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20th March 2018

How to Avoid Payroll Fraud

Payroll fraud is hard to detect and very costly for organisations. If left undiscovered, companies lose millions each year.

The common types of payroll fraud include fraudulent expense reimbursement, inflated wage claims, or counterfeit employees. In the case of fraudulent expense reporting, employees can submit personal expenses as business expenses, duplicate claims, or submit false receipts. There is a perception that “no one gets hurt” in this type of fraud, and can be very common. For fraudulent wage claims, employees submit more hours than they worked on time sheets, or have fellow employees punch in/punch out for them. When it comes to counterfeit employees, this type of fraud is more complicated – it is difficult to arrange and very difficult to detect. It is usually perpetrated by the person in charge of payroll, so it can take years before it is discovered.

There are steps you can take to avoid payroll fraud and ensure your organisation is not subjected to fraudulent payroll claims. Regular audits are a great first step, as up to 18% of fraud is detected through internal audits. Here are other ways to avoid payroll errors and fraud:

  • Automate Payroll with Technology Solutions: Online payroll technology can reduce errors and ensure against payroll fraud. The automation also detects if there is human error or altering of records and protects organisations from compliance issues and fraud.

  • Verification of Employees and Bank Account Information: payroll solutions can provide online identification numbers for each employee and verify bank accounts to ensure there are no counterfeit employees on the payroll. Since payroll is usually the largest expense in a corporate budget, you can quickly identify if the payroll amounts do not match the budgeted amount.

  • Separating Payroll Duties: if more than one person is responsible for the payroll, there is less likely to be errors or fraud. If one person is in charge of the end-to-end payroll process at your company, consider having a manager or senior leader audit the payroll regularly to confirm payroll is running correctly.

Minimising payroll errors and reducing fraudulent payroll processing is vital to both small and large organisations, as payroll is one of the largest expenses in the budget. If you think there might be payroll fraud in your organisation, speak with someone about your concerns. Payroll fraud affects everyone and can have lasting effects on a company. Taking steps to ensure your payroll processing is secure and utilising technology to simplify saves money and resources.

Need help to understand what solution is best for your business?

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