Giving someone a real project to do which they get paid for is a really bad idea. If the person is working for another company at the time then they likely have something their contract that specifically stops them doing work for someone else while still under employment. It's ground for a lawsuit against the employee.

It also means that as the interviewing company that you don't legally own the IP rights for the code you just put into production, which opens you up to a lawsuit as well.

And that's just for when you're hiring someone from another random company, if you're hiring someone from a competitor you've got a whole different layer of complexity in terms of NDA, non-compete, etc. violations.

And then you get into employment law and accounting complications. Who's declaring tax on the payment ? - if the candidate isn't setup for contracting work they'll need to do a bunch of work to sort out the taxes, if the company takes care of taxes than that might be taken as evidence of employment.

It's one of those ideas that might seem nice superficially but which will get you into a world of pain in the long term.