Look Out for These Common Payroll Scams!

Payroll scams can affect any organisation, no matter how big or small. These cons steal money from your company, lowering performance and profitability. To avoid these frauds, you must be on the alert for them.

Here are some of the most typical payroll scams, as well as ways to avoid them:

 

1. Phishing

A phishing incident happens when an employee tries to imitate another worker in your firm. When they request a change, they will ask you to change your direct payment information. For example, their email may be fake, but it appears to be from an actual employee at your organisation.

When an impostor gets all of the information about the actual employee, they can commit a payroll scam. Once you change the banking details, the sender's email and name as requested, you will divert the employee's payroll to the fake account.

 

How to avoid phishing:

Educate your staff on how to be cautious when conversing by email and how to recognise and report suspicious SMS. 

Any request to modify bank information via email should be treated with caution. 

Before you hire someone, make sure their account is valid. Also, don't open or respond to suspicious emails, even if they don't appear in the spam folder.

 

2. Wage falsification

This kind of payroll fraud is typically a two-person show, with a worker and a member of your payroll team working together. The employee is paid more than they are owed, and the money is split with their payroll-based accomplice.

The fact that the offending payroll staff member can later return the employee's salary to normal after receiving the inflated figure makes this one particularly difficult to identify.

 

How to avoid wage falsification:

Use multiple people to authorise payroll, approve timesheets, and produce the signing check instead of just one. You can hire multiple managers to go over the files, including employee salary and categorisation information. Separating payroll processing responsibilities into random managers for authorisation, distribution, and reconciliation would be helpful too.

 

3. Misclassification of employees

This happens when an employee is mistakenly labelled as an independent contractor, either intentionally or accidentally. 

This type of payroll fraud allows employers to avoid paying overtime, remitting employment taxes, insurance, and staff's compensation and benefits. Your organisation could face penalties for such payroll errors.

To decide how you should facilitate a worker's payment, you must first determine whether they are an independent contractor or an employee. Employers who misclassify employees will be penalised by the Labour Court.

 

How to avoid misclassification of employees:

It can be difficult to tell if someone is an independent contractor in some situations; your firm can do so by looking at their credentials. Determine whether or not you train your employees to accomplish their jobs and supply them with the required tools and equipment. You might also get legal advice to better comprehend their decision.

 

4. Ghost employees

This is when a non-existent employee receives a paycheck from your firm. This can happen if a previous employee is still paid or if a current employee creates a fake account in the payroll system. Though they are unusual, employees from medium-sized and large organisations are involved in such payroll scams.

 

How to avoid ghost employees:

Implement a thorough off-boarding process that doesn't forget important details or actions for removing departing employees from the payroll. To keep track of payments, double-check the payroll system for user permission and convert cash and checks to direct deposit or pay cards. Verify that each employee is genuine and that their pay rate is correct.

 

Payroll scams may wreak havoc on your company's revenue and performance, hence it's critical to recognise and avoid them.

 

Source: asappayroll.com