How Much Can a “Ghost Employee” Cost a Business?

If someone is on a staffing company’s payroll but doesn’t actually work for the company, they’re considered a ghost employee, which can be an actual former employee no longer with the company or an entirely fake persona, both of which receive actual payment intercepted by a perpetrator. Ghost employees have been an issue for many years, as significant financial loss over an extended period of time has been documented. They are surprisingly difficult to detect, especially for companies using automatic gross pay implementations.

Without real visibility into 100% of a company’s workforce, all the executives really see are paychecks going out. Multiple time and gross pay functions only create more errors and more information gaps. Due to this, HR must opt for processes with intrinsic preventative measures.


A centralized system, promoting a cohesive unit will help to regulate an organization’s payroll and help to prevent fraud. Implementing counter checks and balances from more than one individual can disrupt the process necessary to create or use a ghost employee.

Various Payroll Duties

Assigning more than one individual to different functions within payroll can deter perpetrators. Collecting time, ensuring law compliance, and sending paychecks could all be done by different employees. The distribution of authorization, access and responsibility can greatly help prevent a fraudulent strike.

Fraud and Other Process Inconsistencies

Internal payroll audits are a useful mechanism to filter the wrongdoers and identify other possible issues in the system. By verifying a handful of employees’ pay rates, and comparing them to their time and attendance records, this can shed some light on any issues in the process and help to avoid undergoing an audit for the entire company if a litigation or compliance complaint arises.

HR policies with simple transparency are the best problem solver. With clear policies in place it is much easier to detect active and inactive employees. Without proper communication and regular HR procedure reviews, preventable oversights can leave former employees on the payroll for far too long.

System of Record

Stop these payroll specters in their tracks by using a system of record based on completed time and work of employees. Payroll costs about 60% of operating expenses, so without true visibility and control into its usage, poor handling and operating creates too much of a risk. When HR is given insight into employee productivity, projects, benchmarks, and outcomes, payroll fraud does not have nearly as much potential to threaten the liveliness and success of a business.

About World Wide Specialty Programs

For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage, we have available to protect your staffing business, give us a call at (877) 256-0468 to speak with one of our representatives.