Payroll fraud involves the illicit altering of the payroll system to the selfish interest of an employee. This is a form of theft that could be caused by a poor recruitment strategy.
It involves a loss of the company revenue to a strategically mapped-out plan by the staff of an organisation. Losing money, not to thieves but your family can be an awful experience.
The various forms of payroll fraud include Timesheet fraud, Ghost payroll, Third-party scam, Commission schemes, and many more.
One of the biggest ever recorded payroll fraud cases was a California couple that was probed for underreporting a payroll thereby diverting $30 million for their personal use.
Recently, the Nigerian Government was able to save over $5 million by getting rid of ghost workers.
Payroll fraud could make even the biggest companies become a thing of history in the competition with time. If it is difficult for the big companies to survive, how much more do the smaller companies?
As hard as it seems to save companies from this internal war, it is possible to prevent payroll fraud if the measures outlined below are put into practice
Employ Honest Individuals
One of the best ways to avoid payroll fraud is to look out for people who would not compromise their moral standards, people who would stay true to their values. However, this is not a gender-based issue as seen by many, it is an issue of personality.
There’s no feeling as safe as knowing your employees can be trusted even in your absence or when they are unchecked. So, improve your strategy by looking out for honest people to work with you in your organisation.
Conduct Regular Payroll Audits
Audits will always be used by business owners, and considering that servicing payrolls costs a lot, it is important to begin the audit at this stage.
One of the most common forms of payroll fraud is ghost payroll. However, this is not common in small organisations due to the team’s size, but cases of adding false records to get a promotion, manipulating leave days, and other cunning tactics can be seen.
All these can be curbed if audits can be made in a surprising way but on a regular basis, which leaves no room for people to hide their dirty linen.
Humans can never be 100% accurate, they’re prone to errors. Machines don’t attach emotions like humans and that provides more accurate results than humans.
This is exactly what the company needs to grow. Payroll systems use fixed percentages and figures and are faster, accurate, and time-saving.
Making use of payroll systems in place of humans makes it easier to monitor payroll spending and trace any disparity if noticed. Doing this would save you the stress of going through an unnecessary headache.
Differentiate payroll duties
In contrary to the preventive measure listed above, your company might insist on using the manual method. If you would be using the manual method, distribute duties in managing the company’s payroll.
While an employee is in charge of handling pay run, another would be in charge of adding new employees to the organisation.
This process, though might cost you more, ensures that a single person doesn’t have access to everything and makes use of the company’s funds for his selfish gain.
This process makes account evaluation more transparent and easy to comprehend.
Control Access to the Payroll System
This is one of the important ways of avoiding payroll fraud. Your payroll system must allow you to control who is allowed to view information, who is allowed to effect changes on it.
This will ensure privacy, availability of data when needed, and reliability of data. Even if the payroll system is automatic, for security reasons it shouldn’t be accessible to everyone.
Use Modern Timesheet system
To curb misreporting, employ the use of a highly developed timesheet system that requires the use of a passcode or two-step verification.
Manual collection of time could birth accidental or intentional misreporting. The modern timesheet system is more beneficial and reliable than the manual collection of time.
Pay close attention to Employee conduct
Hiring honest employees doesn’t totally imply that Employers should be nonchalant about the behaviour of the employees.
Keep a close eye on every employee in the organisation to avoid costly mistakes and regrets. The rate of physical checks present that is prone to theft will be minimal.
Payroll fraud is a plague that should be avoided. It is capable of ruining small businesses, startups, and even big companies if not curbed on time. Business owners must take extreme cautiousness and smartness in avoiding payroll fraud.
All the options listed are important and should not be ignored, though some could be superior to others.
Payroll fraud is better prevented with these measures than seeking solutions to the problems it will create for the company if it happens.