How much does hiring fraud actually cost a small business?

In an age when digital tools make it easier to create and alter images, documents, and other materials, employers have an additional reason to pay close attention to the information candidates provide during the hiring process.

For small business owners, understanding how false or misleading information can enter the hiring process is an important first step.

When you think of employee-related fraud, you likely imagine theft, expense fraud, and other financial crimes. But fraud can occur during the hiring process, too. Here’s what to watch for and why it matters for your business.

In many ways, the hiring process involves a series of information-gathering steps. It starts with the basics. Candidates provide a resume or fill out an application, telling you their name, where they live, and their skills, knowledge, and experience.

Next comes the interview. You ask questions. The candidate provides answers. In some cases, you may sit down for a second or third interview to learn even more. At the end, you judge the information given, weigh it against the facts on the resume or application, and select a first-choice candidate. At some point in the process, you may also conduct whatever background checks you need and evaluate the information they provide as part of your hiring decision.

The quality of the information you gather at each step affects what comes next. That creates multiple points where false, misleading, or fraudulent information can enter the process.

Because most hiring processes are designed around evaluating candidates rather than detecting fraud, identifying false or misleading information may not be something you’ve built explicitly into your workflow. Understanding what hiring fraud looks like is a useful starting point for recognizing where risks may enter your process.

False or misleading candidate information can enter the hiring process at several points, including applications, resumes, interviews, and screening. Candidates may also provide false information or documents to you or to your background check provider as the process begins.

In Checkr’s 2025 survey of hiring managers, 60% said they had uncovered a candidate who misrepresented their experience or qualifications, while 31% said they had interviewed a candidate who was later found to be using a fake identity. The hiring fraud survey also found that 35% of hiring managers said someone other than the listed applicant participated in a virtual interview.

Candidate dishonesty can range from embellishment to deliberate misrepresentation and impersonation. These behaviors aren’t equally serious, but each can affect the reliability of the information you’re using to make a hiring decision.

Embellishment occurs when a candidate stretches or overstates genuine experience rather than fabricating it entirely. For instance, they might make it seem like they had more important responsibilities at a previous job or alter the facts of a real story to better fit a “tell me about a time” type of question.

Embellishment can affect your perception of a candidate’s experience, capabilities, and skills. If material qualifications are overstated, you may make a hiring decision based on an inaccurate picture of what the candidate can do.

Imagine you are hiring for a senior sales position. The role is responsible for meeting ambitious sales goals and involves independent, unsupervised work. After hiring for this role a few times, you determine that the most successful candidates have at least five years of outside sales experience. You decide to list this qualification in your job advertisements, along with other position requirements.

You receive a resume from a candidate with 10 years of work experience. Four of those years were in an outside sales position with a company in another state, and six were with a competitor. You conduct an interview and extend a provisional offer, but the employment verification report comes back; it turns out the company in another state doesn’t exist, and the candidate worked for the competitor for only one year.

Misrepresentation involves providing materially false information about qualifications, credentials, or history. Candidates may misrepresent their work history or claim a degree they never earned. They may also misrepresent professional licenses or voluntary certifications. In some cases, a candidate may submit false diplomas, certificates, or identification documents.

Misrepresentation can lead to hiring someone who lacks the skills, experience, or qualifications required for the role. For roles that require specific licenses or credentials, material misrepresentation may also create compliance or safety concerns.

In July 2025, a US District Court sentenced an Arizona woman for her role in a fraud scheme after she pleaded guilty to conspiracy to commit wire fraud, aggravated identity theft, and conspiracy to launder monetary instruments. The case involved helping North Korean workers gain remote employment at 309 US companies, including Fortune 500 organizations.

The scheme used stolen or borrowed identities belonging to 68 US persons. The woman convicted in the case also operated a laptop farm that helped trick employers into thinking their new employees were based in the United States. In total, the scheme generated more than $17.1 million over several years.

The case illustrates a particularly serious form of hiring fraud: impersonation. It occurs when someone passes themselves off as someone else to gain employment. This may involve using a stolen identity or inventing a completely fraudulent one.

As identity-based hiring threats evolve, understanding why identity verification has become increasingly important can help employers recognize the risks associated with verifying who a candidate claims to be.

Impersonation means the information you’re using to evaluate a candidate may belong to someone else entirely. Depending on the role, that could undermine the reliability of credential, employment, driving, or other relevant checks and create additional safety, compliance, or workplace risks.

There isn’t one reliable dollar amount for what hiring fraud costs a small business. The impact depends on what was misrepresented, when it was discovered, and how much time and money the business has already invested in the hire.

That doesn’t mean the cost is impossible to understand. Instead of one universal figure, consider where your business absorbs the impact.

Hiring fraud can create problems for any employer, but small businesses may have fewer people available to navigate the disruption. When one person represents a substantial share of your team, restarting a search can leave existing employees covering the work for a longer period.

Small businesses may also handle hiring without a dedicated recruiting or HR team. That makes a repeatable process especially useful. Instead of relying on one person’s instincts to spot something suspicious, establish the information that needs to be verified for each role and how you’ll verify it.

When hiring happens infrequently, documenting the process helps you follow the same steps the next time a position opens.

Hiring fraud isn’t a reason to screen for everything. It’s a reason to be deliberate about what information matters for the role and what you can appropriately verify.

Start by identifying which background checks you actually need. Depending on the position, relevant screening can help verify employment history, education, credentials, driving history, or other job-related qualifications. Just as importantly, use a consistent process to review the information candidates provide and address discrepancies as they arise.

If you’re working with a screening company, understanding how to evaluate a background check provider can also help you assess whether its screening options and workflows fit your hiring needs.

No single screening can eliminate hiring fraud. But a repeatable process that combines appropriate verification with consistent hiring practices can give you better information for making confident hiring decisions and help you mitigate risks to your small business.

About the author

Hayley Harrison began her career as a hiring manager at a mid-size regional bank in the Pittsburgh area. She now brings her experience and knowledge of hiring best practices to her work as a freelancer, helping employers refine and improve their processes.