Is your payroll open to abuse? And if it is, what can you do about it?
Here’s an eye-watering statistic: private sector businesses are losing £144bn to fraud each year. In that context, the £12 billion lost annually to payroll fraud suddenly seems relatively tame.
Of course, it’s no small matter for businesses on the end of those losses – but many businesses, it seems, remain blissfully unaware of the problems.
The figure comes from The Annual Fraud Indicator 2016, with research conducted by the UK Fraud Costs Measurement Committee with Experian, PKF Littlejohn and the University of Portsmouth’s Centre for Counter Fraud Studies.
As the CIPD reports, the types of fraud vary wildly. Sometimes it comes in the ‘low level’ form of an employee adding a few minutes to a time sheet, or claiming a few extra miles on an expense claim. Sometimes the fraud is rather more insidious – as companies with an undiagnosed culture of ‘buddy punching’ (passing clocking cards and fobs to colleagues to clock them in/out) will testify.
And sometimes the frauds are large scale and ambitious. The report identifies long-standing erroneous bank transfers and ‘ghost employees’ (ie payments to employees who don’t exist) as typical acts of higher value fraud.
Identifying the problem
Before companies can tackle issues with fraud, first they need to be aware of them.
The report recommends two key measures every business should put in place:
- Audit the payroll
Regular checks on people and systems can not only identify errors and fraudulent activity; the knowledge that regular checks are carried out can prevent fraud occurring in the first place.
- Due diligence
The onus is on HR departments to ensure the checks that should take place prior to employing a new member of staff actually happen. Reference checks should include asking whether a prospective employee has any history of fraudulent activity.
There are numerous ways in which technology can help tackle fraud. From biometric clocking terminals to driver remote tracking, time and attendance systems can create the certainty and assurance previously unavailable to businesses.
Outsourcing payroll presents an immediate fraud protection measure. By placing payroll with a third party, the opportunities that may present themselves to fraudsters by retaining every operation in house are removed. Outsourcing payroll can act as a welcome ‘check and balance’.
At the very least, businesses should avoid sticking their heads in the sand and assuming that fraud ‘isn’t happening here’. The first step to beating fraudsters is to accept the potential for fraud in every workplace and to take the simple measures – reviewing permissions, checking references, auditing payroll – to assess whether your business has an issue.
To find out more about how outsourcing payroll and changing your time and attendance systems can protect against fraud, talk to us here.