Payroll fraud is certainly one thing all businesses should stay away from. Payroll fraud, if you are indicted with it can be criminalize in both state and federal law, as the state government and federal government have plenty of laws regarding to fraud. If your business has committed a form of fraud, you can be prosecuted by both the federal government and the state government at the same time. In order to prevent payroll fraud from occurring, continue reading this article to learn how to cease such bad practices from happening within your business.
The most common fraudulence to occur with payroll is misclassification of employees. This type of fraud, perhaps fashioned by accident, is the most common type of fraud conjured by small businesses.
Don’t Allow for Costly Miscalculations
Being able to monitor your payroll processing in-house is an essential way to prevent payroll fraud and any miscalculations from occurring in your payroll. If you are outsourcing your payroll service to a third party organization, they may not have the due knowledge to know all the employees you have staffed, or what their job purpose is. You should have your own department level accountants create your payroll, or to at least revise the payroll documents of your outsourced payroll service to make sure there are no fraudulent data written by mistake on your payrolls. If you want to monitor your own employed accountant’s activities, you can have your outsource payroll service audit your accounting team’s payroll documents to make sure they aren’t creating fraud or making any other mistakes either.
Have Caution with Hiring New Employees
When hiring new employees, make sure that your employees you are hiring don’t have a bad track record of creating payroll fraud intentionally. It’s important that you hire employees that follow the basic business ethics all businesses should be following by law. Hiring employees that don’t follow legal standards and have been known to create substantial amounts of trouble in the past purposefully should be checked on thoroughly before hire, to determine if he is a trustworthy candidate for your job position. All your staff members should be aware of the consequences of payroll fraud should they commit it, in hopes to deter your employees from committing such immoral acts.
Establish Checks and Balances
Being able to establish a system of checks and balances within your business will be a great way to monitor your employees, and have each department monitor other departments for inaccuracies or fraud within those foreign departments they have no management over. The reason why this is a great practice is because if a department needs help identifying certain issues within their department, other departments can help assist in mending the confusions or problems stemming from that foreign department.
Let’s say the accounting department had issues identifying a new employee. The human resource department, responsible in handling new employees and training, will provide all the relevant information needed to the accounting department to determine the new employees pay, and role in the company. If there was a mistake in identifying an employee’s identification in the business, the human resource department should be quick to notice these mistakes and to mend the problem with the accounting department, hence check and balances. Also, having multiple departments to make sure that they are all following good business ethics and principles, is a great way to stop one department from practicing fraud of corruption within your business.
These small little practices and principles will help your business prevent payroll fraud, other relevant deceits whether they were intentional or honest mistakes made within your corporation.