Payroll fraud is a critical concern for businesses across the globe and as technology evolves, so do the methods available to those willing to commit fraud through exploitation of weaknesses in payroll systems. Let’s explore some of the fraud risks associated with payroll and how your business can safeguard itself.
Timesheet manipulation
In industries that rely heavily on accurate timesheets, timesheet manipulation can pose a threat to your business. Timesheets can be manipulated through inflating hours worked or claiming overtime that hasn’t been worked.
This can be prevented in a few ways, for example, implementing timesheeting software that utilises different permission levels and limits user functionality can reduce the chance of manipulation. You can also conduct regular audits of timesheets and compare them to the actual hours worked on jobs to ensure they are accurate.
Ghost employees
One of the most common payroll fraud risks is the creation of ghost employees. Ghost employees are fictitious individuals added to the payroll who do not actually work for the company. These ghost employees receive salaries, diverting funds away from the legitimate workforce and could prevent recruitment of legitimate employees to support your team.
You prevent the creation of ghost employees by ensuring you have a robust onboarding and offboarding system in place that includes the removal of personal information and data from payroll systems in a timely manner. A further way to prevent the creation of ghost employees is to implement multiple levels of approvals for new hires or changes to employee information.
Phishing
In a digital world, phishing attacks pose a threat to all businesses and fraudsters may attempt to target payroll personnel to obtain sensitive information. They may target them via email or other forms of online messaging using fake emails to trick payroll teams into giving out employee information.
Providing employees with the correct training on recognising phishing attempts and threats will help prevent phishing attacks. You can also take precautionary measures such as implementing multi-factor authentication to access payroll systems and establishing secure communication protocols for sensitive information.
Tax Fraud
Tax fraud has and will continue to be an issue businesses have to overcome. There are several ways a person can commit tax fraud including manipulating figures, creating false tax records or providing HMRC with incorrect information. Despite attempts by HMRC to prevent tax fraud and evasion through schemes such as CIS it remains a problem.
To prevent tax fraud in your business ensure you stay up to date with changes in tax law and regulation, conduct regular reviews and audits of tax calculations and submissions and ensure payroll departments collaborate closely with HR and other relevant departments to validate tax information.
If you would like advice or would like to work with an outsourced payroll agency that will ensure compliance and help prevent fraud then contact our team.
