Payroll_Fraud

Payroll fraud is the unfortunate result of entrusting financial responsibilities to undeserving people. This can be a serious threat for your businesses if you don’t safeguarded it properly, and it can lead to complications with your accounts, putting your business out of pocket as well as your employees. In order to prevent payroll fraud make sure you have safe and secure systems. Additionally, payroll processing software is one way to safeguard your business against payroll fraud. Let’s have a quick look on steps to avert payroll fraud:

  1. Beware of “Ghost” Employees

The engineering of a ghost employee is one of the hardest types of payroll fraud to orchestrate and detect, also potentially the most lucrative. The ghost employee is one which is either fictional or could be a real person who doesn’t work for the company anymore.

So the process goes like this, the payroll administrator will add the ghost employee to the payroll and then the monthly salary will be paid. If it’s a wage employee, then it becomes more difficult to prove, but with electronic payments a payment trail is left and can be spotted. To avoid this, do periodic checks on the employee information to make sure that every employee specified on the payroll system actually exists within the organization. Secondly, when an employee leaves the company, ensure that their information is removed from the payroll system to avoid other employees “accidentally” receiving their wages.

  1. Do Verify Timesheets

It happens that often employees falsify their timesheet submissions and get paid for hours that they didn’t work; as a result businesses lose money. Sometimes few employees arrange for a co-worker to clock in and out for them even when they not working. In other cases it happens that a payroll clerk manually overrides an employee timesheet, adding hours to increase payment.

Avoid such circumstances by conducting regular timesheet audits to verify that the working hours clocked in are accurate. Implement strict timesheet policies regarding submission and ensure that the managers verify and approve the timesheets before submitting to the payroll department.

  1. Check the False Wage Claims

False wage claims, involve fiddling of records by employees to get more pay, and this is quite common. Methods used include: expanding hours worked, fraudulently increasing benefits earned, and increasing pay rates beyond an employee’s entitlement. Other techniques involve employees being paid normal wages/salary rather than taking annual/sick leave, fraudulently reducing an individual’s withholding tax, to inflate commissions or bonuses, which might involve incorrect invoicing for services. Although these all seem similar, in fact they represent diverse fraud methodologies and company exploitation.

  1. Keep an Eye on False Expense Claims

False expense claims comprises of completely fictitious expenses for items or events that never happened, inflating the cost of genuine expenses and duplicate claims.

While expenses fraud demonstrates itself in myriad ways, it is possible to identify a number of the most common examples. Billing for travel and expenses that were never incurred for instance cancelled airline tickets is one of the most frequent, also seeking reimbursements for items that were never purchased (e.g. client gifts). Receipts are often submitted that have been manipulated, or outright falsified, and others will “lose” receipts to allow expenses to be recovered without scrutiny.

  1. Classify Employees Appropriately

Misclassification of employees is a payroll fraud in itself, be it intentionally or due to misunderstanding. Some employers deliberately misclassify employees in order to avoid paying taxes. Others might unknowingly misclassify employees due to lack or experience or knowledge. In any case, this is still considered as a violation of laws and could incur hefty fines on the company per incident. This particular error can be minimized by working with payroll processing software to avoid such misclassification.

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