How to Prevent Payroll Fraud

In an organization, a few important processes are based on review to avoid mistakes especially when the process requires money or sensitive data. Though we take extra measures, an organization is prone to some level of risks increasing the possibilities of fraud being committed through various attributes. When individuals are involved to take the authority or control over the funds, sensitive data of the company, chances of frauds are high.

We can deal with such kind of situations with clear strategies, proper security, and documentation. One of the crucial processes in any company is Payroll as it involves funds as well as sensitive information which demands utmost care and attention.

What is Payroll Fraud all about?

In layman terms, Payroll fraud is the theft of cash from a business via the payroll processing system. It can happen from both employers as well as employee’s side. Below are the cases where payroll frauds are occurring:

  1. About Payroll Process: Managers may show fake employee list and take the salaries. Employees or workers are hired for some salary but the amount actually paid will be different.
  2. Confidential Data Leakage: Accounting or confidential information might be misused when any of the employees or manager leaks the salary data.
  3. Monitoring the Attendance: Employees may claim for the salaries when they were not present or employees who have worked but did not a receive salary as they are not included in the payroll list of the organization.
  4. Daily Wages: Number of work hours is also a key factor in the process of payroll calculation. Employees may claim for more hours than actual or employees are compensated for the fewer hours.So automatic tracking of work hours is mandatory these days.
  5. Paying Incentives: Sometimes injustice happens when salary is incentive based. Employees are paid for the sale they have made or the number of new clients they have acquired. So while calculating salary, it may happen that they do not receive the correct amount for the effort they kept.
  6. Business Travel Expenses: Employees claim travel expenses/dearness allowance which means when they travel for the business purpose to some places and they get back all the expenses which are incurred during the business trip by submitting the bills.

In some cases, authorized person or approval authority might submit false receipts on behalf of employees to receive reimbursements. Claims submitted some times they might not have spent or employees also submit false receipts to get more reimbursement than the actual amount they have spent.

This issue needs careful attention in order to avoid improper fund management, poor employee morale, and impact the growth of the organization. Here, Human Resource Management System plays a key role to reduce payroll frauds.

How to be aware of payroll frauds to prevent them?

Most excellent way to handle HR and Payroll frauds is by using an automated and secured system which satisfies the company’s demands. The organization can choose a trusted payroll service provider to safeguard against payroll frauds. To avoid miss utilization during payroll processing, management has to set rights of the employees as per their designation while using the automated system.

  1. About Payroll Process: These days integrated cloud-based HR software’s are providing an on-boarding module which has the facility to generate appointment letters, offer letters, warning letters and memo automatically. Salary is also integrated with the payroll so that there is no chance of committing fraud by the employees or with the employees. They have the facility to manage documents so that authorized persons can only create new hire or re-hire data to avoid fake employee list in the system.
  2. Confidential Data Leakage: Salary master data is accessible to authorized persons only to prevent the probability of data theft.
  3. Monitoring the Attendance: Payroll solutions are integrated with the biometric machine to calculate salary based on employee punch in and out so that no employee can claim salary when they were not present.
  4. Daily Wages: Employees can also apply for overtime compensation as integrated biometric machine calculates the number of work hours automatically reducing manual intervention. Reduction in fraud while paying salaries ultimately increases the employee’s satisfaction.
  5. Paying Incentives: Salary can also be computed as per set Key Performance Indicators (KPI) with the help HR software. Goals are predefined during performance review meeting by managers or HR authorized a person which is again fed as an input to the integrated payroll system.By this predefined goals; employees are given a proper way to accomplish their tasks. Employees also feel motivated and committed towards work assign; they will not claim compensation for the work which they have not done.
  6. Business Travel Expenses: Employees can submit receipts for reimbursements during the travel period itself. They can view the claim status online and get confirmation regarding their payments. If multi-level approval process is introduced involving 3-4 authorized persons neither managers nor employees can think of doing frauds to claim travel expenses. Payroll solution software is integrated with travel expenses as well for enhanced service.

There are many integrated HR and Payroll Solution providers in the market. These solutions are available at reasonable prices with the latest cloud software’s. Anytime and anywhere access is available to authorized persons to prevent payroll fraud.

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