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Payroll Fraud – Learn how your industry can be affected.

Posted on: September 17th, 2013

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To most business owners, Payroll Fraud probably sounds like something they only read about, but not something that could happen to them.  This is a very dangerous mentality to have.  We have seen and heard about plenty of Payroll Fraud incidents, some that make headlines and some that are never written or spoken about.  Some are intentional, and some are done by accident, but all of them can be extremely costly.

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This article dives in deeper, but here are the most common instances we see:

(1)    Time Theft.  This is a simple process where employees steal time (which equates to money) through their reported hours.  It could be employees rounding their time (i.e. saying they arrived at 9:00AM rather than 9:1 5), or employees punching each other in and out to increase their hours.  There are some simple and effective strategies that business owners can put in pace to minimize time theft.  We find that this problem occurs most frequently in the service industries. Restaurants, hospitality groups, as well as janitorial and temporary staffing companies should be very aware of these issues.

(2)    Ghost Employees.  This involves the person responsible for payroll creating a fictitious employee and paying that “employee”, which turns out to be a friend or even themselves.  This is more common than you might think.  I have even seen instances where family is involved (i.e. owner’s niece was paying her boyfriend).  Even if you feel you can trust the person processing your payroll, you need to take a very close look every once in a while.  This is often times a problem that larger companies have due to the lack of oversight in in their payroll process.

(3)    Employee Misclassification.  This typically involves employers paying employees as 1099 contractors when they should be W-2 employees, or paying employees a salary that should be considered hourly.  The business owner might not have known they made a mistake but this is still fraud and the consequences can be enormous.  This mistake is seen very often in the contracting or construction industry as workers often get misclassified on the jobsite.

It’s important that business owners take Payroll Fraud seriously.  There are some simple steps you can take to make sure you aren’t unintentionally putting yourself and your business at risk.

If you would like further information on protecting yourself against Payroll Fraud please reach out to us at 978-998-6896 or info@masspay.net.


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