At the end of the day though, whether or not someone did the work can be very easily settled - the person who did the work knows how it was done. If someone can recount the obstacles they faced and how they overcame them, then they either were actively involved in doing the work or are skilled enough that they could have been. If someone can only paint a clear picture about some part of a project, odds are that's the only part they were involved in.
Note though that what a contractor worked on and what a startup was happy with are two different things - it is entirely possible a contractor did a lot of work that the customer wound up getting redone to better fit requirements, and the contractor may not even be aware of this. I spent about a year of my life building something for Toyota which I'm incredibly proud of as a feat of engineering, but their priorities changed and they wound up not buying it, so it would be perfectly accurate for them to say nothing they ever possessed was ever built by me. Inconsistencies need to be investigated but they don't automatically mean fraud.
2) Even if caught exaggerating a bit, I'd say to have a bit of sympathy for job seekers/contractors doing a bit of exaggerating. For a long time now, shitty companies out there have been inflating their job requirements either hoping to find some unicorn that can do the job of 10 people for the salary of .5 employees or using their inability to find a unicorn to apply for some tailor crafted H1Bs. Exaggerating your experience a bit to bypass this cancerous behavior is IMO perfectly justified.
3) The only thing that really matters in the end...do they know their shit and can they do the work?
You verify this by simple background checks. Any shitbag background check company can call up a HR department and verify employment dates, you don’t need to call references yourself or get any references at all. It’s a clinical procedure that a third party does for you.
That is a solid indicator of a normal reasonable employee.
Skills is something you have to verify separate to that.
This sounds like you didn’t do a w2 check or a proper skill screen. It’s on you, not them.
Surely you aren’t one of those people that believes dev resumes that say ‘architected this that and this in this that and this language’, are you? Lol
Dev resumes are a running joke. Do a w2 check, followed by a take home project that is a good representation of the work you want them to do. Ditch the leetcode stuff, and gut feeling bullshit, and you won’t ever have an issue.
When a contractor says the did "abc for company xyz". You can always ring up xyz and ask for a confirmation that the person did work for them and delivered abc to their satisfaction.
When managing contractors, I give them clear specifications of what is required and what deliverables are expected and when. If they fail to deliver, then it's the end for them.
Looking at another industry, e.g. home builders, you give the builder a set of drawings, specifications and that is what you manage their contract to.
Many IT projects there's only a vague definition of what is required and the contractor is expected to somehow workout what the requirements are, design and then implement a solution. The only way that is possible is for the contractor to have a great deal of experience in the client's industry and typical requirements.
even people with proper experience and backgrounds have failed before
If you can prove lying, which may include exaggeration, you must terminate them. No exceptions.
If you cannot prove it there is no immediate action to take.
This sounds like an issue of expectation management where you expected to achieve some results from a candidate but actually results differ. In that case the problem is a communication problem that could be from candidate deception but may as likely be your fault as well. It’s impossible to say without further details.