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May 3, 2021 | Time and Attendance | Posted by Brandon Grinwis, Chief Financial Officer at Ascentis

The CFO's Role in Fighting Workplace Theft

As difficult as it can be to admit it, payroll theft is an issue that concerns nearly every employer. It may not always be malicious or even intentional, but the fact is that at some point, there is a solid chance that someone in your organization will commit some form of theft. 95% of employers say that workers have stolen from them at some point. Don't make the mistake of thinking that those figures only reflect obvious theft targets like banking or retail businesses, either. Both of those industries rank in the top five for cases of occupational fraud, but so do less obvious industries such as manufacturing and healthcare.

If and when workplace theft impacts your organization, your CFO and HR and finance teams need to have the right mindset and the right tools at their disposal to deal with it effectively. Let's take a look at a few of the most common varieties of workplace theft, along with some measures your organization can take to combat them.

Time and attendance fraud

While advancements in time and attendance software have made many previously common types of fraud harder to pull off, fraudsters keep up with the times as well as any employer. Time theft impacts an estimated 75% of American employers and adds as much as 7% extra expenditures to company payrolls. Some of the common and costly schemes that continue to thrive in the current workforce include:

  • Buddy punching, in which two or more employees conspire to clock in or out on each other's behalf, making it appear as though they've put in more time than they actually have
  • Pay rate fraud, a form of embezzlement in which a member of the payroll team collaborates with an employee to essentially grant them an unauthorized pay raise
  • Timesheet fraud, in which an employee simply adds more hours to their timesheet than they actually worked
  • Supervisor fraud, in which a higher-level employee skims small amounts from other employees’ paychecks

While clever thieves will always find workarounds, much of the risk from these types of schemes can be mitigated by investing in more automation in your time and attendance processes. Automating your clock-in and clock-out processes takes away much of the opportunity for fraud that comes with more manual functions. Having a consistent digital record that updates in real-time makes it much easier for your payroll team to check for discrepancies and catch mistakes and potential fraud before they cause problems. Those automated records are also hugely helpful in the event that your organization is audited or needs to take disciplinary action against a fraudulent employee.

Misclassified employees

Employee misclassification is one of the most serious forms of payroll fraud from a compliance standpoint, and it's one that is usually perpetrated by the employer rather than the employee. The most common form of misclassification involves listing full-time employees as contract or contingent workers. By underreporting the number of full-time employees in an organization, an employer may hope to reduce overall costs for employee benefits and leave, as well as paying a lower rate for payroll taxes.

This type of fraud not only deprives federal, state, and local governments of crucial tax dollars, it also defrauds employees out of their deserved benefits. Not only does misclassification carry heavy fines under FLSA and other local regulations, it can also do lasting damage to an employer's reputation, making it much harder to attract quality employees and business partners. Fortunately, there are a number of approaches CFOs and financial professionals can take to help their organizations avoid those pitfalls. Those include working with a third-party staffing firm for all contingent hiring and investing in scheduling software that makes employee classifications clear and distinct.

Ghost employees

While the phrase may sound silly, from a financial professional's standpoint, ghost employees are both very real and very scary. This kind of fraud arises when someone within your payroll team creates a fabricated employee record or fails to close out the records of an employee who has left the organization. This creates a "ghost" whose paychecks are deposited to an account controlled by the fraudster. While this kind of fraud happens in all kinds of businesses, employers with large workforces or multiple locations may be at particular risk.

Ghost employee schemes are both surprisingly common and notoriously difficult to identify. Your CFO and finance team can make the effort easier by scheduling regular payroll audits and working closely with your human resources department and floor-level managers. This collaboration, coupled with an easily searchable digital record of employees and payment information, can help you pinpoint discrepancies within the workforce and ferret out fabricated employees before they can do much damage.

While it's highly unlikely that any organization can fully eradicate workplace theft, there are plenty of opportunities for employers to be proactive about it. By putting in place processes and tools that make common fraud activities more difficult to execute and easier to detect, your finance and human resources teams can work together to keep your workplace profitable, operational, and honest.

Learn more about the ways you can safeguard your bottom line by automating your payroll and human resources processes with Ascentis.

Brandon joined the Ascentis executive team in 2019. He brings more than 15 years of leadership in driving growth, efficiencies and profitability at high-performing technology companies. As CFO at Ascentis, Brandon is charged with managing financial operations to support the company’s growth as well as leading the finance and accounting departments. Before joining Ascentis, Brandon was Vice President of Finance & Business Operations at Code42, a fast growing global enterprise SaaS provider of data security technology. Brandon has held financial leadership positions at Digital River and Lawson Software, two other high growth, Software-as-a-Service based businesses.” Brandon received a B.A. degree from Ohio University and a master’s degree from Notre Dame.