The hours criterion is a key concept for freelancers. It helps define your working relationship with clients and can impact your legal and financial status.
What is Hours criterion?
The hours criterion is a test used to determine if a worker is an independent contractor or an employee. It focuses on how much time you spend working for a single client. If you work most or all of your business hours for one client, you may be classified as an employee under this rule.
Why is this important?
This classification is crucial. Being misclassified can lead to legal and tax complications for both you and your client. Understanding this criterion helps you structure your freelance business correctly. It ensures you maintain your independent status and avoid unintended liabilities.
How does it work?
Authorities look at the proportion of your total working hours dedicated to one client. If a single client consumes the vast majority of your available work time, it raises a red flag. This suggests a dependency more typical of an employment relationship than a freelance one.
Pros and cons
A key pro is that it provides a clear, objective measure for classification. The main con is that it can be restrictive for freelancers who prefer or need long-term projects with one client. To mitigate risk, you should diversify your client base via platforms or networking.
Conclusion
The hours criterion is a fundamental rule for freelancers to understand. By managing your client hours wisely, you protect your business autonomy. Always consider this factor when taking on new, large-scale projects.
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