Local payroll pros give insight into payroll fraud
When examining threats to a business’s security, one often overlooked but very real possibility is payroll fraud. More common in larger businesses but found in companies of all sizes, industries and locations, payroll fraud occurs when an employee or group of employees manipulate the payroll system to pay themselves more money than they have earned.
Payroll fraud can take on many forms, and you would be surprised at how creative people can be when they’re trying to claim money they didn’t earn.
Our company provides administrative services for local businesses in San Ramon, Livermore and the entire East Bay Area including human resources assistance, time and attendance solutions, worker’s comp and, of course, payroll services.
In today’s article, we’ll discuss the different forms of payroll fraud and steps which can be taken to prevent them. After reading, you should be more aware of steps to take to safeguard your business and the warning signs of potential fraudulent activity.
The first and most common type of payroll fraud involves payment to employees for work they did not receive or bonuses they did not earn. Most of the time, this happens in the form of one person punching the clock for another person who isn’t actually present. The solution for this punching in issue is to put in a more advanced time and attendance system.
Even if you have an online portal for punch ins and outs, people have the ability to share login information and clock in for each other. More advanced systems require biometrics, many of which use a mobile device’s capability combined with location services to ensure the punch occurs on company premises.
Employees can also manipulate the payroll system manually by either hacking into it or working with an internal payroll manager to input bonuses which weren’t earned. If you handle everything in-house, this is a possibility. You might not think your payroll staff would ever commit fraud, but this type of activity is very common.
The way to overcome in-house manipulation of payroll is to outsource to a third party which has no contact with employees. Payroll service providers not only have a significantly lower chance of collusion with your employees, they have checks and balances in place to ensure this activity doesn’t occur.
Another way people commit payroll fraud is through the creation of false employees. This might seem far fetched, but in a large company one more employee account might not raise a red flag. In this scenario, a real employee receives the paychecks of this false employee. This can be caught by frequently auditing your employee roster and ensuring there are no duplicate addresses or bank accounts in your system.
While it might not seem like these actions could take place in your business, it’s still a good idea to protect yourself against them. By partnering with a payroll services provider, you can outsource the time it takes to perform payroll and minimize the risk of fraud.
If you have questions about how our payroll service works or want to learn more about our services, please call us today and we’ll be happy to help.
