How to prevent payroll fraud
As with many other things, when it comes to payroll fraud, prevention is better than the cure. Getting into legal battles, contacting authorities and attempting to recover stolen money can make for difficult and expensive situations. When you take measures to detect and mitigate fraud, you minimise the chances you’ll have to deal with a legal headache later on.
That said, here are some ways small businesses can fight payroll fraud:
Step 1: Understand employee classification
As a small business owner, you can face serious penalties for misclassifying your workers. Therefore, it’s important to do some research to find out how to properly classify your employees. Refer to the Fair Work Ombudsman’s information on employee types.
Step 2: Mitigate timesheet fraud
Provide workers with clear guidelines about when they can and cannot clock into work. You may even implement identity verification measures, such as an ID card or a fingerprint. And, of course, assign managers to review and sign off on employee timesheets each pay period.
Step 3: Watch for commission schemes
Make sure to review your company’s commissions policy on a regular basis. In addition, keep an eye on the records of the employees earning the most commissions. You might even consider auditing their sales to ensure they’ve earned all of their commissions.
Step 4: Look for workers’ compensation fraud
First, create a clear policy for reporting workplace injuries. Let employees know who to report injuries to, as well as when and how to report. Also, install security cameras so that any potential workplace injuries are recorded.
Step 5: Avoid ghost employees
A simple solution to this scheme is to physically deliver cheques to employees. If this is inconvenient, you can also periodically review your payroll roster and address discrepancies. Look for things like duplicate addresses and account numbers, and ask your bookkeepers about payroll fraud.
Step 6: Keep an eye out for third-party scams
Hackers and scammers are a persistent threat to small businesses. To prevent these schemes, educate your staff about common phishing scams. You might also upgrade to a secure payroll system like QuickBooks Payroll. With our payroll processing software, you can easily manage payroll while keeping your staff’s information safe from malicious third parties.
