Payroll fraud is an issue that can cause real and lasting damage to a company. There are many different types of payroll fraud that can be committed by employees in differing positions throughout a company. However, a HRIS is a tool that can help to drastically mitigate payroll fraud risks from most areas.
Restrict Access to Payroll Information
One of the best internal controls that can be used to help to prevent payroll fraud is limited access to payroll information. Using a HRIS, it is easy to change the settings so that only employees and managers with certain levels of authorization will be able to access certain areas. Policies against password sharing should be established to help keep access restrictions controlled.
Review Segregation of Duties Using HRIS
In many instances of payroll fraud, it is found that a single employee has the ability to perform major tasks related to payroll such as hiring, preparing payroll, and sometimes even firing. When there is no one reviewing payroll to make sure that it is correct and that all of the employees being paid actually still work for the company, the potential for fraud is high. Segregating duties so that one person is responsible for cutting payroll and another for reviewing it can safeguard against fraud, and a HRIS can be used to ensure that segregation policies are being followed.
Set Up and Promote Direct Deposit
When employees utilize direct deposit, there are no paper checks that can be stolen or altered. Many HRIS solutions that have payroll integrated allow employees to set up direct deposit autonomously using the system, so offering incentives for setting up direct deposit may encourage employees to use direct deposit and decrease the potential for fraud. Direct deposit is often more convenient for employers and secure for both employers and employees.
Perform Regular Payroll and Activity Audits
Activity audits can flag unusual activities such as frequent bank account changes for direct deposit and dramatic changes to employee time cards. Regular payroll audits can help employers to spot “ghost” employees and other types of fraud. A HRIS makes it easy to perform these types of audits and reviews with just a few clicks and a few minutes.
Single Bank Account for Multiple Checks
Any time multiple paychecks are deposited into a single bank account, it can indicate fraud. It is rare that employees will share a bank account, so setting a HRIS to alert managers when a single bank account comes up multiple times during payroll processing can help to spot and stop fraud before it happens.
Set Up an Approval Process for Certain Payroll Activities
While audits can help you to spot major timecard changes after the fact, setting up an approval process for time card changes and things like overtime can help you to stop fraud before it even occurs. Having approval processes in place can make it more difficult for employees to commit payroll fraud and can deter some from trying.