As such, these individuals are more than happy to "dip their hands in the payroll jar" to get what they feel they deserve from the company.
Small businesses are especially prone to payroll fraud as they don't have formal systems in place to prevent payroll fraud from happening.
At the beginning of last month, at an interactive forum run by Accsys entitled Payroll in the 21st Century, CEO of Profile Software International David Brown , spoke about a number of forms of payroll fraud that you need to be aware of to ensure the health of your company's payroll.
Brown indicated that this type of payroll fraud originated with the old punch card system where people would punch their friends in to make it seem as if they were at work. This type of fraud would only work if there was a single point to get in and out of the operation.
Ghost employees, as the name indicates, are employees who are "ghosts" in your organisation but are very much present on your payroll and draw a salary.
These types of employees are very easy to create and can be created by anyone who has access to your HR system. All you need to create a ghost employee is a valid ID number.
Another very popular form of payroll fraud is delayed discharge. What this means is that if an employee is discharged on 31 October, his third-party deductions - e.g. medical aid deductions, pension fund, etc. - will be stopped but his gross salary will continue to be paid into his bank account. He will continue to be paid for November, December and January of the following year. In February, he will be taken off the payroll system. This means he will pick up three months' extra gross salary without doing a stich of work.
Other payroll fraud which is very easy to carry out:
Look out for one of these seven red flags in your company's payroll:
How can you eliminate payroll fraud in your company?
Get a supervisor to stand at the time clock at the beginning and end of each shift. This will make employees think twice about falsifying their hours.
Incorporate fingerprint-scanning technology into your company's clocking-in/clocking-out process. This will make it much harder for people to falsify their hours on behalf of their colleagues as people's fingerprints will need to be scanned to verify that they are actually at work.
Have different entry and exit points to your company.
Ensure your employees report all the leave they take because if they underreport this benefit, when that employee resigns you will have to pay him out for leave that he has indeed taken because you have no record that he took it.
Ensure that the loans you give employees get communicated to the payroll department so the fact that this employee needs to repay a loan is documented against his salary.
Fog expenses are expenses for items or events which never happened. So make sure that your employees don't try to pass off personal expenses as business expenses, and scrutinise every single till slip or company credit card statement that you get presented with to sign off. Remember that if fraud occurs - especially with company credit cards - you will not be able to write these expenses off against tax.
This practice is becoming increasingly popular: The initial payroll information is produced by the internal payroll department and is sent to an external organisation which will effect payment. So if fraud is going to occur, it will have to occur across both organisations.
Scan your bank accounts monthly to see if you have any employees who have the same bank accounts or if two or more employees (who don't live together) have the same addresses.
This will eliminate any unauthorised payments from being made.
Only grant access to your company's payroll information to people who need to be privy to this information for their jobs.
