3 steps to help prevent payroll fraud & ensure payments get to the right place
Payroll fraud poses a significant risk for Australian businesses of all sizes – and it’s unfortunately a bigger threat than many realise. In fact it’s so common that it was a subplot for the 1983 classic, Superman III! Recently publicised cases include the misdirection of employee’s taxation payments, the creation of ghost employees on a payroll, inflation of hours worked and false increases to pay rates. Payroll fraud certainly takes many forms and new scams emerge constantly. Worse still, in most instances there’s a high cost incurred by the affected business to prove the fraud – and the chance of successfully recovering all their funds are poor. With the right support and processes however, your business can reduce the risk and occurrence of payroll fraud – ensuring your business profits are never siphoned away by unscrupulous criminals. Here are three important steps you can adopt to help you clearly identify potential problems.
Step 1: Establish clear processes to close the gaps
- Reconcile the number of pays per cycle to the number of active employees you have. If the number of pays is greater than the number of employees, then investigate!
- Regularly inspect the Personnel Change Report for every payroll and payroll preview activity. Look for the following:
- New hires
- Bank account changes
- Pay rate changes
- Address changes, especially to an area where you do not have many other employees
- Regularly run a report identifying employees who split direct deposit pays into multiple accounts and investigate changes to this list to ensure they are valid
- Generate a regular access control report for all client administrator and practitioner roles. Review it for accuracy and appropriateness, and make sure their contact information is valid and up-to-date
Step 2: Spot the tell-tale signs of payroll fraud
Below are some common indicators that fraud may be occurring with respect to your payroll account:
- Receiving a “preview” email for a payroll that you did not submit
- Indication that a payroll has unexpectedly been transmitted or delivered to you
- Employees reporting unexpected or excessive funds in their bank accounts resulting from payroll transactions such as “extra deposit”
- Changes on your payroll that you did not perform, such as a change in status of an employee
Step 3: Tighten security across the payroll function
- Confirm that your computers have regularly updated anti-virus and anti-malware software installed behind a reputable firewall
- Physically secure the computer used for processing and approving payroll activities and dispose of confidential hard copy and electronic media appropriately
- Always change passwords to payroll-related systems whenever there is a change in payroll administration personnel
- Split your payroll management tasks so that one individual is responsible for preparing the payroll and another is responsible for submitting it and verifying the output
- Consider performing payroll and banking tasks on a separate, dedicated system used only for those purposes
Managing payroll requires an eye for detail as there’s usually a significant amount of research to make sure you’re fulfilling changing workplace law and tax responsibilities. No matter what size of business you operate, payroll accuracy, compliance and security should be non-negotiable. A strong payroll partner can guide your busy team to help reduce risk, streamline processes – and deliver cost savings along the way.
At ADP, securing the confidence of our clients is the foundation of our business model, a model we’ve excelled at for more than 60 years, with 650,000 clients in over 110 countries. We understand that trust and expertise is the foundation for any successful partnership, especially outsourcing. Our proven systems have appropriate checks that can act as barrier in preventing the unlawful siphoning of your profits.
Consultation with government
Our legislative team work closely with key government authorities, such as the Australian Taxation Office (ATO) – and are called upon to provide expert input on policy development via senate inquiries. The team’s deep knowledge and wide experience in payroll processing puts us in an exceptionally strong position to contribute to the successful implementation of legislation. ADP’s recent representation at Single Touch Payroll (STP) consultation meetings for example focused on ensuring that the legislation delivers real compliance benefits and efficiency savings for our clients.
Removing risk from payroll payments
Many ADP clients choose to utilise our electronic payment service to remove the risk and complexity of payroll deduction payments such as PAYG tax, superannuation, health funds and garnishees. For over 20 years, ADP has worked with businesses across the world to ensure their funds are moved quickly and accurately to employees and third parties. This removes the pressure on your team to deliver against tight timescales with little margin for error and non-compliance.
Leaving your company open to payroll fraud of any kind not only affects you financially but has the potential to destroy your business. By adopting some good processes and partnering with a recognised industry leader in payroll outsourcing you can get the expertise you need to minimise your risk – leaving your team free to focus on growing your business.