What are the risks of misclassifying an employee as a contractor?

Misclassification can result in back payment of statutory contributions, penalties, and legal liability. In Singapore, misclassifying a worker to avoid CPF obligations can result in fines of up to S$10,000 and imprisonment for repeat offences. In the US, the IRS and Department of Labor impose significant financial penalties. Always classify based on the actual nature of the working relationship — not the label on the contract.