Payroll fraud
Payroll fraud
Payroll fraud is one of the common types of fraud cases that happen frequently in the business. It is a theft of funds from the business via the payroll system. They seek financial gains from payroll fraud by changing the payroll system without authorization. It may cause the business to pay for the employees who commit the fraud, leading to higher cost for the business.
How would the payroll fraud happen?
In general, we can classify payroll fraud into three types:
Ghost employee is done by the dishonest employee who has a fake identity for the business. It will result in the salary being paid to the dishonest employee through the fake identity made by him. Company will bear extra cost of the salary paid to the dishonest employee. It is one of the common ways of payroll fraud that dishonest employees will do.
Timesheet fraud happens when an employee purposely records wrong information to obtain higher salaries, it may happen that dishonest employee records additional hours in the timesheet and claim for higher salaries. It leads the company to overpay the dishonest employee based on the fake timesheet that is being manipulated by himself. Cost of the salaries of the company may increase and may affect other expenses that need to be paid by the company.
It is another common type of payroll fraud that frequently happens in the company. It is different compared to the previous two ways of payroll fraud. Dishonest employees will submit completely fake or unreal expenses for items and wish to claim from the company. It can be done by submitting duplicated claims or inflated expenses by the dishonest employee.
How to eliminate or reduce payroll fraud?
Although payroll fraud is hard to be completely avoided, it can be preventable in some ways. The idea of preventing it from happening is to identify the fraud before it becomes out of control and eliminate it immediately. There are some precautions in identifying and reducing the frequency of payroll fraud in the company.
Conduct periodic payroll audits
Companies conduct periodic payroll audits to review the company’s payroll record so as to identify any suspicious activity or record in the system. If suspicious activity occurs, the company can immediately inquire about the employee who did it. It prevents payroll fraud by weeding out ghost employees or mismarking time cards. It allows the company to minimize the risk of fraud happening in the company.
Identify and eliminate ghost employees
Companies can have periodic checks about the employee information in the payroll system to ensure the accuracy of the information recorded in the system is real. It prevents the ghost employee from existing in the payroll system.By doing this, companies can minimize the possibility that companies extra paid to the ghost employee or in order word the dishonest employee.
Conduct periodic timesheet audits
Timesheet fraud happens frequently in the companies which require tracking of employees’ working hours. Dishonest employees will take the opportunity to record false information to result in overpaying for the companies. The way that companies can reduce the timesheet fraud is to conduct periodic timesheet audits to ensure the working hour as recorded in the timesheet is correct and accurate. It can prevent and eliminate any misrecord information in the timesheets.
It is an alternative and effective way for the companies to prevent the fraud cases that happen in the companies. Using the manual calculation to handle payroll is very wasteful and complicated. Also, there may be miscalculations or mistakes when preparing the payroll which will directly impact the companies. To prevent this problem, outsourcing payroll services to professional payroll service providers is a good solution. They are professional who help your company to handle the payroll system by using their cloud-based payroll software