Milnimazing payroll frauds in a mono economy like Nigeria

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Milnimazing payroll frauds in a mono economy like Nigeria

Payroll fraud is devastating to businesses and organisations which leads to shattering losses annually and can cause businesses to lay off valuable personnel and positions the organisation at a great risk of morribund.

Payroll fraud has become and increasing menace and poses a serious threat to small and medium scale businesses and if it is not further checked and the right preventive measures put in place then the crippling effects could be

overwhelmingly disastrous which further creates a negative impact on our already depleted economy since small and medium scale enterprises have been widely considered and recognised as the engine of economic growth and equitable development in developing economies like Nigeria.


Payroll fraud is a form of missapropriation of fund and is commonly known as insider fraud. It is the deliberate manipulation of the accounting system with the aim of embezzling company’s funds through provision of unreliable information by the managers in charge of the payroll systems.

Payroll fraud is when employees working in the payroll unit intentionally manipulate the payroll system to receive the payment they are not entitled to.Milnimazing payroll frauds

Payroll fraud schemes brings financial damage on a company wrecking havoc on the business and as long as the fraudulent act continues the more financial fallout it causes for the business.

Experts and researchers estimate that almost a quarter of businesses are grossly affected by payroll fraud schemes yearly.

The Bayelsa State Government lost 2.6 billion naira to payroll fraud. The General Auditing Commission in Liberia recently discovered it lost about $163,000 billion to payroll fraud as the wages were still paid to presidential appointees who were no longer in the government’s employ.

Payroll fraud comes in various forms, few times it could be cases of human errors but more than often it is instigated and orchestrated by dishonest payroll administrators.


GHOST EMPLOYEE FRAUD – This involves the fraudulent activity of creating non existent employees and their details are entered into the payroll register so as to continously receive the wages.

Payroll administrators are most often the puppeteers of ghost employees as he/she authorizes the payroll payment and wields absolute control over adding and removing employees from the payroll register.

As the name implies, a ghost employee is someone recorded on the payroll system but does not work for the organisation.

The Federal Government of Nigeria recently rid off 50,000 ghost employees and saving a huge amount of 200 billions of naira.

FALSIFICATION OF TIMESHEETS – This mostly occurs in businesses were employees are remunerated hourly, the numbers of hours worked could be falsified with false claims to have worked certain shifts. This is known as time sheet fraud.

Timesheet fraud is tremendously common in large scale business corporations were employees reports hourly and these employees might fabricate claims that they worked more hours than they actually did and if granted unfettered access to the payroll systems might alter their hourly rate so as to receive more wages

COMMISSION BONUS FRAUD – This occurs when an employee whose wages is based on

commissions or bonuses, he/she would inflate sales so as to receive high commissions/bonuses through posting and recording of non existent sale and falsified sale transactions.

This could be done with the aid of an accomplice to create sales which is later reversed and abrogated.


Protecting your business from payroll frauds might be a challenging task, however with the right procedures and modalities put in place you can significantly alleviate it’s negative impact on your business.

AUTOMATE YOUR PAYROLL – Introducing electronic software systems to your payroll ensures your business to be lessed abuse by employees. Automation completely removes human involvement and oversight thus mitigating the chances of payroll fraud.

With the automation systems introduced to your payroll, the basic functions are automatically processed by the computer,

if changes are modified the system will update and notify you instantly. With the automated software all employees’ wages are accurately processed.

SEEK TO HIRE HONEST EMPLOYEES – Do you set ethics as one of your core values? Some business employers undertake diligent and a critical assessment of prospective employees before hiring and recruiting them, they yearn for trust,

reliability and honesty from their employees before extending them the job offer. Reference talks by communicating with their previous employer would be of immense help.

Run a thorough background check, reach out to guarantors, his residential address and find out information on him/her and ensure you thoroughly scrutinize employees before recruitment in order to prevent cases of payroll fraud in your business

CHECKS AND BALANCES – Engage the services of someone to periodically review the payroll and check for anomalies like ghost employees, this hiring of individuals could be external bodies and third party organisations outside the organisation who offer payroll services. This method helps eliminate potential payroll fraud.


This is one of the most appropriate and efficient way employers discover fraud in their businesses.

Always request employees to report suspicious activities to the employer with the promise of an incentive, this would boost their morale.

Instant punishmnt should be meted out to offenders who have been found guilty of fraudulent activities in the payroll system so as to serve as deterent to others.


This occurs when an employee working within your business checks and reviews the financial status, transactions and operations of your business. This could be done unannounced and randomly in order to get at unsuspecting employees.

According to reports by The Association of Certified Fraud Examiners (ACFE) twelve percent of small businesses detected frauds just by conducting internal audits.


It is necessary to separate your payroll account from the main business money. It makes it easy to evaluate your bank statement, transactions and keeps track of all accurate records of payment, the more accurate your records the more it’s easier to trace payroll frauds


Ensure the personnel in the payroll unit takes some weeks leave regularly, their vacation and off duty woul make you or another employee to run the payroll and if manipulations occur in the payroll it would be outrightly traced.

Thus this helps you keep a track of your cash outflows when employees with financial responsibilities are on vacation.