Payroll fraud prevention saves time, money and headaches
While companies may be looking to work with a payroll services provider as soon as possible to streamline their processes, spending some time choosing the right one will save organizations trouble - and not to mention money - in the long run. A recent article from Construction Business Owner highlighted some of the schemes involving fraud in payroll, including:
Ghost employee schemes:
These scams stem from fraudulent payroll service providers, and they involve setting up a worker on company payroll who is actually not employed by the firm - and in some cases, doesn't exist, the source explains. The payroll firm sets up this individual as a staff member and creates paychecks that are then distributed to that person, quickly funneling company money out of the proper accounts.
For businesses that offer employees commission, payroll can become tricky, which is why many of these organizations seek out the help of payroll service providers. However, firms that are out to scam businesses will try to inflate commission amounts for certain workers through falsifying sales records, invoices and other financial documents, the source notes.
Falsified hours and salary:
Another scam involves entering false hourly and salary information, Construction Business Management explains. Fraudulent payroll firms will add onto the number of hours worked by certain staff members, or inflate monthly take-home pay for salaried employees.
Keeping an eye out for these damaging processes as well as any others that are suspicious, is the first step to highlighting payroll fraud schemes and saving company’s time and money. Frequently reviewing payroll documents is another method that brings any potential illegal activity to businesses' attention.
Vetting payroll providers should be a priority
Much like when they are looking to hire a new employee, organizations need to take the time to properly review prospective payroll firms' qualifications and capabilities. Good questions to ask include:
- Are they a nationally recognized company?
- Do they have a long history of implementing high ethical standards?
- Are they a publicly traded company who has to adhere to SEC regulations?
- Do they have a certificate of liability insurance?
Payroll providers handle company funds, analyze employee information and processing tax documents, all of which are sensitive business elements. Therefore, it is vital that these companies keep materials safe and deliver a high level of accuracy.
In addition, businesses should request to see payroll providers' financial information, such as investor presentations, SEC filings and annual reports. Organizations need to know that the payroll firms they are working with are financially secure, as this helps avoid any potential problems in the future.
Being aware of payroll fraud prevention and knowing what to look for in a potential provider are surefire ways to pick a legitimate firm such as Paychex, ensuring that all payroll processes are accurate and timely.