What is “Ghost Payroll”, and What do You Do About It?

Imagine having a payroll where half of the employees didn’t actually exist. This is called ghost payroll, and it is a type of fraud that impacts 27 percent of businesses, according to the Association of Certified Fraud Examiners. It happens to everyone, with small businesses affected twice as often as larger ones.

Ghost employees are essentially a scam where money is funneled into empty accounts, left for the thief to take later. Depending on a business’s size and finances, this can go for months (or longer) unnoticed, and can do severe damage to a business’s infrastructure. Payroll fraud is a problem that while can become exacerbated, can also be solved or prevented.

The problem with fraud is that it takes up a lot of time and resources to resolve, and this often results in a waste of resources that could be better applied elsewhere. Don’t let ghost payroll and ghost employees infiltrate your business. This kind of problem can be incredibly detrimental, if not fatal, to a smaller company. But no matter what the business size is, no one deserves to be scammed.

Here’s what you do when confronted with the problem of ghost payroll, courtesy of GPayroll.

What is a Ghost Employee?

Not referring to anything that’s paranormal, employees that are “ghosts” are essentially shells. The business believes that this individual works there, but it’s really no one.

That means it’s basically a free extra paycheck for the fraudster to pick up. In some cases, there could be an actual person involved (whether aware or not), but many will find that an individual has been completely made up.

Why Would Someone Want a Ghost Employee?

It’s simple. It’s a chance to earn an extra paycheck fast. Maybe one fake employee and that sole paycheck isn’t a lot. But imagine if there were over 10 fake employees registered on payroll. What if there were more? The bigger the company gets, the bigger of a risk it’ll become.

However, this doesn’t mean that small businesses aren’t susceptible. For example, imagine a small business where they hire a Human Resources worker and they happen to be fraudulent. In that case, the business has a lot to lose; and dealing with any kind of lawsuit could cripple the company permanently.

What Can You Do About It?

All businesses need to ensure that their payroll policies are being implemented properly. Everything should happen on time and everything needs to always stay up-to-date. When employees resign or are let go, they need to be removed from payroll immediately.

Finally, make sure all payroll duties are separated. Having one person run everything is always risky. When it’s multiple individuals, there’s less chance of an issue arising. Don’t lose anymore time to ghost employees and payroll fraud.

As a final line of defense, it is crucial that staffing agencies have a staffing insurance plan that includes Crime Insurance coverage. This important policy provides coverage against a wide range of crimes against staffing agencies that range from physical theft to complex embezzlement schemes (including ghost payroll). No business wants to believe that one of their own employees could be conspiring against them, but it is of the utmost importance that they be prepared for anything that could happen.

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.