With lots of media attention around payroll theft, with some stories making national headlines, organisations should be on guard against externals threats and internal misconduct, detecting and ultimately preventing payroll fraud.

Some great research from insurance company Hiscox last year in America provided eye opening statistics and tell tales pointers for organisations, and with over half of money obtained through frauds never ever being recovered, it provides real food for thought for organisations, particularly SMEs.

In the UK there are three basic types of payroll fraud – ghost employees, false wage claims, and over inflated expenses claims.

Research has suggested that most people would commit fraud if they thought they could get away with it and certainly false wage claims and overinflated expense claims are often quite common to an organisation. The creation of ghost employees, however, often involves someone at the heart of the organisations payroll department, and can include external help.

Key stats from the Hiscox report that should make UK employers take note:

With the National Fraud office reporting over £300million of fraud every year in the public sector alone the risks to any business is immense

SO WHAT CAN BE DONE TO COMBAT PAYROLL FRAUD?

1)      Let everyone know what’s expected – clear guidelines, coaching and training on the impact of fraud in your organisation

2)      Lead from the front – bring fraud into the open and discuss it openly from the top down. Ask your employees to be vigilant, and let you know of any weaknesses in your systems – you may not have thought of all possible failures in your systems.

3)      Take away the risk – use an outsourced provider for your payroll and build you internal audit procedures and practices around that, ensuring anything handled internally carries dual signatories or ongoing audit checks. If you can grab extra time to spot fraud through outsourcing then you should take it.

4)      Thoroughly check who you’re employing – both internally and externally. Comprehensive employee screening should be the norm internally. Ensure any outsourced payroll provider has ISO 27001 and Payroll Assurance Scheme accreditation so that you can be sure security is at the top of the agenda.
5)      Look out for the ‘tell’ – as in poker employees can give away signs that all might not be well. Unexplained wealth or purchases, knowledge of large employee debts, drug habits or gambling are all tell-tale signs.

6)      Know your team – Always be on the lookout for anomalies – employees with the same address, team members staying late for no apparent reason, and thoroughly check their expenses (they’ll soon get to know if you only take a causal glance).

7)      Never leave just one person in charge – It’s hard, especially in smaller companies, to have more than one person in charge of payroll, but it’s risky. If you cannot do that in your organisation then consider rotating roles on a regular basis or get someone independently to sign off payments.

8)      Stay on top of leavers – make sure your procedures when someone leaves are watertight.

Practical steps can help limit the risk to your business. Taking no steps will leave your company exposed.

Hiscox- A snapshot of employee theft