Connect with us

Labour Complexity

Time For Smes To Get Tough On Payroll Fraud

Payroll fraud hurts the bottom-line at many South African businesses, with SMEs suffering the most from this form of white-collar crime.

Yolande Schoultz

Published

on

Tax-fraud

Payroll is one of the biggest expenses in any small or medium-sized enterprise (SME), yet it is also one of the areas of the business most likely to be neglected when it comes to risk management. As a result, incidences of payroll fraud are growing at an alarming rate among SMEs in South Africa.

Payroll Fraud Is On The Rise

According to research conducted by Alexander Forbes in 2011, payroll fraud costs South African business more than cash-in-transit heists. The growing number of clients asking Sage VIP for help with forensic investigations after falling prey to payroll fraud suggests that the crime is on the rise, says Yolande Schoültz, Risk & Fraud Management Division Manager at Sage VIP Payroll & HR.

“Payroll fraud happens most to businesses with less than 100 employees, and it can seriously hurt their ongoing sustainability. It usually takes 18 months to detect payroll fraud, and it is usually uncovered by accident. By that time, a business could have lost a vast amount of money,” she says. “Yet we don’t have accurate statistics because so few businesses prosecute employees for this crime.”

Related: Understanding Your Responsibility as an Employer

Payroll fraud is committed in numerous ways. One example is a corrupt payroll manager paying him or herself through a ghost employee. Another common scam sees the fraudster adjust overtime or leave for other employees in exchange for a kickback. More recently, there have been cases of employees selling payslips to criminals for use in identify theft.

Opportunity and Motivation

Motivation, opportunity and rationalisation – the three components of the classic fraud triangle – come together in the SME’s payroll to create enormous risks for smaller businesses, says Schoültz.

Motivation is the reason an employee might have to try to defraud his or her employer – for example, he or she might need money to feed a gambling or drug habit, or could be short of cash for school fees or medical expenses.

Even when an organisation carefully screens employees to avoid hiring those with poor credit histories or criminal records, it cannot be certain that its employees will not have a motive for theft. And once people have been tempted to commit payroll fraud, they can usually rationalise their behaviour to themselves, for example by telling themselves that they’re underpaid or that they’ll pay the money back when they can.

For these reasons, SMEs should assume that anyone working with money in the business needs oversight. People’s motivations and rationalisations for payroll fraud cannot be eliminated, but you can significantly reduce their opportunities to act on the temptation to commit the crime.

Small businesses often do not have the controls in place to reduce the opportunities for employees to commit payroll fraud, she adds. Risk management is often low on a SME’s list of priorities because it is so busy with sales, product development, and customer service. Yet safeguarding the business from payroll fraud is relatively simple and needn’t cost much money.

One Simple Step

The most important thing to do, she argues, is to enforce segregation of duties in the payroll department. For example, a clerk could capture payroll data, while the payroll manager could manage access to the system as well as add and remove employees from the payroll. Then, a financial person could be tasked with checking that the numbers add up.

Even a small business should be able to assign different people to the responsibilities of processing the payroll and signing it off. Payroll software can also help to reduce the risk of fraud by giving managers better visibility into transactions, providing an audit trail, and providing a set of controls and checks.

Schoültz calls upon SMEs who are victims of payroll fraud to prosecute the offenders, even though it is expensive, time-consuming and difficult to do so. The Bribery and Anti-corruption Act compels organisations to report incidents of fraud of over R100,000 to the authorities, she notes.

However, companies often feel it will hurt their credibility to be in the news because an employee has committed fraud. What’s more, it can take R100,000 or more and four years to successfully prosecute someone for payroll fraud. Most SMEs feel they simply cannot afford the time and money.

The result is that payroll fraudsters are often free to move onto a new company and carry on with their behaviour when they’ve been caught and fired by one of their employers.

The following signs may indicate that a business is at risk of becoming a victim of payroll fraud:

  • There is only one person with access to the payroll system and the ability to use it.
  • The person responsible for the payroll never seems to want to take leave—that may indicate that he or she has something to hide.
  • He or she is at work earlier and leaves later than anyone else in the business—perhaps to do the fraudulent business when there’s no one else in the office.
  • He or she is eager to work from home, out of sight.

