Payroll Briefs

8 Ways to Prevent Payroll Fraud in Your Business

October 28, 2022

Employee payroll fraud is a challenging issue for many business owners across the country. It occurs when an employee or unauthorized user wrongfully manipulates the payroll system to receive payment they haven’t earned. DM Payroll Solutions shares the different types of payroll fraud, as well as ways to prevent it, to ensure your business doesn’t fall victim to a fraudulent attempt.

Common Payroll Fraud Schemes

Payroll fraud comes in many forms, including:

  • Timesheet fraud – Logging time and getting paid for hours not worked.
  • Falsifying wages (or buddy-punching) – Having coworkers clock in for each other.
  • Ghost employees – Paying someone who doesn’t work for the company.
  • Excess PTO – Taking time off without properly imputing it into the system.
  • Commission fraud – Falsifying sales numbers to receive a higher commission.
  • Expense reimbursement fraud – Claiming personal expenses as work-related.

Ideas to Prevent Payroll Fraud

To keep your business safe from payroll fraud, check out the following tips to create a good defense:

  1. Create a separate payroll account to pay regular payroll and bonuses separate from your general business accounts.
  2. Separate payroll set-up, approval and processing functions with a proper checks and balance system in place.
  3. Review payroll reports after payroll has been approved and processed to verify payee names, rates of pay, hours and deductions are appropriate.
  4. Require managers to approve timesheets and overtime requests.
  5. Have a monthly procedure in place to review advances and monitor repayment efforts.
  6. Cross-train and rotate job duties of employees in payroll and human resources.
  7. Conduct an independent internal audit to double-check your company’s finances and operations, including payroll.
  8. Establish a zero-tolerance policy for fraud and prosecute violators to set an example.

We’re Here to Help

Detecting payroll fraud isn’t necessarily easy, but it’s often less complex than you might think with the right payroll provider on your side. DM Payroll Solutions offers a secure online platform equipped with tools such as dual authentication, user access controls and a payroll-preview report to run your payroll with confidence. To learn more, contact us today!