Tips to Prevent Payroll Management

Payroll management fraud can be defined as any scheme in which an employee causes the employer to issue a payment by making false claims for compensation. It has been one of the costliest and a very common forms of asset embezzlement. Before it is actually spotted it is already 24 to 30 months i.e., approx. 2 years therefore can cause a potential damage of 1000’s of dollars.

We know that payroll fraud generally occurs due to the payroll mistakes which generally include factors such as ghost employees, benefit schemes, falsified wages etc. There are a few ways to prevent payroll frauds.

Setting mandatory vacation roles: It is simple a person who is dedicated comes on time, works overtime and never misses on a day can be a snitch. Therefore, the employee who handles payroll should be given regular and mandatory vacations. By this practice another person will replace the employee for the duration and common fraud can be detected easily.

Monitoring Overtime payments:
Keeping a check on overtime payments is another way to prevent payroll fraud. Since, hourly employees may work overtime during a busy day so one should ensure that they are legitimate and warranted. That the payment is done only for the work done.

Limit access to payroll information: Payroll is a very sensitive documentation and granting everyone an access to the document can be a very costly act which leads to fraudulent activity. Only the staff which actually needs to deals with the functions of PPI, wage and deduction information must be given an access to the same.

Reviewing payroll reports: A payroll report must always be reviewed. It is easy to believe that the payroll would be the same every month but it is advised that a regular check is carried out since there is always a variance in flag anomalies and audit reports which indicate the changes.

Time and attendance geofencing: Geofencing, another factor which can help reduce payroll frauds as it creates a virtual perimeter which is created by the employer for a specific work location. This helps in tracking the login and logout location hence, a check can be maintained that the employees are working within the define location.

 IP whitelisting: IP whitelisting is another amazing feature that ensures only the IP addresses which are included in the whitelist is able to access the sensitive payroll data. Therefore, adding another layer of security.

Separating Processes: In small businesses it is easier to make one person in-charge for running various functions. HR and Payroll can easily be merged into each other. This just creates a double security check and avoids any kind of fraud since, the process that was otherwise to be done by one individual is bifurcated into two distinct steps. This creation of two separate departments, run by different people creates a transparency and reduces the possibility of frauds in payroll management and saves the company from many losses by ensuring that the payment is going in the right place and there is no wage falsification.

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Last modified: October 13, 2021

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