ONLINE PAYROLL SYSTEM

From online payroll system that I have learn, I know that the main reason why many organizations use online payroll is to save money and make the job of running a business easier and more efficient. With an online system, larger corporations can keep track of their financial processes, while smaller companies can avoid hiring additional employees to take care of payroll and other financial tasks.

Despite the organization use system in payroll to make the job run smoothly, but it still have a problem which is payroll fraud. Payroll fraud is an occupational fraud where an employee attacks the payroll system of a business. They include schemes against the salaries and wages payment systems and the expense reimbursement systems. Payroll frauds can be categorized into three general areas which is ghost employee frauds, false wage claim frauds and false expense reimbursement frauds. A ghost employee is someone recorded on the payroll system, but that does not work for the business. Six controls may reduce the likelihood of ghost employee frauds. They will not guarantee the frauds will not be committed but will reduce the opportunity for them to start and increase the chance of detection.

False wage claim fraud is falsely adding extra hours or other relevant factors to wage information to increase remuneration. To avoid this fraud, the organization needs to record the normal hours, but not work them. This can be done by having someone else clock an employee out at the usual time, when the employee is not there. The method of recording the hours actually worked has to be controlled in a manner appropriate to the business. The same approach may be taken with recording any other standard used to pay employees. False expense reimbursement fraud is the making of improper claims for the reimbursement of business expenses allegedly paid by the employee.

In my opinion the organization should take are several steps to avoid payroll fraud. First the organization needs to conduct a full background check on anyone who will be responsible for payroll or who will have access to company bank accounts. Second, the organization must limit access to payroll data to only those who absolutely need to have access to that information to do their jobs. Third, they must always process payroll using a checks and balances process, where one person prepares the payroll and a different person reviews the payroll. This is known as segregation of duties and reduces the temptation for an employee in the payroll group to run fraudulent payroll. Lastly, small businesses should set up a review process every pay period to help eliminate fraud and errors in the payroll. For example, they can send data to the payroll processor earlier enough to allow enough time to review payroll reports before printing checks or making direct deposits. Based on all of these steps, the organization can avoid fraud from happen in their organization.

References:

http://www.worrells.net.au/factsheets/Payroll_Frauds.htm 

http://www.nfib.com/business-resources/business-resources-item?cmsid=57312