Payroll fraud is one of the most common white-collar crimes in the business world. For that reason, every business must put in place sound policies and processes to address this growing risk. Here are some quick tips on how you can protect your organisation from this crime.
Proper separation of duties
One effective way to mitigate the risk of payroll fraud in your business is to assign responsibility for different payroll duties to different people. For example, different staff members should ideally be responsible for capturing payroll data; for adding and removing employees; and for verifying the pay run and signing off the payroll. This gives you a clear audit trail, ensures a clear line of accountability, and puts strong checks and balances in place. In this sort of environment, someone should quickly pick it up when there’s something unexpected happening in the payroll. This is a good way to prevent common schemes such as a fraudster in the payroll department adjusting overtime or leave for other employees in exchange for a kickback.
Invest in automated software
Given the complex nature of payroll calculations today even in a small and relatively simple business, automated payroll software is essential if you want to make sure that the figures are correct. A robust payroll software will reduce the possibility of human error in or tampering with your payroll – reducing opportunities for payroll fraud and enabling you to more easily provide accurate and timely information to SARS.
Bank account and ID number verification
There are many sly and subtle ways that dishonest employees might try to defraud you through tampering with the payroll. For example, one common scam is to set up a ghost employee with a fake ID number and a real bank account.
You therefore need to tick a few boxes when you pay a person on your payroll – that the person exists, that he or she is the person you wish to pay, that the bank account you will pay exists, and finally, that the bank account belongs to the person you intend to pay. A good payroll solution will feature online ID number and bank account verification to enable you to do just that.
Look out for suspicious behaviour
When someone in your workforce is up to mischief, they often show a number of tell-tale signs. These include an unwillingness to take leave, getting to work early and leaving late even though they are not under unusual deadline pressures, and a sudden eagerness to work from home, out of sight. These behaviours don’t necessarily mean that an employee is committing fraud – there could be other explanations – but they do suggest that you should be a little more vigilant. Also, make sure to take a note of your employees punch in punch out time clock.
Keep a sharp eye open for forged payslips
Instances of criminals using payslips in identity theft are on the rise – the crook will present a fake ID book and payslip to secure a loan or buy a big-ticket item on credit for example. An expert eye can usually tell if a payroll slip has been tampered with. Still, we recommend that you always phone the company that issued the payslip to verify that the person who is asking you for a loan actually exists, works for the company, and earns what the slip reflects.
Prosecuting someone for payroll fraud can be expensive and time-consuming, but we recommend that you file charges if you have evidence that an employee is guilty of this crime. All too often, fraudsters get away with moving from company to company to commit the same crimes because companies are reluctant to spend time and money to prosecute them.
By Yolande Schoültz, Risk & Fraud Management division manager at Sage VIP