Most organisations’ biggest and most important expense is its payroll, and no business can risk this resting in the wrong hands, especially when budgets are tight and employees are under pressure.
 
A well-run payroll is the lifeblood of the organisation, as are the qualities of professional support and integrity that underpin the role itself. Ethics and a strong moral code are mandatory qualities for anyone entering the payroll profession, but how are these guaranteed and what happens when they need to be enforced?
 
“The organisation needs to know that the right person with the right ethics is sitting in the payroll hot seat,” says Cathie Webb, Director, South African Payroll Association (SAPA). “They need to know that the person handling their employee pay is dotting the I’s and crossing the T’s and not letting things slip through the proverbial cracks.”
 
Unfortunately, not all payroll practitioners are created equal and what some see as a non-negotiable ethical stance, others see rules that can be bent.
 
A professional stance
“For most professional payroll practitioners, the qualities of integrity, trustworthiness, competence and reliability uphold their own code of behaviour,” says Webb. “However, for the organisation to ensure that these are qualities ascribed to by their payroll practitioner, they need reassurance in the form of a professional body.”
 
A professional organisation is key to establishing a national code of ethics that is adhered to by members and respected by business and other organisations. Practitioners that commit to membership are more likely to follow the code outlined by the institution and will be more inclined to remain in line with the behaviour of their peers.
 
“Once you have signed on the line, you are more aware of the rules, and the consequences of not sticking to them,” adds Webb. “It makes you more careful in how you practice your role. A good reputation is everything - you don’t want things to slip through and for your reputation to become damaged in the process.”
 
Take a stand
A professional membership provides the organisation with the wherewithal to confront fraud or bad practice. It ensures that any practitioner engaging in fraudulent activities is exposed to peers and other organisations. Unfortunately, many organisations don’t take a stand when it comes to their own experiences of poor payroll practice.
 
“We have noticed that when a business asks for assistance in auditing their payroll matters,  as they’ve suspected something isn’t right, if the payroll practitioner is found guilty, 99% of companies don’t bother to take it further legally,” says Webb. “They cite cost and time, but it can be that they are embarrassed that they didn’t follow procedure.”
 
Access to a professional organisation such as SAPA will allow for the organisation to reveal poor practice and prevent it from happening to someone else. They need only report them to the board with proof in order for the practitioner’s membership to be revoked. This level of involvement by organisations will go a long way towards ensuring that ethics remain top of line and mind.
 
“Corruption is rife and companies must be careful,” concludes Webb. “Ensure your payroll practitioner is a member of the professional body (renewable annually), check their reputation with SAPA, and encourage them to become a member if they are not already. Put the right structures in place to mitigate fraud and limit temptation – and a good payroll practitioner can help you do that.”
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za  
 
For more information on SAPA please visit:
Website: http://www.sapayroll.co.za/
Twitter: @SAPayroll
LinkedIn: The South African Payroll Associatio

Author: Arlene Leggat, a director at the South African Payroll Association (SAPA)
 
South Africa has a higher than average rate of overtime fraud owing to limited prevention and detection systems, and a workforce which has become dependent on the financial advantage it offers them.
 
Every year another story revealing extensive overtime fraud hits the media, exposing how easy it is for employees to defraud companies. In February 2017, 283 employees were implicated in the Merafong municipality for committing fraud estimated to be valued at millions of Rands.
 
Overtime fraud is a lot more prevalent than we want to believe. The challenge is that most companies tend to not take the case further than a rap over the knuckles - dismissing the person and making them another company’s problem. The right thing to do is charge them and ensure they get a criminal record.
 
Alongside a clearly defined policy around overtime fraud, or theft of any kind, the threat of criminal action will go a long way towards making anyone think twice before they lie about the hours they’ve worked. It isn’t, however, the only step that must be taken towards effective prevention.
 
Measures of prevention
Employees need to realise that overtime fraud can be as little as claiming one or two extra hours a month, not just 200. A lot of people don’t see those little hours here and there as fraud. It is. And it should net them a criminal record.
 
Organisations must educate employees on overtime hours, what constitutes fraud, and what will happen should they be caught committing it. Then, they need to invest in systems which can mitigate fraud overall. One such solution would be to implement an automated clocking-in system. It isn’t infallible, but it does allow for improved control over hours spent working versus hours put down on billing.
 
Another option is to implement controls within payroll, making it the last line of defence. The business must put its overtime policy into play from the start and it must ensure that it is strictly adhered to. It also needs to comply with overtime legislation as outlined in the Employment Act. 
 
Two sides to the story
The Basic Conditions of Employment Act states that employees are not allowed to work more than three to four hours of overtime per day. The number of hours is dependent on the length of the standard work day, and the role of the employee.
 
