I'd much rather do that extra work during the hiring process than have to deal with a bad hire later.
IMHO, hiring based on homework is no guarantee that you won't end up with a bad hire anyway. It is just another imperfect data point to base your decision on, but one that comes at the cost of massively reducing your number of candidates.
This would be additional income complicating tax, and many companies restrict employees from taking on outside paid work without approval.
No matter how you slice it, these multi-hour homeworks are a stupid idea. And the real reason for them is to discourage candidates to justify getting indentured labour instead. Or to discriminate against older workers with more existing time commitments.
It seems wrong to reject a good idea because other bad idea will interfere with it. Maybe I'm fortunate; I take extra irregular work in the sum of about 30 days a year, and at the end of the year HMRC and I settle up very simply and easily. I couldn't imagine taking a contract that said I couldn't do any other work; it's by no means uncommon in the UK for people to have extra part-time work that fits around their main job. I think we shouldn't reject a good idea - paying people if you want them to do multi-day interviews - just because other bad ideas (tax systems that can't handle earning extra cash, employers who view their staff as property) will make it awkward for some people.
It’s usually about avoiding conflicts of interest - you can generally get the box ticked easily enough to do something unrelated to your job with them. But “doing an audition at a competitor” is unlikely to be signed off!
But even so - these homework assignments are stupid, and discriminatory on factors unrelated to job performance, and no other industry does it. In fact they yield worse candidates because quality candidates don’t tolerate this kind of nonsense.
And how would this work - you take vacation to do your trial period? You quit to do a trial period knowing it’s still an interview not even an offer?
We want people who are desperate, people who will give up their precious free time to do our bidding, people who don't know when they're being asked to do something plainly ridiculous. We want people who will give up their vacation to try to please us. These are the people who will embrace poor working conditions and tie themselves to us through Stockholm syndrome.
There's not much I can do, it's so common a practice nowadays (literally all of my team members are in a similar construction and we are working on fixed projects from nine to six) that with my next workplace I will do the same.