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Three types of payroll fraud you must protect your business from

by , 25 July 2014
In the current tough economic climate, businesses are in survival mode. People need to work harder than ever before to get recognition from the companies they work for, says Lia Marus, the editor of HR Pulse,

According to Marus, as a result, this gives rise to many disgruntled employees who feel they're working at 150% capacity but aren't getting rewarded for it. These individuals are more than happy to 'dip their hands in the payroll jar' to get what they feel they deserve from your company.

To make sure your employees don't take you for a ride and bring your company to its knees, beware of these three types of payroll fraud.

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Beware of these three types of payroll fraud

#1: Buddy punching

This has nothing to do with giving your friend a black eye...

Marus explains that this type of payroll fraud originated with the old punch card system where people would punch their friends in to make it seem as if they were at work.

If you still have a system where there's a single point to get in and out of the operation, guard against this type of fraud.

#2: Delayed discharge

According to Marus, another very popular form of payroll fraud is delayed discharge.

What this means is that if an employee is discharged on 31 October, his third-party deductions – e.g. medical aid deductions, pension fund, etc. – will be stopped but his gross salary will continue to be paid into his bank account. He'll continue to be paid for November, December and January of the following year. In February, he'll be taken off the payroll system.

This means he'll pick up three months' extra gross salary without doing any work.

#3: Changes to bank details

In this article, experts behind the Practical Accountancy Loose Leaf Service explain that if your employees can change details on your payroll programme, it'll be possible for an employee to change another employee's bank details. If he changes the details to his bank account, one employee will get double pay and another employee won't get any.

There you have it: Three types of payroll fraud you need to lookout for. Keep reading FSP Business to discover smart ways to eliminate payroll fraud in your company.

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