Payroll Fraud is theft from a business via the payroll system. The BBC recently published findings from the report by Jim Gee, former NHS anti-fraud boss. The NHS is estimated to be suffering around £5.7bn in fraud per year, with around £555 million to £1.49bn attributed to payroll fraud.
This is out of a total budget of around £110bn, and so represents a significant healthcare cost. The Department of Health does not apparently recognise the figures, but equally there was no official denial. The NHS are already taking steps to tackle the fraud but the report’s authors accuse the Government of not doing enough.
What is Payroll Fraud?
Payroll fraud takes a variety of forms. It can be an employer inventing fictitious employees and paying them through the payroll, as in the case of a recent pub landlord. This is also known as ‘ghost’ employees and can be hard to detect, but does leave a fairly easy paper trail.
Falsifying timesheets can be more difficult, as this may involve a line manager. A friend can ‘clock –in’ for a colleague, and employees can end up with hours of leave at the company expense, or a little extra is added to every shift. Biometric time clocks can help avoid this, but also training and company culture can play a big part in reducing or eliminating this threat.
Pay rates can be altered, so an employee can receive a higher wage than agreed, but then covered up by reverting pay rates after pay day. This requires collusion with a payroll clerk, but can be easily spotted by checking employee’s rates in the payroll reports.
Expense or allowance claims can also be falsified, this can be difficult to detect again, and relies heavily on supervision to detect and prevent fraudulent claims.
Can Payroll Options Help?
Outsourcing the payroll to Payroll Options helps tackle fraud by allowing an independent party to scrutinize the payroll. Although not all types of fraud can be eliminated in this way, there will be an audit trail produced with every pay day. The reports should also be scrutinised by a second member of staff to the person submitting the pre-payroll information.
Because the payroll data is brought together, send to a third party, processed and then returned, these are all demarcated steps at which the fraudulent activity could be detected. If there is a suspicion then very easily there could be a team making initial investigations, rather than a single member of staff.
Fraud thrives when it is undetected, if the threat of detection is increased this will act as a deterrent and safe guard the business’s workforce. Contact Payroll Options to find out more.