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Payroll fraud costs UK firms £12 billion each year

Is your payroll open to abuse? And if it is, how can your workforce management system help put things right?

According to The Annual Fraud Indicator 2016, private sector businesses are losing £144bn to fraud each year. An astonishing £12 billion of that is lost through payroll fraud.

How Much Is Fraud Costing

The figure comes from the UK Fraud Costs Measurement Committee, whose research was carried out with Experian, PKF Littlejohn and the University of Portsmouth’s Centre for Counter Fraud Studies.

The CIPD report on the findings explains that types of fraud vary significantly. ‘Low level’ fraud might take the form of an employee adding a few minutes to their time sheet, the occasional ‘sickie’, or claiming a few extra miles on an expense claim. ‘Mid-level’ fraud might include a culture of buddy-punching, where passing clocking cards and key fobs to colleagues to clock them in or out early/late is commonplace.

And large scale frauds are identified in the CIPD’s report as including ‘ghost employees’ (ie payments to employees who don’t actually exist) and duplicating or artificially inflating bank transfers.

Identifying the problem

As a first step, companies should avoid sticking their heads in the sand and assuming that fraud ‘isn’t happening here’. Instead, they should take simple measures – reviewing permissions, checking references, auditing payroll (systems and people) – to assess whether the organisation has a problem.

Combating fraud

If payroll fraud is identified it will be for managers to deal with the ramifications, but once those are complete, the next step is to minimise the risk of fraud occurring again. A whole workforce management or time and attendance system can help businesses do that in a range of ways:

  • Biometrics and face scans: You can’t buddy punch someone into work when you need their hand, finger or face to do it. Biometric and similar scanners ensure that times clocked are the times actually worked.
  • Remote clocking: Businesses that have large numbers of staff on the road have long had difficulty knowing exactly who’s where, when. There are many benefits to remote tracking, not least the safety of the people being tracked, but when staff can clock in remotely – and have that clocking GPS stamped – there’s much less potential for fraudulent activity.
  • Absence management: A time and attendance system with absence management tools makes it easier to spot patterns in your workplace absence, and address them before they become issues. That brings a huge range of benefits, including highlighting problems staff need help with. But one of the simplest differences an absence management system makes is the reduction in ‘sickies’ that can follow its implementation.
  • Access control: Control who can have access to which parts of your building and you reduce the potential for fraud.
  • Manager scrutiny: Whether they are approving rosters, leave or timesheets, the potential for inaccuracies to sneak through the system is reduced when managers have the capacity to do it at a time that suits them. Whether they do that on the train, or when they’re working from home, web based time and attendance tools help managers manage better.

Find out more about how a time and attendance system can help reduce payroll fraud in your business. Talk to us here.

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