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Addressing Payroll Fraud

The Common Types Of Payroll Fraud - And How To Avoid Them

Payroll fraud is a serious issue that can cost businesses a lot of money. Businesses are estimated to lose billions of dollars each year to payroll fraud. This fraud type can take many forms, from embezzlement to falsifying time cards.

Here are some of the most common types of payroll fraud:

  • Ghost Employees
    A ghost employee is someone who is either a fake person or real person who has died or otherwise left the company, but their personal data remains in the books and someone other than this person cashes the checks.
  • False Reporting
    This fraud occurs when an employee is paid for work they did not do. The employee may be paid for hours they did not work, or they may be paid for a job that does not exist.
  • Sick Leaves and Vacations
    The next most common type of payroll fraud is when employees claim sick or vacation days they haven't taken. This can be a difficult one to catch, as it's hard to know if someone is truly sick or not.
  • False Expenses
    This is the common type of payroll fraud and can be done in several ways. The most common method is employees submitting false expense reports for reimbursement. Another way this fraud is committed is when employees are paid for hours not worked. This can be prevented by requiring employees to punch in and out of a time clock or using an employee tracking system.
  • Misclassification of Employees
    This employee payroll fraud occurs when an employer intentionally misclassifies employees as independent contractors. By doing so, the employer avoids paying Social Security and Medicare taxes, unemployment insurance, and workers' compensation insurance. Additionally, they may also get away with not providing employee benefits.
  • Commissions And Bonuses
    Commission and bonus scams can occur when employees falsify their sales records or hours worked to receive a larger commission or bonus. This fraud can be prevented by implementing strict controls over sales recording and approval and working hours.
Training To Identify And/Or Prevent Payroll Fraud

HRcertification.com has a number of courses that can help your organization to identify and prevent payroll fraud. We?ve highlighted some of the best-sellers below; simply click on the links to see more details about a preferred course or go to HRcertification.com to see our full list of courses.

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