If you use this method, I feel you should pay your applicants for their time taking this test. (I think it is worth it.) The very best candidates will not be scared, and they will feel valued that you paid them a real salary for the hours you took up.

This limits you to using this tests as a near-to-the-last step, not the first step. But this is only fair. Asking folks who have only a slim chance of getting hired to do this work, is not nice. (and asshole behavior will always get you in the end.)

this is an EXCELLENT way of identifying the best candidates if you have a very clear idea of what you are looking for.