The Association of Certified Fraud Examiners found in 2018 that U.S. businesses will lose at least five percent of their gross revenues to some form of fraud. For small businesses, the median loss amounted to $164,000 with the biggest factor lack of internal controls. So if this happens so much from the inside according to experts, the best thing is for every employee to be aware of how to spot the signs of payroll fraud.
With new wire frauds that can confuse newer Human Resource (HR) workers, constantly training and building employee trust as a leader is crucial. Last year, an employee of the Atlanta-based small business Candy Crown was sentenced to seven years in prison for embezzling over $300,000 over the course or three years.
How? Payroll fraud. It’s no joke. A third of businesses experience it and don’t realize the millions they are losing, according to experts. And often it’s an employee that a leader or executive wouldn’t expect.
Corruption is common; when it comes down to your company funds and paying your other employees, there are some things that you should know. Here are the most common types of payroll fraud and how you can combat against it, via The College Investor.
It doesn’t seem like a big deal, having an employee clock you in five minutes before you get there. Or staying an extra fifteen minutes past your time. But the thing is, those things add up heavily over time. That’s why having some kind of measures in place will help minimize when employees take advantage of their time sheets. There are even cases where employees won’t clock out for lunch or even stayed clocked in overnight.
While many might be accidental, there are those who are looking to add up their hours by getting time on their records. Strict policies, regular audits and having a good idea of when your employees show up for work will help you catch if an employee is trying to make a little extra cash via slowly adding up hours on your time.
People Go Ghost. So Do Workers
This is a weird one, but sometimes employers are paying for employees that don’t even actually exist, known as ghost employees. It’s the most second common type of fraud: essentially someone in your HR department opens up a new employer, gets them set up on a direct deposit somewhere but they don’t actually exist at all.
This kind of stuff is hard to catch with bigger companies. A smaller company most likely wouldn’t have this particular issue. But thanks to regular third-party audits, these kinds of issues can also be found fairly quickly. There will be clues in the checks meant for the ghost employee; for example, their file might have the same social security number as someone in your HR department.
This type of payroll fraud, committed by the company themselves in order to cut corners with money, is ultimately detrimental for just about every worker in the company. Those getting paid under the table are breaking the law, avoiding taxes and are unable to really build a career through volunteering.
If someone thinks they are a full-time employee for a full year and find out later during tax season that their job listed them as an independent contractor, that is wrong. It’s fraud, and it’s the company trying to save money on benefits. But if they are caught doing that, staffing agency insurance isn’t going to be helpful.
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 (800) 245-9653 to speak with one of our representatives.