- Check your payroll files in detail to verify the existence of employees.
- Review the payroll records to identify missing data such as NI numbers or addresses, which could indicate ghost employees.
- Consider employees at the same address and or with the same bank account
- Identify employees with unusually low PAYE / NI liabilities
- Review employees with high tax codes
- Review all changes to an employee pay rates
- Ensuring all hourly wages are approved by someone authorised to do so
- Similarly ensuring expense claims are appropriately authorised
- Review those employees with unusually high overtime compared to others in absolute or percentage terms
- Compare your payroll to the payroll budget, looking for unusual variances.
- Compare your payroll to previous periods and again review variances
- Review commissions and bonuses paid, looking for unusual differences.
- Review unpaid debtors to see if they were fictitious aimed at increasing bonuses
- Identify unusual patterns in sales which could be related to increased bonuses
The above list is not comprehensive but by adopting these disciplines your business would be in much better shape to identify any payroll fraud.
There is an excellent list of fraud detection techniques at Payroll-Fraud.com. Many of these are relevant to the Australian tax systems but the principles apply equally to the UK.