Ghost payrolling is a method of fraudulently claiming funds.  Often set up by an existing payroll manager, accounting employee, or other staff member who has access to the company’s payroll information, a “ghost,” or nonexistent employee, is added to the company’s payroll and then subsequently paid.  In large companies, ghost payrolling can often go unnoticed, costing corporations thousands of dollars.  The key to keeping your business safe against ghost payrolling is to properly prevent the process from occurring.  There are often signs to look for that indicate your company may be at risk of a ghost payrolling scheme.

1.  NO DOUBLE CHECKS OR CONTROLS.  Having a system of double-checking is essential.  Not only does this help prevent ghost payrolling, but it also prevents any other errors from slipping through the cracks in your payroll system.  This could mean having additional employees routinely verifying the payroll process.  It could also include splitting up the payroll tasks between several employees.  Or, you could even seek assistance from third party payrolling services.

2.  NO W-2 FORM VERIFICATIONS.  Go over each employee’s returned W-2 form.  Although not always a sign of a ghost employee, paychecks that do not withhold any earnings for taxes can often be a sign of fraud.

3.  PAYING WAGES IN CASH.  Direct deposit is usually considered the safest way to prevent ghost payrolling from occurring.  Even paying employees with checks allows for the opportunity to forge or misrepresent information.

4.  NOT KNOWING YOUR EMPLOYEES.  Make a habit of randomly, personally delivering checks to employees.  Before handing over a check, always make sure to receive proper identification. Make sure you know who is working for you.

5.  ALLOWING OPEN ACCESS TO PAYROLL.  Limit the number of employees who can access the payroll files. This ensures that, when and if there is an issue with your payroll, you know who is responsible for the problem.

6.  NOT LOOKING FOR UNUSUAL WITHDRAWLS.  A one-time large sum withdrawal or a salary that is only paid once are both signs that you may have a ghost employee on staff.  Another sign of ghost employees are matching bank numbers with different names.  If you notice any of these suspicious signs of fraud, further investigate the process.

7.  NOT KNOWING THE SIGNS.  The most important part in preventing your business from falling prey to ghost payrolling is knowing what to look for.  By regularly observing and going through payroll files, unusual or large numbers should be noticeable.  Unfortunately, payroll fraud is not uncommon.  If you suspect a payroll crime, investigate the situation immediately.

Matthew Walden is a partner at Infinity Consulting Solutions (ICS), a premier staffing and consulting agency headquartered in New York City.  As an expert in the recruiting field, Walden offers over 20 years of expertise.  If you would like to reach out to him send him an e-mail at

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