Contractor recruitment fraud is a long-running scam that preys on temporary work agencies, and unfortunately, it’s still thriving in 2023. Fraudsters posing as legitimate clients and contractors work together to defraud recruitment agencies out of thousands of pounds, sometimes even reaching six-figure values. In this article, we’ll discuss what contractor recruitment fraud is, how it has evolved, and what practical steps recruitment agencies can take to protect themselves from falling victim to these scams.
What is contractor recruitment fraud?
Contractor recruitment fraud is a type of scam where fraudsters pose as a legitimate client and contractor, and work together to defraud recruitment agencies. The scam works by the fake client requesting a specific type of contractor, and soon after, the fake contractor with the exact requirements would call up. The legitimate recruitment agency would match them and set them up to receive payment for work, without realizing that the contractor and fake client are working together to defraud the agency.
How has contractor recruitment fraud evolved?
With the emergence of job boards and social platforms, contractor fraud has changed shape. Nowadays, the fake client will provide the fake contractor upfront and ask the legitimate agency to pay the fake contractor. This type of fraud is harder to detect and can result in significant financial losses for recruitment agencies. Fraudulent operator “companies” conducting this scam are known to have in excess of £200,000 against their record in county court judgments. Recruitment agencies have collectively lost over £1 million due to this type of fraud.
How to protect your agency from contractor recruitment fraud?
To protect your agency from contractor recruitment fraud, you can take several practical steps:
- Conduct online credit checks on suppliers/contractors and strictly adhere to the credit limits imposed on them. Acknowledge that if a company has lots (more than 200) credit enquiries against their name in one month, it’s a red flag.
- Spot high-value timesheets – fraudulent contractors will often attempt to claim as many hours as they can.
- Enforce a checking process on suppliers/contractors which includes checking their company is registered on Companies House.
- Use the Companies House website to identify companies that are filing ‘Micro Accounts’ as this could be a red flag.
- Look out online for recent changes to website domain names – another potentially red flag.
How to check contractors are who they say they are?
To check the details of the contractor, recruitment agencies can:
- Check the contractor’s identity documents – ensure they are genuine.
- Look into the physical location – verify the addresses they have provided.
- Verify bank details – check whether the bank details match those of the contractor/supplier.
- Ask for landline numbers – these are harder than a mobile phone number to hide behind, so ask all suppliers to provide a landline.
- Check company email addresses – make sure that these are from the correct company (impersonators may use an email address that is very similar to a legitimate company).
- Consider using a digital verification platform to cross-check these details and reduce the risk of falling victim.
Contractor recruitment fraud is an old scam that is still producing new victims in 2023. To protect your agency, you must take practical steps such as conducting online credit checks, verifying contractors’ details, and checking if their company is registered on Companies House. Remember, falling victim to contractor recruitment fraud harms genuine contractors too, and it’s often the reason why recruitment agencies impose stricter onboarding rules on real contractors, making the process tougher for everyone. By taking the necessary steps to protect your agency, you can help prevent contractor recruitment fraud and safeguard your business from significant financial losses.