Could this affect your business? Certainly!
Payroll fraud basically comes in two types, large one off transactions or high volumes of smaller transactions.
The latter type is most prevalent. The most common type of which is the "Payroll Ghost" an employee that doesn't exist. This can be quite sophisticated and may involve employees who haven't yet commenced employment or leavers who are kept on the books. In both of these cases there is a familiarity with the employee names. The fraud would generally be for smaller amounts repeated on a regular basis.
What can you do to identify and stop these ghosts. Well there are a number of steps
- Segregation of duties - makes sure one person doesn't have control over the whole payroll process
- Payment - ask employees to sign for their payment if cash
- Deductions - look for employees with no tax or NI
- Duplications - check for duplicate names, addresses, NI numbers, bank accounts
- Employee reference numbers - make sue that they are not reused
- Physical headcounts - ask managers to physically approve their employee list
- HR database - you have it, use it to cross check employee records
- Budget variations - Query why any variances are happening
- Absences - check for unusual activity on absence eg long periods with no payment
How can your business manage the risks of payroll fraud generally. The Chartered Institute of Personnel and Development, together with CIFAS have an excellent guide to Fraud that we would highly recommend http://www.cifas.org.uk/download/cipdguide.pdf
If you have any specific concerns please contact us.