As a business owner, you may never expect to experience payroll fraud or abuse within your company. Payroll fraud can happen in any organization though, and it can be detrimental when it does. Extreme financial loss and multiple years spent navigating the complex legal system are just a couple of things your company might have to endure.
What can you do in your business to help reduce fraud and abuse? Workers’ compensation payroll solutions can help. Let’s take a look at some common types of payroll fraud, workers’ comp payroll solutions, and how PEOs can step in to help prevent fraud.
Common Types of Payroll Fraud
Payroll fraud schemes come in many shapes and sizes, but one of the most common are overpayment schemes like timekeeping and overtime fraud. These schemes involve inaccurately tracking the hours you’ve worked or overtime hours accrued.
A ghost employee is someone who is on a company’s payroll but doesn’t actually work for the company. They may be a fake person entirely—created by a current employee who has access to the system—or they might be someone simply pretending to work for the company.
Claiming fraudulent expenses is another way employees can abuse payroll. By tacking on small amounts to legitimate expenses each time or creating false expenses altogether, this form of fraud could go unnoticed for some time.
How Workers’ Comp Payroll Solutions Address Fraud
Payroll software can be incredibly helpful in preventing payroll abuse and fraud. Background checks and onboarding for new hires can help ensure new employees are legitimate and have a clean record.
Workers’ comp payroll solutions also prevent payroll information from being readily available within your organization. Having a limited number of employees who can access payroll details makes it easier to track down the source of any issues should they arise.
Payroll software also makes it possible for employers to pull and review payroll reports at any time.
Role of PEO Services in Fraud Prevention
If you’re a business owner or HR manager with a lot on your plate, outsourcing payroll can be incredibly beneficial—particularly when it comes to fraud prevention. PEOs—or professional employer organizations—handle businesses’ administrative tasks like payroll, workers’ comp, and risk management.
Payroll processing can be tedious and stressful, so PEOs step in to alleviate that burden from already-busy business owners. When you partner with a PEO, they’ll handle onboarding for each new hire—thoroughly vetting them along the way.
PEOs utilize software that helps ensure employee data is secure and payroll is done accurately and on-time every time. Allowing a PEO to handle payroll processing for your company means fewer people within your organization will need access to your payroll information—further protecting your business from fraud.
Implementing Anti-Fraud Measures
Partnering with a PEO means employees will have an app where they can access their personal information. This offers a secure system for them to clock in and out, and it helps prevent users from creating and tracking time for ghost employees.
Limiting access to payroll information is a great way to help prevent payroll fraud and abuse. When you work with a PEO, it eliminates the need to give multiple employees access to payroll data. PEOs will process your payroll, and you or your HR manager can access those reports at any time to confirm their accuracy.
While PEOs handle payroll and other administrative tasks, employers are still in charge. Documentation and authorization will be required before a new employee is added to payroll.
Additionally, PEOs can run payroll audits at any time, and they’ll regularly check for unusual time-tracking activity.
Protect Your Business from Payroll Fraud
Payroll fraud or abuse can be detrimental to your company. Not only will your business take a massive financial hit after experiencing fraud, but it will likely also take a toll on its reputation.
Outsourcing your payroll processing is one the best ways to help protect your business from fraud or abuse. Reach out to the team of experts at OCMI Workers’ Comp today to see how they can help prevent payroll fraud within your organization.
