Payroll fraud occurs when employees get their employers to pay them more wages and compensation than is due to them by making false claims and falsifying records. By being more vigilant and adopting control policies, you can protect your business from the losses you might incur because of payroll fraud. The Association of Certified Fraud Examiners warns that internationally, businesses can lose up to 5% of their revenues every year because of fraud; and small businesses typically suffer more because they without the elaborate internal controls that larger companies might implement.
Your employees could be collecting wages in the name other employees who are not truly working for you; or who have worked for you in the past and have left your company. To conquer this problem, you must make sure that when an employee’s sets are terminated, your records are updated right away. Also tally the actual number of present employees with the number of paychecks you write. You could also get your employees to physically pick up their paychecks and sign for them. Make sure they provide you with proper identification such as a Social Service Number that you can later verify with the authorities. Also check if your records have actual addresses and all payments show mandated withholding. If any of your employees complains that she has not received her paycheck, you might want to check your complete payroll course of action.
False Time Sheets
Another method of claiming undue compensation is by clocking in additional hours than the employee has truly put in. If you have an electronic time card system in place, you can assign a supervisor to punch cards. You can also implement new technology by which employees have to add in a password or a code when checking in to work. examine overtime payments carefully and put in a system of rotation by which supervisors are reassigned now and then. Separate payroll duties so that supervisors are not the same personnel who add up the time clocked and make payroll. If your bonuses are based on work hours, you could take it upon yourself to authorize them.
Bank Statements and Taxation
You can keep a close watch on the wages you’re paying by studying your bank statements. for example, if you see any similar bank details it could be an indicator of double payment. however, if details of a particular payment are missing, you might want to probe the recipient. Also be on the alert for any payment codes that were idle but have suddenly been activated. In case an employee changes his bank account number, you might want to verify and ask for reasons. You could also verify your bank payments against your list of employees. Above all, you could monitor the taxes you’re deducting and remitting to the IRS for inconsistencies.
Your employees can also add false entries to sales records and commission statements to claim additional pay from you. To protect yourself, check your sales revenues against the commissions you’re paying. Also confirm if you’re paying for sales that did not truly materialize. If your sales figures are going down but the commission charges are continued or already rising, you might want to probe the issue. Further, carefully study reports of customers not wanting to honor their dues. When making payroll, check the percentages of the commissions your employees have requested from you against the sales they claim.