeships.

Yes, there is also confusion from the fact that fellows/trainees and
employees (at the same levels)  appear to perform very similar
activities.  That is because, at these levels, acquisition of knowledge and
skills for fellows/trainees is gained by performing the activities
(generally research) that an employee does.  One differentiation can be how
"success" is evaluated: did the fellow/trainee "learn" through performance;
did the employee succeed in performance?  Another is the standard for
tenure in the position: was the fellow/trainee successfully meet the the
training goal (like a scholarship requires continued meeting of a grade
point average, for example); does the employee do the required work in a
satisfactory manner?  What they did day-to-day may be similar, and success
may look the same, but the underlying question was different.

Making these differences clear in your documentation of procedures may help
your legal staff understand.  And making transition from one category to
another, and back, simple to accomplish will help; leaving any
administrative process difficult encourages ignoring correct process, which
can lead to major non-compliances.  There are related concerns for these
two categories in the benefits area.  Health benefits -- level and who/how
pays -- is most important to these individuals, which is why most
fellowship/traineeship awards allow health insurance as a specific direct
cost while for employees it is buried in the benefits package.  The
institution is responsible for FICA/medicare withholding and employer
payment for employees, but not for fellow/trainees.  DO make the transition
easy because often individuals move from one category to another, and can
be in either or both during a tax period.  And if possible, for perceived
equity, make the total compensation (income and health benefits) as similar
as possible between individuals who are at equal levels but in different
categories.

Chuck

At 07:10 PM 6/29/2004, you wrote:

>All,
>
>At the past week's NIH regional conference, I heard NIH tell us that any
>trainee (postdoc or grad student) who receives a stipend instead of a
>salary should NOT be charged to NIH R01 grants.  Before we discontinue
>this practice at our institute, I thought I'd check with each of you to
>see what is actually done in practice.
>
>We do what I suspect many of you do:  treat postdocs on a fellowship as
>"non-employees receiving stipends" while treating postdocs paid from
>institutional funds as "employees receiving a salary."  This ensures that
>the former can be paid from fellowship awards (most of which prohibit an
>employee-employer relationship) while the latter can be paid from R01
>awards (which REQUIRE an employer/employee relationship, according to my
>interpretation of A-122 Paragraph 7a and 53, each of which use the word
>"employee").  Even though this drives our legal staff crazy, knowing that
>two groups of people who are doing the exact same thing (training) are
>treated differently from an employment perspective, we've persevered
>anyhow, under the assumption that is how many other
>universities/institutes do this.
>
>Do any of you have a different take?  Or treat your trainees differently
>from us?
>
>As always, thanks in advance for your responses.
>
>Pat Kaufman
>Director of Finance
>Stowers Institute for Medical Research
>Kansas City, MO
>816-926-4027    xxxxxx@stowers-institute.org
>
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Herbert B. Chermside, CRA
Special Asst. to VP-Research
Virginia Commonwealth University
PO BOX 980568
Richmond, VA  23298-0568
Voice:  804-827-6036
Fax     804-828-2051
e-mail xxxxxx@vcu.edu

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