Payroll — ghost employee

The payroll pays someone who does not work for the organization: a fictitious person, a former employee kept on the payroll after leaving, or a relative or associate who does no work. The perpetrator controls the paycheck or the direct deposit account.

Fully covered.

Starter pack: Payroll review

Red flags

In the data

• Paid but not in the HR master, or paid before hire or after termination
• Invalid SSN or SSN shared with another employee
• Bank account or address shared with another employee or a vendor
• No tax withholding, benefit deductions, or PTO use
• No changes to address, withholding, or benefits over a long period

Behavioral

• Supervisor insists on distributing paychecks or handling payroll for the department
• Supervisor resists headcount verification

Internal controls

• HR maintenance and payroll processing are not separated
• No periodic headcount or payroll-to-HR reconciliation
• Payroll master changes are not independently reviewed