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What is payroll fraud?

As the owner of a business in California, one of your jobs is to ensure that all operations are completed accurately so that the company can grow and progress. Unfortunately, dishonest employees can make this difficult and, in most cases, there is no way to prevent them from doing it. Forbes.com reports on the danger that is payroll fraud.


One form of this crime that has one of the highest number of incidents is referred to as “ghost employees.” This is what happens when an employee creates a false identity and provides paychecks for this fake person. Sometimes this can go on for years without anybody noticing, costing you thousands of dollars in fraudulent payments.


The most common form of this crime is timecard falsification. While this may only be a small amount each paycheck, making it easy to miss, it can also go on for long periods of time and add up to a significant chunk of change.


Employers can also cause payroll fraudulence on their own by accidentally misclassifying workers. Although this can be an honest mistake, most states will issue an expensive fine when this happens and require the business to pay back any lost payroll taxes.


While it is impossible to prevent your payroll manager from stealing money, you are completely able to catch the crime and stop it before any more funds are lost. The best way to do this is by reconciling your payroll with someone other than the regular manager to ensure that all calculations are correct. This should be done often to prevent issues. This information is not intended as legal advice but should be considered educational.

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