“Payroll fraud is one of the most common white-collar crimes in the business world. For that reason, every managing and financial director must put in place sound policies and processes to address this growing risk,” says Anton van Heerden, managing director for Sage VIP and Sage Pastel Payroll & HR.

“Automated payroll software can help. A good solution will offer automated ID number and bank account validations, employee credit checks and the delivery of secure salary EFT payments—all of which can prevent paying ghost employees or putting money in the wrong bank account.”

Related: Risk is the Admission Fee of Entrepreneurship

Advertisement
Comments

Company Posts

Why Your Employees’ Health Is Your SME’s Wealth

Absenteeism costs R16 billion annually, according to Stats SA. That’s a lot more than it costs to sign up for a group offering that is specifically designed for small to medium enterprises.

Fedhealth

Published

on

michelle-morton-of-fedhealth

Vital Stats

Fedhealth’s Commercial Executive, Michelle Morton explains the importance of group health cover to keep your SME’s pulse strong.

1. Why is it important for a SME to care about the health of its employees?

First, when an employee in a critical role within the SME falls ill, there’s often nobody else to fill the skills void created by his or her absence. This can have a detrimental effect on the daily operations and business output.

Second, offering sound medical aid may attract and retain the right talent to the business.

Third, choosing a medical aid like Fedhealth, which places a big emphasis on preventative health and wellness, can also assist the SME owner in cultivating a healthy culture in the workplace.

Related: Fedhealth Brings Healthy Benefits to your Staff

2. What should business owners consider when looking for a group medical plan?

Apart from factors like affordability, a good reputation, and ability to pay claims, look for schemes that offer value-added services, such as wellness days where staff can undergo crucial health screenings, and programmes to address specific health issues.

3. What are the top health concerns for today’s workforce?

Back and neck pain are second to headaches when it comes to painful conditions affecting humans — especially office workers, who are often desk-bound for hours on end. Fedhealth offers qualifying members a 12-week Conservative Back and Neck Rehabilitation programme to help correct the problem through exercise and behaviour.

Diabetes and hypertension are also on the rise, while some employees face HIV/Aids, weight issues or struggle to quit smoking. Fedhealth provides assistance for all these diseases and health concerns.

4. How will the employees benefit from working for a company with a great group medical plan?

I believe it makes the business a more attractive place of work for employees, as medical aid is a much-needed benefit and costly if one has to pay for it out of one’s own pocket.

Related: Why Fedhealth Believes In The Power Of The SMME Sector

5. Please explain the importance of the SOS Corporate Wellness benefit

The Sisters-on-Site service (SOS Corporate Wellness) is a value-add as it brings basic healthcare to the office. This means that staff can regularly see a qualified nursing sister at their place of work for minor health issues, instead of having to take time off work to visit the doctor or clinic.

Employees build a rapport with the sister, as they see her on a frequent basis. Through the SOS Corporate Wellness benefit, they can also conduct important health screenings that might flag serious health issues of which the employees might be unaware. Sisters-on-Site can also facilitate monthly health themes to raise employee awareness on issues like breast cancer.

 

Continue Reading

Company Posts

Why HR Legislation Compliance Can Curb Business Failure

Don’t let your business reputation get dented due to non-compliance.

Published

on

HR Legislation Compliance

HR Legislation Compliance

Vital Stats

Millennium Support Services is designed to afford all business enterprises the opportunity to have Human Capital Management for their business.

“It is just unfortunate that non-compliance is exactly that “non-compliance” and most small businesses reputation gets dented or even fully destroyed, in the event that they are being accused of non-compliance by employees and statutory bodies” says Sharon Tshabalala CEO of MSS.

“Small businesses have no resources yet at the same time are not exempted from compliance. So, through the use of technology we are able to provide easily accessible HR services across the board.”

Related: Human Resources Management Demystified

Millennium Support Services provides businesses with exclusive distinctions of its service, so that you can ensure that your business remains compliant.

Human Resource Policies

human-resource-policies

The advantage it has over other online HRM systems is that it offers online access to Human Resource policies based on approved legislative framework.

1Independent Representation

In cases where disciplinary proceedings have to be under taken, an independent chairperson will be made available. When disputes have been escalated to the CCMA, a Labour Relations Expert will represent the employer.

2Disciplinary Policy

The primary purpose of discipline is to encourage employees to correct their conduct and/or discourage employees from breaching standards of conduct. Depending on the nature of the breach, there are five forms of disciplinary sanctions taken against employees – either formal or informal.

