We know a business is vulnerable when it has ghost employees. Their presence tells of lapses in management and payroll processing. They represent your employees’ lack of regard for fraud and security policies. In HR, we take ghost employee scandals very seriously. How can you claim you’re managing people well enough when you don’t even know if some of them really exist?
Who are ghost employees?
Simply put, ghost employees are people who get paid without actually working. They could be real people who, without their knowledge, were put in a company’s payroll. They could also be false identities made up by some dishonest employee or official. Abyrint says ghost workers can be classified into three groups: fictitious persons, real persons, and real persons who had actually died or left the company but for some reason remained on the payroll. Let’s look at what each classification means.
1. Fictitious persons
Invented by someone with influence. True ghost workers. The largest schemes.
2. Real persons
Ended up on the payroll through the collaboration of perpetrators. Can also be somebody who’s late or sick for work, but was clocked in by somebody else.
3. Real person leaves/dies but remains on the payroll
Can be the outcome of poor and inaccurate payroll processing.
Source: Abyrint
While anyone inside or outside a company can organize a ghost employee scam, Abyrint says that everything will rely mostly on the involvement of someone from the higher-ups. Or more specifically: a person authorizing salary payments. A recent study confirms that most occupational frauds (which ghost employee scams usually belong to) are committed by workers in accounting, operations, sales, executive/upper management, customer service, purchasing, and finance.
How do we protect our company from them?
There are a number of ways to prevent or get rid of ghost employee scams. Having your payroll reviewed by third party firms (or someone outside your payroll department) regularly is one, but aside from that, you can also do the following.
1. Automate your payroll processing
In payroll management, manual doesn’t just mean slow. It also equates to having more specialists and officers on board, which often results to more confusion over who’s in charge of different tasks. It means more people have the ability to access and modify payroll files, too — a setup that fraudsters love.
Switching to automated payroll gives you more than fast and accurate work. It also leaves scam perpetrators with fewer entry points to your system. With less chaos and fewer rooms for mistakes, there will hardly be anything for them to take advantage of.
If you’re finding it hard or expensive to switch to automated payroll right away, think about being less predictable. Separate and rotate payroll duties. Just make sure not to lose track of any area or movement in the logistics.
2. Promptly update records of inactive employees
Immediately remove deceased or resigned employees from your payroll database. Ensure that all their records in your company’s intranet are up to date. Clearly indicate when and how these people’s ties with the company were cut. By doing these, you’ll keep fraudsters from stealing their identities.
3. Use biometrics to track attendance
A biometrics attendance tool takes care of Abyrint’s second type of ghost worker — the real people who ask their colleagues to clock in or out on their behalf. It’s also more convenient to use. No need for employees to boot a PC and type a series of passwords with uppercase letters and special characters. Especially if they’re already running late.
Of course, this doesn’t mean that biometrics is 100% fraud-proof. Biometric data can still be compromised, but only if you don’t protect the information required to access them. Biometrics helps you prevent frauds that can be organized easily, the ones that should be done in rush, in times of extreme desperation.
4. Do personal performance reviews with everyone on the payroll
The truth, as they say, hides among the details. Having personal performance reviews leaves fraudsters with the burden of giving you more details for their scheme to succeed. Hiding behind an inactive employee’s identity would be difficult, if not impossible. In doing this, leave no stone unturned. Be on the lookout for roles that aren’t reviewed that often or that aren’t subject to evaluation at all (should there be any in your organization).
5. Clearly define your payroll management process and stick to it
Not sure who does what in your payroll or finance team? It’s always high time to define your process. CLEARLY. That means knowing exactly who has the capacity to add people to the payroll, set the wages, and submit documents to the bank.
Knowing the process isn’t enough, however. Make sure everyone sticks to it. You can set process adherence as an individual or team goal so that everyone won’t lose sight of the need to go by the book.
6. Constantly improve how you protect and validate employee information
The ways in which criminals organize frauds evolve with technology. That’s why companies should always look for more advanced means and methods of protecting their people’s data. In the digital age, not updating your data security measures is the worst kind of complacency. If you’re reluctant to go this far because of the cost, think about how much money your business will lose in the hands of ghost-employee scam perpetrators.
In the end, protecting yourself from any kind of ruse is all about keeping score, having the right tools, and taking proactive measures. You’ll never know when you’ll be haunted by ghost employee schemes, so it’s important to be ready. Always.
