Protect Your Staffing Company from the Rising Threat of Fraud

You receive an inquiry through your website requesting payrolling services through your staffing company for about 30 employees. The business may not be local and may not be in one of your core competencies. You start to move forward with getting the information you need to onboard this new customer.

STOP! You may soon be the victim of payroll fraud.

Twice within one week we’ve helped clients identify fraudulent requests for payrolling. It all seems legit – willingness to set up a Teams or Zoom call, several dozen employees – until you dig further.

We are seeing more and more instances of payroll fraud recently, and it’s critical that staffing companies are aware of what to look out for before you become a victim.  

While many of the sessions at the 2025 ASA Staffing Law & Compliance Conference this past May were filled with valuable information, we felt one of the sessions, “The Threat is Real: Combatting Fraud in the Staffing Industry,” was especially critical and important.

The experts presenting this information were Evan Fenaroli, VP Management and Professional Liability, Philadelphia Insurance Cos.; Kerri-Ann Griggs, Esq., Partner, Alson & Brid; and Ariel Zion, Esq., Chief Legal Officer, Insight Global. Their presentation centered on four different types of fraud currently impacting the staffing industry:

1. The Bait and Switch: you interview one person, but another person shows up for the assignment.
2. The Man in the Middle: You receive an email purporting to be from your employee or vendor requesting a change to banking information.
3. The Payroll Scheme: You receive a request to payroll employees with fraudulent identities with payment going to the fraudster’s bank account.
4. The Trade Dress Grifter: Someone poses as your company to defraud unknown candidates based on the goodwill you’ve built.

In this article we will focus on #3: The Payroll Scheme. (We’ll address the other three fraud schemes in our next newsletter).

This topic is critical since we are seeing an increased number of our own clients being approached as potential fraud targets. Thankfully we’ve been able to help most avoid losses.

ASA has also noted an increase in this type of fraud. The highlighted a specific incident in a March 17, 2025, ASA Legal Watch alert entitled “Staffing Agencies: Beware of Payrolling Scams.” In this alert, ASA shared the case of a staffing company in Massachusetts who was approached for payroll services for a local company. According to ASA “The individual provided his company’s employee roster. The staffing firm ran a credit check on the company and found the company name, owner’s name, and address all matched a legitimate Massachusetts business that has existed for 15 years, but there was very little credit history.

Several additional red flags then appeared. The individual had unusual urgency to complete the payroll. The alleged ‘employees’ began onboarding, but when the staffing company tried to contact them by phone, no one could be reached. Upon advising the individual that the staffing company utilized E-Verify and required visual identification verification, the individual disappeared. It was then determined that the alleged ‘employees’ had submitted fake identification documents and their direct deposit forms were attempting to route funds to cash cards.”

In conversations with our clients, a few points have been consistent in the fraudster’s approach:

• The staffing company was contacted by an individual through the staffing company’s website.
• Fraudster asked for about 30 workers to be payrolled by the staffing company.
• The individual set up a Zoom call with the staffing company but had “technical issues” so they had to do the call over the phone.
• Individual sounded like a man, possibly foreign.
• The fraudster provided the staffing company with the name and address of a real business. Upon calling the business separately (not from information provided by the fraudster), it is uncovered they are not seeking payrolling, and this person is not with the company.
• The fraudster’s email address did not match that of the company he claimed to be representing.
• The staffing company receives all information about the staff to be payrolled directly from the fraudster via email. No direct communication with the so-called workers.
• The fraudster contacted a staffing company that would be out of state from the address of the business to be payrolled.
• Businesses to be fraudulently payrolled include painting, construction, or the healthcare industry.
• In one example, a healthcare customer was in Arizona but he claimed to be calling from Florida.
• The Fraudster used some of the same worker names in different schemes.
• Some workers using same or similar bank for ACH deposit.
• Staff had the exact same hours and similar bill rates. High mark up for payrolling. No overtime.

Our clients sensed that something seemed off and that things just did not add up. Don't ignore your gut feeling! If you feel something isn’t quite right, dig further or call your TRICOM representative for guidance.

There are ways to help mitigate the opportunity for fraud before you become a victim. During their ASA Staffing Law presentation, Fenaroli, Griggs, and Zion also offered mitigation strategies such as:

• Identifying fraud detection measures such as software and training
• Conducting bank account audits
• Monitoring IP addresses
• Maintaining credit or background check requirements (especially for new clients)
• Implementing tighter invoicing deadlines

 If you do not go to the actual business site (which you should do when they reach out to you for payrolling), it is highly recommended to get on a Zoom/TEAMS video call with them to confirm their identity. Also, research the company on your own to validate the owner’s name, company website, business address, and email addresses. Information will not match what you were given from the fraudster. Most importantly: don’t skip your normal underwriting process of approving a new customer!

As a business owner, you have many moving parts to manage without also having to worry about being the victim of fraud. The important thing is to be diligent, trust your instincts, dig deeper if something seems off, and don’t be afraid to reach out to other resources such as your TRICOM representative for help.