How to prevent it Payroll Fraud
Employers can take several steps to short-circuit payroll fraud:
Employ a certified payroll practitioner and if fraud is suspected then request a Payroll Audit
The days when payroll was a ‘fallen into’ career, one which was discovered as someone worked their way up the ranks, are rapidly disappearing.
Today, payroll is one of the pillars holding up the business, handling one of its biggest costs and providing strategic insight which transforms corporate communication and impacts on the bottom line. “When a business hires someone who has chosen a career in payroll, they are hiring someone who understands the challenges, knows how to minimise statutory risks and reputational damage and who can see the links between payroll, finance and HR,” says Webb. “They have the skill and knowledge to address any disconnect with management and are strategists who know their value and how to communicate with those in charge.”
Today’s payroll practitioner is a strategic thinker who understands risk, recognises the potential for engagement across departments and knows the business from the inside out.
Segregation of duties
Certain payroll duties can be delegated to others. For example, the payroll practitioner prepares the banking file, but finance performs its submission to the bank. A third person should be responsible for checking that all the reporting balances. Additionally, the banking transactions should always require two authorisations, by people who clearly understand that the responsibility includes checking the details.
Internal audits It’s good practice to perform regular audits to make sure the business is running smoothly. Include a thorough inspection of payroll records and processes.
An approval process Payroll submissions should follow a systematic approval process with department or team managers reviewing and signing-off payroll for their staff. The financial director or CEO should also inspect and approve consolidated payroll for the company.
Master record auditing It may be possible to place automatic alerts on changes to computerised master records, such as employee pay rates or bank detail changes. Secondary staff are alerted, and review and approve them.
Task automation Some payroll tasks can be handled by a computerised process. Because calculations or processing happen in the background, there’s less opportunity to tamper with figures.
Staff rotation Train backup staff to perform payroll duties so they can stand in for an absent payroll practitioner. But also have them perform payroll duties regularly so that one person never has complete control.
Annual leave Force payroll practitioners to take annual leave. It’s a good way to prevent both fraud and burnout. A well-rested practitioner is more alert and less prone to errors that could also result in loss if undetected.
Be proactive Your dedicated payroll practitioner may or may not be defrauding your company. “Rather than worrying about it,” advises Webb, “take time-tested steps to prevent the opportunity.”
Pay Solutions offer Payroll Audits so if you suspect any payroll fraud activity give us a call now!
Disclaimer: The information published in this article or newsletter is of general nature and should not be used without obtaining specific advice as to its application in your business or under your specific circumstances. Pay Solutions will accept no liability if the information is used without first obtaining specific advice from one of our consultants