Protecting Your Staffing Business from Payroll Fraud2 Min Read

For staffing companies managing large and frequently changing workforces, fictitious or “ghost” employees can be difficult to detect. Without effective oversight, payments to fraudulent bank accounts may continue across multiple payroll cycles before anyone identifies the problem.

Through our work with staffing firms across the country, we’ve seen how these schemes can exploit gaps in internal controls. The risk is particularly significant in organizations where one person can create new employee records, change banking information and process payroll without independent review. This concentration of responsibility, which happens more than you’d imagine, can make fraudulent activity easier to carry out and conceal.

Staffing companies can reduce their exposure by strengthening several fundamental controls:

• Separate critical payroll responsibilities. Employee setup, banking changes, payroll processing and approval should never be controlled by one individual.

• Limit system access. Provide employees with only the access required for their roles and regularly review user permissions.

• Require independent review. Changes to employee records and direct-deposit information should be verified and approved.

• Compare payroll with customer billing. Workers receiving pay without corresponding customer billing may warrant investigation.

• Use data analytics to identify anomalies. Automated analytics and AI-enabled tools can make it easier to detect unusual patterns and other potential warning signs.

Not every discrepancy indicates fraud, but exceptions should be documented and investigated promptly. Separating responsibilities, limiting system access and comparing payroll records with customer billing data can help staffing companies identify potential problems earlier.

As you plan for the year ahead, consider whether your payroll controls have kept pace with changes in your workforce, systems, and business. UHY’s staffing industry specialists can help assess potential gaps and identify practical opportunities to strengthen your safeguards.

Contact Our Staffing Industry Professionals