The gig economy brought the labor market into the 21st century, giving many the freedom and flexibility they sought for their entire careers. They get to be their own boss, set their own hours and make money on their own terms. 

This change has been equally beneficial for companies. They get all the perks of hiring an employee without the complex tax and legal obligations. Accordingly, they can scale much faster, seamlessly expanding their service offerings or customer base.

For all intents and purposes, the gig economy is a win-win for employers and workers. However, there is more than meets the eye — the gig economy hides a dark side fraught with legal, financial and reputational risks.  

The Risks Associated With the Gig Economy

While the gig economy can benefit everyone involved, it poses considerable risks. 

Intellectual Property Theft

HR software company Rippling filed a lawsuit against competitor Deel in March 2025, alleging it engaged in corporate espionage. The alleged spy conducted thousands of suspicious searches within four months — averaging approximately 23 daily — and stole confidential business data. When Rippling caught the thief, he deleted messages and fled the building. 

This story may sound outlandish, but such events are becoming more common. The nature of gig work means human resource teams often see a revolving door of contractors, many of whom work remotely. Unless the information technology (IT) team pays attention to activity logs, they risk intellectual property theft. 

Reputational Damage

Even if HR doesn’t participate in the gig economy, it may damage its reputation. Bad actors often pose as real companies on sites like Indeed, Facebook and LinkedIn. Their fake job postings only exist to scam people out of money. 

Fraudsters trick people into accepting genuine-looking checks. Since the money initially appears in their bank accounts, the interaction seems legitimate, and they wire a portion according to their instructions. However, those funds do not exist, and the victim will be liable for reimbursing the bank. Already, millions of people are falling victim to this scam. 

People who believe they were hired only to be scammed may wrongfully accuse the legitimate company of theft, resulting in undue reputational harm. 

Data Security Risks 

While data security has always been a risk of doing business with digital tools, remote work has amplified it. Many people don’t know basic cybersecurity do’s and don’ts — like how working at a coffee shop on public Wi-Fi exposes them to cyberthreats. 

In 2024, it took organizations around 194 days to detect a data breach. On average, attackers had over six months to spy on users, steal confidential information or lay the groundwork for larger cyberattacks. Since people who work from home lack oversight and use personal devices, they may take even longer to identify suspicious activity. 

Mistakes HR Teams Make Hiring Gig Workers

The gig economy enables people to work temporary, flexible jobs on demand. It is often facilitated by digital platforms like mobile apps, videoconferencing platforms or remote access protocol software. 

Misclassification

Technically, gig workers are independent contractors — they perform project-based or short-term work instead of establishing an ongoing employee-employer relationship. They are not entitled to overtime pay, paid leave, workers’ compensation or unemployment benefits. 

Misclassification is common. If a business controls when a person works, what they work on and which tools they use, they are likely an employee, not an independent contractor. Even offering employee-type benefits like insurance, vacation pay and pension plans is a gray area. 

Under 26 U.S. Code § 3509, employers are liable for employment taxes if they fail to withhold and deduct any tax due to misclassification. Their liability increases if they disregard reporting requirements due to willful neglect. The income tax withholding rate increases from 1.5% to 3% of wages, and the social security tax rises from 20% to 40% of the correct amount. 

Insufficient Vetting

Insufficient vetting is another major mistake. Since gig work limits oversight, the HR team must go beyond the basics to ensure new hires are the right fit. Interviews and background checks are not enough, as security awareness training company KnowBe4 can attest. Ironically, it hired a North Korean spy — someone the CEO called “the perfect interviewee.”

The bad actor installed malware on the company laptop during onboarding, immediately raising red flags. The threat may have gone unnoticed if he had waited a few months before launching his campaign. KnowBe4 hired him for an IT role, after all.

5 Strategies for Mitigating These Challenges

HR professionals can use these five strategies to ensure fair treatment, provide adequate support and mitigate data security risks. 

Define Clear Expectations 

Defining clear performance and information security expectations during onboarding can help the company avoid negligence-related data breaches. HR should collaborate with the IT team to establish clear tracking and enforcement mechanisms.

File Form SS-8 With the IRS

If the HR team cannot determine worker status for purposes of federal employment taxes based on the three main categories of evidence, the Internal Revenue Service recommends filing Form SS-8. The sooner, the better — it can take six months to get a determination. This approach is ideal for those continually hiring the same people for specific services. 

Choose Secure Digital Platforms 

Tracking is essential for catching suspicious and noncompliant activity early on. HR should consider drafting contracts that stipulate new hires must use a specific, secure platform that gives the IT department visibility into their work-related actions. 

Rigorously Vet Candidates 

Going beyond background checks and surface-level interviews involves looking for unexplained exits, screening for synthetic identity theft and requiring a 90-day probationary period. Portfolio reviews and reference checks will help establish whether their story is credible. A granular assessment is essential for leadership or IT roles. 

Add Disclosures to Job Posts

HR teams should add a one-sentence disclosure to job posts and the company’s official website informing potential candidates of phishing and scams. They should explicitly state that the hiring team will not request wire transfers. Anyone doing their due diligence should be able to catch this warning, preventing undue reputational damage. 

Shining Light on the Gig Economy’s Dark Side

The dark side of the gig economy only exists because fraudsters and hackers are taking advantage of a huge trend. HR professionals shouldn’t assume all gig workers are at fault. Instead, they should adapt their hiring process to weed out bad actors.