How Can You Avoid Payroll Fraud in Your Firm?
Payroll fraud can hurt every company, big or small. Many times, trusted employees use their access to payroll or bank accounts for their own benefit. Mubarak Al Ketbi (MAK) Auditing helps business owners protect money and keep payroll honest.
What Is Payroll Fraud?
Payroll fraud means an employee tricks their company into paying extra money by making false compensation claims. This fraud hides in the system for a long time, so companies lose a lot before finding out. Payroll fraud usually happens from inside the company.
Common Types of Payroll Fraud
You should learn about different types of payroll fraud. Here are some common payroll scams:
- Falsified wages:
Employees claim hours they never worked. Sometimes co-workers help by punching timecards for absent staff. - Ghost employees:
Companies pay fake or former staff. Fraudsters add these names to the payroll and collect the money. - Timesheet fraud:
Staff log time for hours they skipped or arrived late. They might ask friends to cover for them. - Commission fraud:
Employees create fake sales records to get extra commissions. This is common where bonuses depend on sales. - Expense reimbursement fraud:
Staff claim personal expenses as business costs to get reimbursed.
Example: Payroll Fraud in a Real Office
Emily worked with Dr. Watson for 20 years. He trusted her with payroll and bookkeeping. Over time, she got access to bank accounts and checks. Emily began to issue payroll advances to herself, then she hid these on the books. Dr. Watson noticed strange advances on his credit card. He asked for an internal audit. Mubarak Al Ketbi (MAK) Auditing checked the payroll records and found Emily’s fraud.
Why Is Payroll Fraud Hard to Detect?
Payroll fraud is tough to spot because:
- Employees who do it know the system well.
- Fraud stays hidden in payroll records.
- Companies trust the wrong people for a long time.
How Can You Avoid Payroll Fraud in Your Company?
You can use these simple steps:
- Conduct periodic payroll audits:
Regular audits reveal hidden problems. Get outside experts to check your payroll. - Divide responsibilities:
Never give one person total payroll control. Split tasks like entering data, approving hours, and paying wages. - Limit payroll access:
Give minimum access to employees. Only let trusted staff handle sensitive information. - Monitor cancelled checks:
Always check if cancelled checks are real. Don’t hand out blank checks. - Reconcile payroll regularly:
Review payroll statements at fixed times. Appoint someone outside the payroll team to double-check the process. - Approve timesheets:
Get a senior supervisor to approve timesheets before processing payroll. - Prosecute fraudsters:
Don’t ignore payroll fraud. Take strong legal action against anyone caught cheating.
Benefits of Payroll Audits
Audits keep your payroll clean. You get:
- Early detection of fraud
- More trust in your financial system
- Fewer losses from employee theft
- Better business reputation
Why Should You Take Payroll Fraud Seriously?
Payroll fraud costs companies time and money. When fraud goes unchecked, a company’s profits fall and trust breaks down. Early action and regular audits save you from bigger trouble later.
For more information:
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
