Protecting your SME against payroll fraud

Build your business skills with these key strategies for reducing employee risk

Employee fraud can damage team morale and company reputation as much as the bottom line. Eradicating employee fraud requires understanding of both your payroll health and the techniques employed by potential scammers. Dealing with payroll fraud is no different.

You’ve heard or read horror stories of trusted insiders ripping off their employer, but what have you done lately to stop it happening to you? More than 40 percent of the companies surveyed for PwC’s 2018 Global Economic Crime & Fraud Survey: Australian Report had not assessed the risk of fraud in the last two years, and almost half had not completed a cyber vulnerability assessment.

Use this blog and our free whitepaper (download below) to initiate a payroll security audit and gain a deeper understanding of the threats and solutions you need to manage.

Know your scam
Some payroll scams exploit weaknesses and blind spots within your business and payroll systems, and some undermine from outside by soliciting personal information to intercept payments – these scams are potentially harder to monitor and control.

The massive benefits of the digital age and booming levels of interconnection have created vast new opportunities for organised crime. The crims’ increasing influence, sophistication and uptake of the latest technology is comparable to that of the businesses they steal from – making them the toughest competition you never knew existed.

Cyber-threats from outside your organisation include impersonation scams, where nefarious external parties access employee information through email or ‘phishing’ and redirect employee funds.

Another external threat, but from closer to home, sees contractors inflate their claim for hours worked or manipulate financial data to receive performance-based bonuses.

Internal threats come from a fairly diverse (and somewhat inbred) family of scams. Look for things like unpaid advances to employees, ‘ghost employees’ created for collecting fraudulent wage payments, and even a scammer’s attempts to increase their hourly rate in the payroll system.

    There are generally three main factors driving employees who commit workplace fraud. First, there are motivating factors like financial stress or outright greed; then there’s the opportunity to set up or participate in a fraud; and finally, the fraudster’s own rationalisation of their crime. As you can tell, opportunity is the one driving factor that you can control.

    There are a number of simple processes to protect your payroll from fraud, such as:

    • Establishing a secure portal for employees to log and send payroll change requests
    • Implementing a Whistleblower Policy outlining staff responsibilities and protection for reporting suspected fraud

    • Undertaking regular security testing; engage a third-party to test your processes and responses.

    Download the FREE checklist – Nine Simple Processes to Protect Your Payroll From Fraud

    Download  checklist now

    Don’t dodge due diligence
    Before it even reaches the level of fraud, major payroll blunders in SMEs are usually avoidable. The breakdown is usually tied to busy admin staff with minimal oversight becoming single point of failure, like an overstretched bookkeeper making mistakes. In Australia we have the Fair Work Ombudsman to help keep businesses honest and Award compliant, first with the carrot, then with the big stick.

    For honest mistakes you can ask for forgiveness, but a mistake caused by a lack of due diligence is a bigger burden to bear.

    Look out for indicators of untrustworthy suppliers, including a reluctance to complete the standard onboarding process, and an overly complex or opaque corporate ownership.

    How well have you screened your staff before offering them a job? You need complete background and reference checks of potential employees, especially those with responsibility for finance or handling cash or goods. Once you have their written approval, you can investigate their criminal background (if they have one), educational and professional qualifications, and previous employment.

    If you’re a business manager seeking to mitigate the threat of payroll fraud, download the Aurion Guide to Fraud-Proof Payroll to identify vulnerabilities, implement prevention strategies and secure your payroll system.

    Download the Aurion Guide to Fraud-Proof Payroll

    Is your payroll secure – or are you losing money or business-critical data without even knowing it? The Aurion Guide to Fraud-Proof Payroll will help you identify various types of payroll fraud and provide strategies to prevent payroll fraud from impacting your business. 

    We help you to:

    • Identify common types of payroll fraud
    • Learn simple payroll fraud prevention techniques

    • Build strategies to fraud-proof your payroll service

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    About the Author

    Nick Ransley - Content CreatorNick Ransley
    Content Creator

    Nick researches and writes quality content that educates our community about current and emerging Payroll & HR trends. This requires building solid relationships with internal and external stakeholders to understand issues, products, and the wider Payroll & HR landscape.