Although most employers are confident that they’ve classified their independent contractors correctly, a new survey by ICon Professional Services shows that the reality is quite different from the perception — and that the financial risk those employers take on is underestimated.

According to the survey, 68% of the executives said they were confident they’d pass a worker misclassification audit. However, only 55% of those executives actually passed when audited. 

77% of the respondents believe that their financial risk for misclassification is below $100,000. But the reality is more serious. If 100 employees are misclassified as independent contractors and paid an average of $100K a year, the company’s risk could easily be as high as $4.5 million. 

50% of respondents use up to 20 independent contractors per year, while 30% use up to 100 per year, and 15 % use more that 500 per year. 

The reasons for using independent contractors rather than hiring employees are many (gaining talent for special skills, quick access to talent, cost efficiency, and risk mitigation). But if these respondents are typical, a large number of business owners and executives need educate themselves and take a closer look at how they classify their workers.