The Internal Revenue Service recognizes an honorium as a payment given to someone for services for which fees are not legally required. Within higher education, as well as private industry, honorariums are traditionally paid to prominent business, government, and community leaders who are "recognized experts" providing services as professional speakers and temporary consultants. These persons function as independent contractors who are normally compensated through a company's accounts payable system.
In practice, honorariums are modest payments that reasonably equate to nothing more than a "token" payment in partial recognition of the speaker's/consultant's actual worth. Honorariums that are not obviously modest are actually "fees for services rendered" and are subject to income and employment taxes.
An employer never pays an honorium to an employee. If the payment remains modest and nominal, i.e., less than the going rate for the service provided, the employer most likely is in violation of existing federal and/or state wage-hour laws, i.e., the Fair Labor Standards Act. Employees are always paid "fees for services rendered", either as base pay or additional compensation.
A current employee cannot be paid outside the payroll system unless he or she is an independent contractor. Generally, an individual may qualify as an independent contractor in one of two ways. The individual may pass the "reasonable basis" tests established by Congress in 1978. Or he or she may qualify as independent under the "common law" tests of employment status.
Current employees have already established an employee relationship under the "common law" tests. A person cannot be treated as an independent contractor if the university has treated the worker (or any worker in a substantially similar position) as an employee for any period after December 31, 1978. Treating a worker as an employee includes filing a Form W-2 for the worker or asking him or her to complete a Form W-4.