Ghost Employees: Who are they and How to Handle Them

Ghost Employees
When you hire someone to do a job for you or your company, you expect them to be honest and work hard. Ghost employees are the opposite type. Learn how you can get rid of them.

Hiring the right people is crucial to the success of a business. They have to fit the company culture, be competent, and, most importantly – trustworthy. 

Labor is often the biggest expense for a company, and this is where ghost employees come in. These employees don’t work for you but still receive a paycheck from your company every time. Read on to find out about who ghost employees are, their types, and how you can handle them once and for all.

Why are ghost employees a risk for your company?

The hardest type of payroll fraud to detect is the occurrence of a ghost employee. Unless proper controls are in place, your company is vulnerable to being exploited. And it is not uncommon either. 29% of companies internationally experience payroll fraud. It takes 24 months to detect it, which is among the longest of all fraud types. 

Who are ghost employees?

Ghost employees are workers who, much like ghosts, aren’t actually there. They appear on your payroll without your knowledge, and receive a salary, costing your company money, time and productivity loss. A perpetrator from your organization commits fraud by placing the ghost on your payroll and generating a paycheck for someone who does not work for the company. Stealing time and ghost employee schemes occur in several ways:

Real people

These ghosts are living beings who have a valid ID and Social Security Number. They usually appear to be sick or late for work. In reality, they are in collaboration with the perpetrator and split the profits with them. Ghost employee schemes are typically run by two or more people who are friends or relatives of a supervisor. However; a supervisor can run the scam alone by using two sets of ID’s. The detection of these schemes can be complicated. This is a gigantic scheme, so the losses to your company will be even higher.

Real people who left/died but are still on the payroll

These ghost employees are hard to set up for the perpetrator since it relies solely on past employees. The real issue here is the quality control measures employed by the company. If the company still issues a paycheck for a person who has left the company then it might be hard to detect and punish someone for this type of fraud because of insufficient checks and balances in company procedures.  

Fictitious people

As the word suggests, this means putting a non-existent person on the payroll. This scheme is set into motion and controlled by someone with a labor supervisory role in the company. However, detection is possible with biometrics.

Who profits when there are ghost workers?

To answer this question, it is important first to understand who has the power to set up such a scheme. Three types of authority are required for forging an employee onto the payroll: authority to hire, authority of periodic salary payments, and authority for payment of salary. The individuals who have this authority are typically part of the scheme. A ghost employee scheme is heavily reliant on the authorization of periodic salary payments. 

What you can do

Detection of fraud is an issue, no doubt about it. However, there are several control measures you can take to protect your company from becoming a victim of ghost employees. 

Conduct audits of payroll records

This is the most common way to detect payroll fraud. If you periodically compare your records to time card reports and search personnel files, you may just find fake employees, duplicate SSNs, addresses, or bank accounts.

Establish strict HR processes

Make sure to have HR policies in place that guide your employees towards the prevention of fraud. In particular, having a reliable mechanism for adding or removing employees from your payroll might do the trick.

Get a killer workforce management system

Old fashioned punch in time cards do not fit the requirements of controlling a modern workforce Being a company that doesn’t stay in the past is crucial. That’s why you should set up a safe workforce management system that’ll gear you towards success and away from fraud. Sitetrack360 is the perfect solution. It will equip you with modern technologies that will eliminate employee time fraud and ghost employees. 

You’ll have a punch in system with face recognition to verify the identity of your workers. You’ll also get a geo-fence system to recognize the location of your employee punching in and a GPS feature can make sure they stay in their assigned location during work hours. SiteTrack360 can also integrate with world-leading accounting systems so you can easily send employee hours and cost codes into payroll with a simple mouse click.  

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