Namely: Verbal Warning, Written Warning, Final Written Warning, Suspension of Salary and finally Dismissal.

3Grievance Policy

The purpose of this policy is to give guidance and to provide a framework on how to raise and deal with grievances effectively at the earliest possible stage. There are three types of Grievance which have an informal/formal procedure.

Namely: Mild Grievance, Serious Grievance and Sensitive Grievance.

Related: Is Leveraging Your Resources Getting The Job Done Properly?

4Occupational Help Policy

The purpose of this policy is to establish minimum standards and requirements of occupational health and safety for the corporation in order to reduce the risk by:

  • Identifying hazards and possible risks causing incidents and accidents,
  • Setting standards of practice, procedures and accountability,
  • Measuring performance against standards, Evaluating compliance with standards,
  • Correcting deficiencies, deviations, and set standards of procedures to be followed,
  • Creating and maintaining a healthy and a safe work environment.

HR management is a specialist field, with many laws and regulations to navigate. If you don’t have a background in this field and can’t afford to hire a full-time HR specialist, consider outsourcing this function.

Millennium Support Services – Human Capital Management made easy.

Continue Reading

Company Posts

Will A Strike Cripple Your Business?

Strikes can cause a drop in productivity; ensure you have a staffing solution to see you through uncertain times.

Published

on

profit-loss

Strikes can cause a drop in productivity; ensure you have a staffing solution to see you through uncertain times.

South Africa’s economy has become very competitive and losing business to a competitor could be a serious blow. When employees strike, your business is likely to lose money due to delayed services and lost production time.

Businesses with advanced strike management policies and planning in place have a higher success rate in avoiding potential losses due to strikes. Workforce Staffing is a staffing partner that protects your Return on Human Investment during these challenging circumstances.    

Related: Finding Your Staffing Partner

Do you have a Strike Contingency Plan?

When 400 staff members unexpectedly decide to strike at dawn, you need a staffing partner that will arrange for capable and reliable staff members to take their place, that same day.

You will need:

  • A reputable staffing provider that knows how to liaise with authorities to establish a safe production environment for your staff.
  • Legal assistance in organising interdicts and disciplinary hearings, making sure you follow due process to shorten the strike period as much as possible.
  • Experienced hands in successful contingency planning and efficiency to keep your business productive even during industrial.

One of the biggest concerns for businesses is the amount of time and money that’s squandered due to absenteeism when employees strike.

Barend Matthee, Northern Cape Regional Director for Workforce Staffing, explains that using contract workers for a project will allow for cost-savings as workers will only be paid for the duration of the project. The principle of “no work, no pay” will apply.

“Optimisation of contract workers through Workforce Staffing’s understanding of various on-boarding processes, including medicals, inductions, etc., allow for quick turnaround times on replacement staff, as well as the opportunity for contract workers to be circulated to various other clients or tasks,” notes Matthee.

Related:Organisational Behaviour Expert Siphiwe Moyo’s Insights Into Keeping Your Employee’s Motivated

This holistic approach allows for good time- and resource management on projects.

Outsourcing staff also provides you with a temporary workforce that has the required skills and experience to meet your company’s changing needs.

An expert staffing provider will ensure that your projects are fully-staffed and up-and-running within a short space of time, saving both time and money. 

Workforce Staffing calms the storm with its: 

  • Critical experience in striking situations
  • Solid infrastructure and resources, mitigating your risk
  • Legal consultation on processes and services
  • Logistics management like transport, labour, compliance, worker induction and contingency sites
  • Provision of ongoing labour to maintain your service levels
  • Facilitation of continuous communication between all stakeholders

Workforce Staffing has the experience and infrastructure to mitigate your risk:

  • Receive Support from its NATIONAL BRANCH NETWORK
  • Enjoy HR AND IR INDUSTRY SPECIALISTS expertise
  • Receive a CONTINGENCY WORKFORCE quickly and effectively

Contact them today to retain maximum productivity. 

087 135 8888  |  info@workforce.co.za  |  www.workforcestaffing.co.za

Continue Reading

Trending

FREE E-BOOK: How to Build an Entrepreneurial Mindset

Sign up now for Entrepreneur's Daily Newsletters to Download​​