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off-site Payroll Administrators help reduce fraud!

Pay Solutions your “off-site Payroll Administrators” takes the worry out of your business so you will know exactly where the business money is going to, there is no risk of payroll fraud taking place. Pay Solutions your “off-site Payroll Administrators”  use a world class, sophisticated,  advanced powerful payroll technology. This functionality enables Pay Solutions to administrate the payroll as well as the client having access to any of the information 24/7.

The risk of payroll fraud is a fear for many company’s in South Africa, the fraud triangle is a model for explaining the factors that cause someone to commit fraud. It consists of three components which, together, lead to fraudulent behavior:

1. Perceived unshareable financial need 2. Perceived opportunity 3. Rationalization

Pay Solutions your ‘off-site Payroll Administrators’  here are some of the ways fraud occurs within the payroll process:

off-site Payroll Administrators

  • Advances not paid back. The most passive type of fraud is when an employee requests an advance on his payroll and then never pays it back. This works best when the accounting staff does not record advances as assets (instead charging them directly to expense), or never monitors repayment. Thus, the non-payment of advances requires inactivity by the recipient and inadequate transaction recordation and follow-up by the accounting staff. A monthly procedure to review advances will eliminate this issue.
  • Buddy punching. An employee arranges with his fellow employees to have them punch his hours into the company time clock while he takes the day off. Supervisory reviews and the threat of termination are the best ways to avoid this risk. A more expensive alternative is to use biometric time clocks, which uniquely identify each person who is signing into the time keeping system.
  • Ghost employees. The payroll staff either creates a fake employee in the payroll records or prolongs the pay of an employee who has just left the company, and alters the payment record so that the direct deposit or check is made out to them. This works best in large companies where supervisors have very large staffs and so do not usually track compensation in sufficient detail. It also works well when a supervisor has left the company and has not yet been replaced, so that ghost employees can be inserted into their departments until a new supervisor is appointed. Periodic auditing of the payroll records is needed to spot ghost employees. Another way to spot a ghost employee is when there are no deductions from a pay check, since the perpetrator wants to receive the maximum amount of cash.
  • Pay check diversion. Employees could take the paycheck of another employee who is absent, and then cash the check for themselves. This can be avoided by having the paymaster retain all unclaimed checks in a locked safe, and by requiring that everyone receiving a pay check prove his identify with a driver’s license or some similar document.
  • Pay rate alteration. Employees collude with the payroll clerk to increase the amount of their hourly pay in the payroll system. A more clever clerk will then return the pay rate to its original level after committing this fraud for just a few pay periods, so that the issue is less easy to spot. This can be detected by matching pay rate authorization documents to the payroll register.
  • Unauthorized hours. Perhaps the most common type of payroll fraud is the padding of time sheets by employees, usually in small enough increments to escape the notice of supervisors. This is a particular problem when supervisors are known to make only cursory reviews of time sheets. The best control over this type of fraud is the supervisory review.

Payroll fraud has seen reported incidences increase at an alarming rate especially among SMEs in South Africa. The growing number of companies asking payroll firms to assist with forensic investigations after falling prey to payroll fraud and this indicates that the crime is on the rise.

Chat to Pay Solutions your “off-site Payroll Administrators” about how secure their payroll technology is and how this can help reduce the risk of fraud within your organsiation.