What Are Some Common HR Frauds And How To Prevent Them?

June 15, 2024
532 Views

Human resource departments are central to managing sensitive information about related organizations and its employees. This makes them a highly suspected target for various types of fraud. In this blog, we will outline some of the common HR frauds and ways to prevent them!

What is Fraud in HR?

Fraudulent activities in companies are on the rise. People are using company’s asset for personal gains. HR Frauds can take many forms such as financial, cyber, personal or related to procurement. Regardless of the type of fraud, it can be costly for the business. It also reflects negatively on the business’s reputation.

It is important to take active anti-fraud steps to prevent the consequences. Taking the right precautions such as verification, background checks, audits can protect your business’s success. Additionally, an HR department must be equipped with the right resources and knowledge to detect and inform frauds immediately.

5 Main HR Frauds Companies Are Likely To Face

We have listed 5 main HR frauds companies can be suspected of! Read more about them.

  1. Payroll Fraud
    One of the most prevalent types of HR fraud includes misrepresenting or falsifying timesheets, commissions or bonuses. Payroll fraud happens on managerial or executive levels. Some of the instances for this fraud can include approval of inflated overtime hours in order to receive pay for time not worked.
  2. Ghost Employee Fraud
    A falsely listed employee receiving payment when they are not working for your company is known as ghost employee fraud. It can also happen when an employee has resigned but has not been removed from the company’s payroll system. In that case, someone within the company is enjoying their salary.

    Misusing Company Assets

    As an HR manager, you are made responsible for using company assets when necessary. In this type of fraud, the employee might be misusing the company’s credit card or assets such as a car, laptop for their personal use.

  3. Procurement Fraud
    Overseeing the purchase of everyday use items falls under HR’s duty. Procurement can easily get away with suspicious and fraudulent activities like over-purchasing items. They can reserve those items for personal use or reselling. Another example of procurement fraud can include submitting high-priced invoices to attain profit.
  4. Identity Theft
    Human resource department pools in sensitive information about their appointed employees. This includes their real name, identity number, personal address and bank details. Stealing personal information of employees or job applicants for malicious purposes.

How Can You Prevent HR Frauds In Companies

We have built on some of the common HR frauds, which makes it easier to take preventive measures. Here are a few proactive steps for companies to detect or prevent HR frauds.

  • Implement multiple levels of approval for payroll processing or expense reimbursements.
  • Perform detailed background checks of all new hires.
  • Conduct regular internal audits of payroll, expense and other HR functions.
  • Provide training and awareness sessions for employees on detecting or reporting fraudulent activities.
  • Use robust cyber security measures to protect online information.
  • Review contracts between vendors to ensure compliance.
  • Implement automated HR and payroll systems to avoid human errors or suspicious activity.

Overall Summary

In order to protect your company from common HR frauds, it is important to know them first. Some key HR frauds can include payroll fraud, procurement fraud, ghost employee fraud, misusing company assets, and identity theft.

As an outsourced help, ElevationHR provides companies with unbiased, regulated and well-accounted help. We channel the right expertise, resources and knowledge to prevent HR frauds in companies and restore their success. Call us at (281) 353-8847 for more details.

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