Payroll fraud is the theft of money from an organization via the payroll processing system. It is mostly carried out by those people who have access to the payroll system leading to issues of false payments. Without the correct procedures in place, payroll fraud can go unnoticed for a considerable amount of time causing an organization to fall into losses.
There are several ways of committing payroll fraud. Some of these ways are ghost employees, timesheet fraud, and false expense reimbursement. A Ghost employee is a person who is created on the payroll but does not work for the company. The employee is entitled to all the bonuses and benefits just like other employees, the only difference is that the money is going straight to the fraudster’s account.
Timesheet fraud involves paying employees incorrectly for the hours they work. In most cases, organizations overpay employees based on manipulated timesheet submissions.
False expense reimbursement is the most common form of payroll fraud. The claims often include false expenses for items or events that never took place. For example, claiming travel costs; when in truth no traveling took place, and manipulation of receipts before being submitted. In addition, some employees claim to have lost their receipts to avoid presenting them and make false claims.
What are some of the best ways to prevent different types of payroll fraud?
Conduct background checks
Conduct a background check on everyone who will be responsible for preparing and submitting the payroll and have access to the organization’s accounts. This helps to ensure that the person hired is trustworthy and of high integrity.
Review of payroll reports
It’s always good to review payroll reports after payroll processing to ensure that employees are receiving their correct pay. It is also important to cross-check employees’ addresses and bank account numbers to see if multiple payments have been made to the same bank account which is a way of committing payroll fraud.
Limited access to payroll information.
It is one of the best practices in an organization to those who absolutely need to access payroll data. Each employee should be provided with login information to access the payroll data and establish a policy against password sharing.
Organizations should outline expense policies clearly by making it mandatory for employees to produce receipts whenever they are making an expense claim. Payroll software allows employees to upload their receipts as evidence of any claim.
Outsourcing payroll services
Outsourcing your payroll is an efficient and cost-effective way of paying your employees. It also ensures safe and accurate payroll processing.
Interested in preventing payroll fraud in your organization?