To avoid bankruptcy, watch out for these three types of payroll fraud

Simangele Mzizi, Fsp Business, 02 Jan. 2015

Tags: payroll fraud, types of payroll fraud, how to prevent payroll fraud

Not so long ago, we reported that research by Alexandra Forbes shows that payroll fraud costs South African companies more than cash-in-transit heists.

Unfortunately, this isn’t about to change anytime soon.

Sage HR and Payroll Managing Director, Anton van Heerden, says incidences of payroll fraud are growing at an alarming rate among SMEs in South Africa.

He says the growing number of clients that ask them for help with forensic investigations after falling prey to payroll fraud suggests the crime is on the rise. And he predicts these incidents are likely to continue in 2015.

If you fall victim to this fraud, your company could go bankrupt.

But you can avoid this fate if you watch out for these three types of payroll fraud…

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Look out for these three types of payroll fraud

1. Ghost fraud
In this article, experts behind the Practical Accountancy Loose Leaf Service, explain that this type of fraud happens when an employee adds a fake employee to your payroll system.
The ghost can be a real person or a fraudster can create a fake person to place on your payroll.
The aim here is to get you to pay the ghost. After you make payment, the fraudster gets his money.
Be sure to scrutinise these four areas to detect ghost fraud in your business.
2. Buddy punching
We explain here that the origins of this type of fraud date back to the old punch card system. People would punch their friends in to make it seem as if they were at work.
This fraud still happens even today.
You must guard against it especially if you have a system where there’s a single point to get in and out of the operation.

3. Pay rate alteration
This type of fraud involves an employee persuading the payroll clerk to increase their hourly wages to inflate their cheque. Often times, your payroll manager will return the pay rate to normal after committing the fraud, says
To protect your business, do a payroll audit after payday. It will help you see whether or not someone made changes.

If you find anyone committing payroll fraud in your business, make an example out of them

Be on the lookout for these types of payroll fraud. And bear in mind that employees always find new avenues to prey on your business.
It’s for this reason says you must set an example by disciplining anyone you find guilty of payroll fraud. Your employees need to know you don’t tolerate people who steal from you.
PS: For more information on payroll fraud and how to prevent it, check out The Essential Fraud-Proof Business Guide.

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