Your payroll system controls how much you pay your employees. But what happens when you lose control of your payroll?
If someone tampers with it, you could easily over or underpay an employee.
You can prevent this problem though. All you have to do is use these eight controls to prevent payroll fraud in your business...
The eight payroll controls will help you prevent payroll fraud in your company
1. Salary increase: You or management must give approval for this first. Use a Salary Increase Letter your management or HR department creates to verify the increase is legit.
2. New staff member: You, your management or your HR manager will approve this, depending on the level of the new employee.
Control this by using an:
• Employee take-on letter; and
• Employment contract prepared by management or HR department.
3. Termination: Either your management will approve this or you'll use a resignation letter from the staff member showing his last day of work.
4. Salary adjustments other than increases (salary splits etc.): You or your management must approve this first. You must issue an approval letter stating why you approved this change and, if the staff member's an independent contractor:
– He must prove he doesn't earn more than 80% of his income from you; and
– You must keep this proof on file to show why you taxed him as a consultant.
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5. Leave: The manager directly responsible for your employee must approve the leave he wants to take. Use a leave form approved by management to control this.
6. Reimbursive travel allowance: Your employee must get approval from his manager for this. Use a travel justification form in conjunction with a management approval form to control this.
7. Banking detail changes: Management must approve this first before they make any changes. Ask your employee for a bank letter showing his banking details. You also need your employee's written approval if you don't pay his salary to his personal bank account but rather into a joint bank account, for example.
8. Staff loans: You need an agreement signed by your employee and management to approve this.
Use these eight controls to ensure no one tampers with your payroll and gets more money than they deserve.