How to prevent payroll fraud

Payroll fraud might sound like something out of a movie, but in reality, it’s a lot more common than you think.

Sadly, small businesses are often the most vulnerable because they put more faith in their employees and often do not invest in the infrastructure to help catch payroll fraud. Perhaps because they think it’s too expensive? – Well it’s not.

Citadel is a clocking system designed to help you track time and attendance and only pay workers for what they work. The system needs no tech investment as it is cloud-based, and costs just £00.8 per employee a month.

With a clocking system, workers will not be able to defraud your company, and if there is ever any issue of overpayment or disciplinary action for lateness, you will have the digital records to back it all up.

Here are the top ways employees commit payroll fraud.

1. Time theft

This can happen two ways;
1) A worker who will late, instructs someone else to clock in or out for them – meaning they are paid for time not worked.
2) a worker purposefully clocks out late, or in early to begin being paid without authorisation.

How to avoid it: Invest in a time and attendance clocking machine that involves biometric clocking such as a fingerprint or facial recognition. You can’t ask a buddy to clock if they don’t have your fingerprints. You can also set rounding and grace rules to ensure workers are only paid for their hours.

2. Absent Employees

Again, this seems unbelievable but it happens ALL THE TIME (see our clocking cases). Someones being paid, but not showing up to work. Either they are absent, or fictional to defraud payroll.

How to avoid it: Again, a biometric time clock can stop absent employees from being paid – you don’t clock, you’re not working. You can also check labour and cost centre costs to see how much work is being done vs the amount it’s costing you – you’ll soon see if things don’t add up.

3. Inflating Pay Rates

Adding 50p an hour here or there to boost a pay packet in a way that is valuable for the fraudster, but not too noticeable for payroll.

How to avoid it: Usually, this type of fraud involves employees familiar with the payroll software, so make sure your systems are all password secure and only trusted people have access to them. If you are suspicious of payroll activity, set up a pre-approval process, where a manager (or Director) can personally scan the Time and Attendance data for any discrepancies between hours worked and end pay.

Find out more about our clocking systems here.

Any questions, or if you’d like to request a free online demo to see how clocking in with Citadel could work for you, call 01761 410015, email us or click the chat icon.