Typically, payroll fraud involves one of the following:
- Inflating hours worked
- Fraudulently increasing expense claims
- Increasing pay rates beyond what the employee is entitled to
- Employees paid normal wages / or salary rather than taking annual or sick leave.
- Fraudulently reducing the PAYE for an individual.
- Inflating sales figures to receive inflated commissions or bonuses.
- Claiming expense reimbursements for personal expenditure.
Prevention is always better than cure.
Here are our top 10 tips for preventing payroll fraud
- Recruitment Combating fraud commences at the recruitment stage. Ask for and thoroughly check references from previous employers
- Limit access Make sure employees can only access what they need to perform their role.
- Undertake regular reviews of your controls Familiarity with processes often means that staff members shortcut or fail to follow the correct procedures.
- Password management You have a password to protect your systems from unauthorised access. So use it, change it often and don't make it obvious. Implement a password policy for all employees.
- Segregation of duties Split your payroll processes to involve more than one person, ensuring that one person alone does not control, create and pay the company payroll.
- Outsource your payroll By outsourcing your payroll you are automatically introducing a third party into your payroll process and lowering the chances that a payroll fraud would go undetected
- Lock it up Keep your physical payroll files under lock and key. Anything printed needs to be either stored securely or destroyed with a shredder
- Keep sensitive information sensitive. Allow your payroll people separate printers to avoid the chance of pay information being accidentally left on a general printer.
- Conduct Random Checks. If staff members don't know that a check is about to be carried out, they are unable to correct details prior to an audit.
- Hot review Most importantly make sure you review your payroll before it is paid.
See my next blog on How to detect fraud in your payroll for tips on what you should be looking for when you review that payroll.