Payroll fraud challenges in a remote work environment

Remote work has been a hot topic for the past several years. Since workplaces were strongly encouraged to allow non-essential employees to work from home in 2020, remote work has become an even bigger discussion. As regulations allow companies to bring employees back into the office, many are asking if remote work is a viable long-term option. As leaders consider the benefits and drawbacks to remote work, one concern is if they’ll see an increase in payroll fraud opportunities for employees.  

Below, we’ll discuss some of the top concerns with payroll fraud, as well as how to prevent it from happening in your organization.  

Time Theft 

One of the questions often asked about remote work is, “How do we know an employee is actually working?” Time theft is when an employee is on the clock but doing something not related to work, like running personal errands. It is a valid concern for both new and long-term employees. 

Remain proactive against time theft by: 

  1. Consider outlining time theft in your employee handbook, requesting employees initial next to it that they’ve read and understood your policy on working during work hours.  
  1. Another option is to allow some flexibility in work schedules, so that employees don’t feel the need to commit time theft if they have another obligation, like a doctor’s appointment, arise during work hours. 

Payroll processing concerns 

When your organization’s accounting and payroll teams work remotely, it can impede regular payroll processes like writing and signing checks, or paychecks being mailed on time to the correct team members for the correct amounts.  

To combat these challenges, consider making some changes to how payroll is handled.  

  1. First, consider moving to a digital payroll system with direct deposit and mails out payroll checks for you. The right system will allow your company to instill several levels of approval over the payroll process. Whether moving to an electronic system or maintaining your current one, require managers approve all timesheets, including overtime.  
  1. Also require a separate person to review the payroll records after the person handling payroll is finished.  

Increased review and monitoring 

Even with the above changes implemented, it can be a good idea to increase monitoring and reconciliation if your company plans to implement remote work as a long-term option for employees.  

Start by reconciling your accounts on a more frequent basis (i.e., monthly instead of quarterly). You’ll also want to compare payroll hours to previous months and years. Is there typically an increase in hours worked during this month of the year? Any major discrepancies should be investigated, as it’s possible there’s a greater workload this year or the employee is inputting time not spent on work.  

Fraud costs companies billions of dollars annually, and quite often companies are not even aware that a corrupt employee is in their midst. The fact of the matter is that payroll is usually perpetrated by a single or multiple insiders – in other words, the people you trust. However, taking remote work off the table, especially after employees got a taste for the benefits of working from home, can lose your company some of your best and brightest team members. A recent study reported nearly 40 percent of those surveyed would be willing to quit their jobs if they didn’t have the option to work remotely at least part-time. Many organizations are considering a hybrid work model as staff begin returning to the office post-pandemic in an effort to balance staff and company needs.  

If you have concerns about payroll fraud in your organization, please call one of our professionals today.