A shadow/ghost employee is someone who is recorded on the payroll but does not work for the business. The ghost can be a real person who knowingly or not is placed on the payroll, or a fictitious person invented by the fraudster.
Payroll fraud is as likely to be committed in the national and regional capitals as it is in remote administrative districts. Unearned salaries are paid not only to fictitious (ghost) names, but also to shadow workers (ex-employees, resigned, dismissed, or retired), and to existing staff. The latter receive unearned salaries through "overtime" pay, fraudulent payment vouchers, and disingenuous name splitting. In some departments, staff members might count weekends as overtime, doing work which could have been done during normal working hours.
There are three basic steps to a shadow/ghost employee fraud:
- Creating the shadow/ghost
- Generating false time sheets
- Collecting and converting the payments.
Creating the Shadow/Ghost Employee
The first step is placing the shadow/ghost employee onto the payroll system. If the fraudster has access to the system, this may be as easy as using the 'Add Employee' function in the payroll program. Where they do not have access they may use an insider or rely on the high volume of paperwork in larger companies to slip the employee in via intake or recruitment drives.
Generating False Time Sheets
The fraudster may not have to take any action to generate the payment if the shadow/ghost is paid a wage. The shadow/ghost will simply be paid the same amount every month.
Collecting and Converting Payments
The payment must be collected by the employee and, if necessary, converted into a useable form. What steps are necessary will depend on how employees are paid. In Ireland today it is policy that wages are paid into bank accounts.
If wages are paid by direct deposit, the employee does not need to do anything to get the payment and the payment does not need to be converted. But the employee requires a bank account to receive the money.
Steps to Prevent Shadow/Ghost Employees
- Conduct periodic payroll audits in which all employees have to physically sign and show proper identification to receive their payslips.
- Cross-reference the payroll for duplicate addresses or PPSN numbers.
- Verify PPSN numbers.
- Randomly inspect your payroll database for employees with no address listed or a PO box as address.
- Require direct mailing of payslips or have accounts distribute them physically to employees.
If you suspect shadow/ghost employee fraud within your business or company, or if you need help safeguarding against it, please call one of our professional investigators who will guide you through the appropriate steps to protect your company, your profits and your integrity.