Sunday, May 26, 2024
No menu items!

Can Payroll Fraud Be Stopped? Insights from a Specialist

Must Read

In today’s corporate landscape, payroll fraud lurks as a silent predator, posing a significant threat to organizations’ financial integrity. Yet, the unsettling truth is that this menace often remains undetected until it’s too late.

Yolande Schoültz, a seasoned specialist in combating payroll fraud,
Yolande Schoültz

Yolande Schoültz, a seasoned specialist in combating payroll fraud, sheds light on this alarming reality.


Schoültz highlights how payroll fraud schemes frequently evade detection for extended periods, only unraveling when a culpable payroll administrator is absent. This scenario underscores a critical issue: the lack of vigilance and oversight within payroll operations. Despite payroll being a cornerstone expense for most companies, it’s often overlooked, creating an environment ripe for exploitation.

The insidious nature of payroll fraud can be attributed to several factors. The absence of formal qualifications for payroll administrators and the detachment of payroll functions from broader financial oversight exacerbate the problem. This complacency allows fraudsters to manipulate antiquated systems and exploit lax controls, perpetuating their illicit activities with impunity.

To mitigate the risk of payroll fraud, proactive measures must be adopted:

Pay attention to payroll departments

As mentioned, payroll departments often become isolated, and their teams are more trusted than many other financial functions. Even if one can trust their payroll administrators, this complacency is poor governance and a recipe for future fraud. Businesses must put functions in place that scrutinize payroll indicators. This action is particularly essential if there are highly variable payouts, such as overtime, sales bonuses, and freelance contractors.

Produce direct reports

Payroll fraudsters often hide their crimes through gatekeeping, maintaining defensive control over their records and refusing others direct access. To combat this, different stakeholders should be able to print reports rather than rely on what the payroll department provides. A modern, integrated payroll software platform will enable different people to access and produce reports.

Conduct an annual headcount

Headcounts can be onerous as they require employees to report in person with their credentials. However, doing this exercise once a year will deter fraud and uncover ongoing activities such as ghost employees.

Train staff in payroll

It’s staggering to realize that while payroll is often a company’s single-biggest financial cost, there is scant training for payroll administration. There are certifications and professional bodies, but most financial professionals have a bare-bones understanding of payroll, and many other employees (such as executives and managers) have no real grasp on the practice. Providing training and workshop opportunities will strengthen their knowledge and reduce fraud risks.

Segregate duties and access

Payroll fraud often occurs when payroll systems are monolithic, opaque, and controlled by a handful of people, due to old and outdated payroll software. Yet payroll duties can extend into finance, human resources, and team projects. At the very least, financial staff should have access to the payroll system and assigned duties or oversight roles. Nobody should have complete access to all payroll functions. Modern payroll software platforms let organizations assign roles and segregate duties to ensure oversight.

Open charges against the accused

Discovering fraud under your roof is never pleasant, and some companies prefer to avoid the problem by firing the fraudster and sweeping the damage under the carpet. But while this might help them save face, they are making the problem worse. People who commit fraud are prone to do so again, and many caught payroll fraudsters are repeat offenders. If charged, they can get a criminal record, stopping them from sneaking into a different business and starting their theft again.

In conclusion, the fight against payroll fraud demands a multifaceted approach that combines heightened awareness, robust controls, and swift legal action against perpetrators. By embracing these strategies, organizations can safeguard their financial resources and preserve their integrity in an increasingly complex business landscape.

- Advertisement -

Regular Vigilance Crucial for Spotting Software Breaches

Chief Technology Officer for Obsidian Systems, Karl Fischer, says "Constant vigilance is essential to identifying software security breaches." Fischer recounts,...
Latest News
- Advertisement -

More Articles Like This

- Advertisement -