The process which involves money or sensitive data is always subjected to audit or review to ensure that it remains risk-free. An organization is always prone to various risks, which can include fraud being committed upon it by outside or internal elements. Fraud can happen where sensitive and valuable data is unprotected with the right amount of security or where employees are unsupervised and have full authority over the organizations’ fund.
Payroll is a critical process under the HR Function that requires protection from risk, as it has access to funds and sensitive data. To make a payroll process robust and secure, firstly accurate pre-post Payroll procedural documentation process should occur at different levels in the team. A highly recommended safety measure is to establish a Maker-Checker balance, where the ‘maker’ is the one who actually enters the payroll data while ‘checker’ is another member of the team, who will validate the entries submitted in the system by the ‘maker’ to rectify any inadvertent errors. Twice validation will support future audit references.
Having clear multi-departmental segregation of duties generally recommended by compliance and risk teams will ensure that there are multiple stakeholders who have independent responsibility to validate any data or approve any transaction. A responsible member of the management can do a random check of payroll records with Time, Attendance &Leave system or personnel records which will ensure that no fraudulent employees are enlisted in the payroll data. Cross verification or confirmation of the data may be sought from other departments from recruitment teams, or Finance teams, etc.
Whilst the information and cross-checking may help to give you things to consider when carrying out your Payroll activities, the most vital thing to do is to use a secure Payroll software to carry out the processes or to enlist an Outsourced Payroll provider to do this for you.
Payroll fraud happens when businesses neglect their day-to-day cash flow. To reduce the occurrence of payroll fraud, employers should make sure employees know that the process is being scrutinized during each pay period.
It is true that in spite of our best efforts & care, errors do occur sometimes in payroll which could either be of minor or major in nature. Any error should be thoroughly investigated to ensure that there is no wider impact. Vigilantly monitoring cash flows in and out to prevent fraud before it happens is important to protect a business’s financial assets.