While experiences of fear and distrust have been documented as a part of recipients’ interactions with disability benefits, there have been few attempts to explore how they are shaped by system features and their impact on employment pursuits. The purpose of this article is to unpack how fear and distrust emerge among people with mental illness who have recently entered the welfare system. Using an interpretative qualitative approach, the authors draw on the findings from 69 in-depth interviews with key stakeholders about their experiences with employment. Stakeholders included recipients, welfare program and policy staff, and service providers in the community. Data were analyzed by exploring similarities and differences across perspectives and contexts. The findings highlight how system features shape and perpetuate fear and distrust through poorly communicating information about the system, a chaotic state of constant change and complexity, a lack of attention to building trusting relationships between caseworkers and recipients, ongoing system errors, and excessive reporting requirements. The impact of the current state of affairs is significantly harmful to recipients, especially those living with mental illness. Our findings also highlight a possible way forward by building trusting relationships and finding ways to improve communication channels.