Unsafe payroll processes leave many businesses vulnerable to fraud.
The Association of Certified Fraud Examiners says that more than 25% of companies experience payroll fraud, with smaller businesses facing double the risk compared to larger organisations. Sometimes, it’s simply a case of human error, but it’s more often than not instigated by opportunistic and dishonest payroll administrators.
A 2016 PwC survey shows that 69% of South African companies have suffered at the hands of both internal and external perpetrators, with 28% reporting fraudulent HR activities such as the falsification of employee benefits and the miscalculation of payroll expenses. The rest of the continent is just as susceptible to payroll fraud and local governments are common victims.
The General Auditing Commission (GAC) in Liberia recently discovered that over LD$15m ($163,000) worth of national funds was lost to payroll fraud. An estimated LD$3m went towards salaries paid to presidential appointees who were no longer in the government’s employ.
The payroll manager of Elgeyo-Marakwet County in Kenya was arrested earlier this year for stealing from the local coffers. Over a four-year period, he paid himself three separate salaries into three separate bank accounts and amassed a stolen fortune of KSh14m ($133,000).
“Ghost employees” are also plaguing Kogi state in Nigeria. Local government staff have reportedly continued to draw salaries long after retirement and others have been collecting double salaries for years.
Without the right protective processes in place, payroll fraud is easy to commit and difficult to detect. Outdated payroll systems that rely on Excel spreadsheets and manual accounting processes are often part of the problem. Here are three ways new technologies can help your business in Africa stay fraud-free and keep your payroll and HR functions fully compliant.
Automated payroll software eliminates the need for manual intervention. The less your company’s processes need human oversight, the less chance there is of payroll fraud. Modern payroll technology can automate the following five functions: Leave management – leave dates are automatically inputted into the payroll system via an employee self-service authorisation process.
Should a staff member try to take more leave than they are entitled to, the system will notify you immediately. Commission allocations – a payroll system with a built-in company specific commission calculator ensures that employee commissions are worked out and paid correctly.
Data integration – you can choose payroll software that integrates seamlessly with your accounting software as this will further reduce the room for manual intervention. Earnings and deductions – you can set up recurring employee earnings and deductions for automatic processing. Bank account and ID number verification – modern payroll technology can confirm new employees’ details such as their ID number and bank account.
Cloud-based, mobile payroll software makes it easy for payroll managers, administrators and employees to access relevant payroll information on any device, anywhere and at any time. No information is hidden from view and the accessibility leaves a clear audit trail. Different access controls can be allocated to different employee levels to protect sensitive medical and financial data.
Thanks to real-time cloud analytics, management can filter data points according to relevant fields and generate daily activity reports with little effort. This way, any payroll fraud will be quickly spotted and stopped fast. The sooner payroll fraud is identified, the less costs your company will incur.
Ultimately, people are less likely to commit a crime if they know there is a good chance that they will get caught. Transparent company data makes it difficult for employees to commit payroll fraud and get away with it.
A modern payroll system enables you to segregate your workflow and add levels of authorisation to HR and payroll tasks. This helps you combat fraud by sharing responsibility of the payment process across two departments.
For example, the HR department inputs a new employee’s master information like name, surname, ID number and address. The system then directs the task to payroll to load the employee’s earnings and deductions. This makes it very difficult to create and maintain ghost employees.
If the opportunity to commit a white-collar or economic crime is removed, the chances are no crime will take place. There is no cure for human dishonesty so make sure your business doesn’t suffer because of it. Update your African business’ HR and payroll processes with innovative automated technology and protect your company from costly fraud.
Bruce van Wyk, director, PaySpace
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