The real cost of a bad hire: Recruitment fraud costs UK £24 billion
25 Apr 2019
Published in: Member News
Crowe advises on real cost of recruitment fraud.
Recruitment fraud is costing UK organisations £23.9 billion a year according to new research from national audit, tax, advisory and risk firm, Crowe UK, in conjunction with the University of Portsmouth’s Centre for Counter Fraud Studies.
Johnathan Dudley, Crowe’s Midlands managing partner, said: “The report reveals the extent to which fraudsters are infiltrating businesses and foiling traditional recruitment processes.
“Crowe’s research uncovered an average fraud rate of 0.52% of turnover. Applied across the country, the total annual cost of recruitment fraud to the UK economy is £23.9 billion.”
Recruitment fraud – including lying on applications, using false or fabricated documents and/or arranging false references – is allowing applicants to secure positions as senior executives and, even more worryingly, as doctors and pilots.
In one case study, an individual secured a position as a commercial airline pilot based on a fabricated application, and was working in the role before the fraud was discovered. Following an investigation, it transpired that the individual was a serial offender with previous convictions. He was caught, prosecuted and sent to jail.
This example demonstrates how employers are continuing to leave the door open to fraudsters by not using simple but effective pre-employment checks.
Costs associated with a bad hire include lost money spent on training and the recruitment process, reduced productivity, internal investigations and disciplinary proceedings, aside from any external sanctions and reputational damage.
Once inside, fraudsters often engage in further misconduct against their host organisations, such as fraud, theft or corruption. With access to sensitive data and private company information, unscrupulous employees pose a serious security threat and exacerbate the likelihood of a data breach.
Jim Gee, National Head of Forensic Services at Crowe, says: “Recruitment fraud is a serious problem, for organisations of all shapes and sizes. Initial misrepresentation or misleading information presented on a CV is often seen as being little more than ‘a white lie’, but it can and does lead to bigger financial and reputational costs down the line.
“In many cases, organisations are unwittingly welcoming a Trojan Horse with open arms. Once 'inside', dedicated fraudsters are emboldened and double-down on their deception, making further misconduct commonplace.
“Vigilance is vital. Recruitment fraud denies genuine candidates the employment they deserve and denies businesses the people they need to thrive, particularly at a time when they need all the support they can get. Basic pre-employment checks can quickly reveal false statements and unmask fraudsters, while ongoing vetting and external specialist support will further bolster defences.
“The case studies in the report explored may look like something from a Hollywood movie, with bogus bankers and fake pilots, but this is a very real threat. With fraud growing 50% in the last ten years, the question fraudsters may often ask themselves is not ‘why would we do this?’ but ‘why wouldn’t we?’”
The full report ‘The real cost of recruitment fraud’ can be found here.
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