Collectively, within a seven-day period, you are not allowed to work more than 10 hours of overtime – it is legislated and companies cannot change this at will. Unfortunately, this is largely ignored by most companies in South Africa due to several factors, including a lack of skilled staff. So, if overtime policy isn’t being adhered to and the company isn’t enforcing it, then it opens the door for employees to commit fraud.
 
Consequences count
There must be someone monitoring overtime, checking it against systems and legislative parameters and enforcing its adherence rigorously. Not only will this limit the employee’s ability to commit fraud, but it will ensure that an eye is always on the overtime ball.
 
If employees believe that there are no consequences and that they can push boundaries, they do. This then leads to a weakened moral culture within the business, and that can have far reaching effects on morale, productivity and, of course, fraud.
 
To limit the potential for overtime fraud and to ensure that employees are also protected against working more hours than they should, the organisation must actively develop policy to monitor it. Payroll has a pivotal role to play in balancing overtime requested against internal policy and legislation, ensuring that hours are kept within legal limits from the outset.

ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za  
 
For more information on SAPA please visit:
Website: http://www.sapayroll.co.za/
Twitter: @SAPayroll
LinkedIn: The South African Payroll Association

The Association of Certified Fraud Examiners says that payroll fraud is the No. 1 source of accounting fraud and employee threat globally. It affects 27% of all businesses and lasts, on average, 36 months.
 
South African statistics are scarce, mostly because payroll fraud is under-reported by companies jealous of their reputations.

A rare public case was the arrest in 2014 of two Eskom employees for tampering with the corporation’s payroll network system in a scheme that could have costed the company billions.  Research by Alexander Forbes in 2011 showed that payroll fraud was costing South African business more than R100-million a year.
 
“Payroll fraud is very much a reality and, in South Africa, my experience is that it’s most prevalent in medium to large companies that run electronic payroll systems, and where the number of employees makes manual checking difficult,” says Nicolette Nicholson, director at the South African Payroll Association.
 
She adds that payroll fraud is an occupation, “The books will be balanced legally on the system, because it has applied legislation. But typically, the fraud takes place when new data is entered onto the system, and that’s why it’s not easily picked up by financial audits.”
 
Nicholson explains that payroll fraud usually requires collusion between colleagues, and small transactions that do not trigger alerts are preferred—one reason fraud schemes go on for so long. Most payroll fraud hinges on overtime claims, the payment of salaries to ghost employees whose bank accounts are controlled by the fraudster, dishonest expense claims and the payment of an extra month’s salary when an employee resigns or dies.
 
Causes for payroll fraud include intent and character, as well as peer pressure – where a person’s financial circumstances make them vulnerable to syndicates.
 
Nicholson advises that the best defence is to make a company a low-risk candidate by following these tips:
 
- Put controls in place from the beginning. Duties related to payroll processes should be rigorously segregated, with different people responsible for input, approval and release as a minimum. Frequent spot audits should be performed in addition to external audits, which do not cover segregation of duties. 

- Use external fraud examiners, as most fraud is committed by managers, an external agency should be used to undertake fraud checks. 

- Ethics management is a pillar of King III for very good reason: if the company’s code of ethics is truly embedded into the corporate culture, the occasional rotten apple will find it harder to identify accomplices. 

- Achieve process stability. Pay day is an emotive issue, so small issues tend to get ignored in favour of getting the payroll run underway. It is critical to keep to payroll procedures and cycles, or controls will be abandoned. 

- Empower employees. Very often, blue-collar workers may be barely literate or may have a culture of not questioning payment. Work with union or employee representatives to educate employees about what information should appear on their payslips, and encourage them to check that information for accuracy. It should also help nurture a culture of trust that is likely to impact positively on productivity generally. 

- Leverage the power of data. Put basic business intelligence capabilities in place to enable exception reporting and trend analysis to spot anomalies in overtime, PAYE, tax on bonuses and so on. Early detection is critical. 

- Stern consequences. Criminal action should be taken against an employee caught committing payroll fraud, if the consequences are kept to a mere human resources disciplinary or suspension, the guilty party can go onto work for the next company where he/she can continue their misconduct. This is because the Labour Law does not allow unwarranted reference, in other words, if the guilty person’s potential new employer calls the previous employer for a reference, they cannot divulge anything about the person’s fraudulent activities. However, if the person is pursued criminally, the previous employer is allowed to do so. 

“Fraud can have serious consequences for any company, both financial and in terms of the corporate culture,” concludes Nicholson. “Making it hard to commit it in the first place makes good business sense in every way.”
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za  
 
For more information on SAPA please visit:
Website: http://www.sapayroll.co.za/
Twitter: @SAPayroll
LinkedIn: The South African Payroll Association