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Payroll Fraud – Part 1

Payroll Fraud in the Workplace

We recently found this article on payroll fraud within the workplace which we will post over 2 weeks as its something that can be prevented by being aware of your employees and their behaviour.

When work dedication masks payroll fraud Payroll fraud schemes typically last about 2 years before being detected, and are twice as frequent in small businesses as in larger ones. This is according a 2016 Global Fraud Study by the Association of Certified Fraud Examiners.

Most often, perpetrators hold accounting positions (21.6% of cases). Cathie Webb, a Director of the South African Payroll Association (SAPA), says employers should be wary when their payroll administrator resists being away from the office. “It may be they’re afraid that someone standing in for them will uncover irregularities and expose them.” So a payroll administrator who never takes time off, arrives early, leaves late and works over weekends may seem dedicated. But they could also be committing payroll fraud.

Apart from always being at their desk, such administrators are overly protective of their records, computerised or physical. They’ll insist that the work won’t be done correctly by those who don’t know their system but will avoid training backup personnel to perform their duties.

How it starts

“It often begins with financial difficulties at home,” suggests Webb. “The practitioner might create and pay a falsified employee or change their own pay rate for a single run just to get out of hot water.” But when the act goes unnoticed, it becomes easier to repeat and eventually snowballs into major fraud.

Why the problem exists

Unfortunately, blame falls squarely on the organisation. “In most cases we’ve witnessed, the shocked employer completely trusted the payroll administrator and never audited their work,” reports Webb. “It’s an accounting function and the same checks and balances need to be enforced.”

Next week we will look at ways of avoiding and recognising payroll fraud.

Pay Solutions offer Payrolll 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