freelancer shaking hands with employer

Stop! Are You Misclassifying Your Employees As Contractors? 

Freelancers are growing in the workplace! And, so too are the penalties for misclassifying employees as contractors. 

In the UK, over 4.38 million people now work as freelancers. In the US, 38% of workers are freelancers, and in India, the gig economy is set to create up to 90 million jobs by 2030 (Statista 2025). 

Freelancers are particularly common in the media industry, where businesses rely on freelance writers, editors, and designers to stay agile and competitive. While hiring freelancers has many benefits such as flexibility, fresh skills, and reduced cost – it also comes with risk. 

Let’s consider why this matters, and how you can protect your business. 

What Is Worker Misclassification? 

Misclassification happens when a business hires someone as a freelancer, but the relationship they have with them looks more like traditional employment. 

It’s not enough to call someone a contractor. Many governments are cracking down on misclassification and they look at the reality of the relationship – not what the contract says. 

If your freelancer works regular hours, uses your equipment, and only works for you, they may be considered an employee. Getting this wrong can result in serious consequences. 

Why Worker Misclassification Is a Problem 

Misclassification is more than a paperwork error. It can result in: 

  • Fines and penalties as companies can be forced to pay back taxes, unpaid wages, and benefits. 
  • Legal battles because misclassified workers may sue for backpay or employee rights. 
  • And in some countries, it can even lead to imprisonment. 

Governments lose billions in taxes due to misclassification and they’re cracking down on employers who are not compliant. 

Some businesses deliberately misclassify workers to avoid taxes and benefits. Others do it by mistake. Either way, the risks are enormous. 

Real-Life Misclassification Cases and Penalties 

Here are some high-profile companies that got caught out: 

  • Vox Media: Paid $4 million to settle a lawsuit after misclassifying freelance writers as contractors. (Staffing Industry2020
  • Uber: Fined $100 million in New Jersey for misclassifying drivers. (NYT 2022
  • Nike: Faces fines of over £430 million for allegedly misclassifying temporary workers. (The Guardian2023

These cases show how serious governments are about enforcing the law. 

How To Avoid Misclassification 

Here’s a quick checklist* to help you spot potential misclassification risks: 

Question Employee Freelancer
Who sets working hours? The employer The freelancer
who provides equipment? The employer The freelancer
How is the worker paid? Salary or hourly Per project or invoice
Is the work ongoing? Yes Usually project-based

If your freelance journalist or designer is working regular hours or has been on retainer for months, they may fall under employee classification. 

If your freelancer looks more like an employee, it’s time to reassess your relationship. 

Why Worker Misclassification Is On The Rise 

Governments around the world are cracking down on misclassification. Why? 

  • People are becoming more aware of the benefits they’re entitled to. 
  • Large companies have made headlines for getting it wrong. 
  • Because misclassification costs governments billions in taxes. 

The Risks Of Getting It Wrong 

Misclassification can hurt your business in many ways: 

1) Fines: Governments impose heavy financial penalties. 

2) Backpay: You could be forced to pay lost wages, benefits, and taxes. 

3) Reputational damage: Lawsuits and bad press can damage your brand. 

4) Operational disruption: Legal issues can distract your team from business priorities. 

It’s not just big companies that are at risk. Small and medium businesses are also being investigated too. 

Worker Misclassification By Country 

Here’s a quick overview of how some countries are dealing with worker misclassification: 

  • UK: Workers can claim holiday pay, unfair dismissal, and pension contributions if misclassified. 
  • US: Companies can be hit with fines, backdated taxes, and legal fees. 
  • EU: Penalties include large fines and repayment of lost benefits. 

How Project Global Can Help: 

At Project Global, we know how complex worker classification can be – particularly for industries like media and publishing, where companies often rely on freelance talent. Our freelancer managed service gives you complete peace of mind. 

With Project Global you get: 

  • Correct classification from day one. 
  • Tailored contracts to fit each worker’s role. 
  • Automated compliance checks. 
  • Ongoing support from our experts. 
  • A managed service, supported by PEP – our Freelancer Management Portal giving you compete visibility and control. 
  • Fully managed hiring, onboarding and payments to ensure you stay compliant. 

Our white-glove service means you’ll always have a team of compliance professionals by your side. 

Ready To Stay Compliant? 

Misclassification doesn’t have to be a risk. With Project Global, you can grow your team confidently and reduce your compliance worries. 

Get in touch to learn more about how we can help.