Tips in Preventing Fraudulent Activities Related to Payroll in UAE

In any type of organization that issues payroll stubs in UAE to employees, there’s always the possibility of fraudulent activities occurring. Payroll fraud is perpetuated in various ways. For those who don’t know, payroll fraud is a scheme wherein a staff member causes an employer to issue payment by creating false claims related to compensation.  

Payroll fraud can take a very long time to be able to detect. A report found that it takes at least three years for it to be caught. Approximately nine percent of asset misappropriation cases involve fraudulent activities related to payroll.  

In this article, we’ll provide you with several tips to prevent fraudulent activities with your company’s payroll services in UAE. Let’s start.

How to Prevent Workmen Compensation Fraud in the UAE

Workmen compensation fraud is possible in all kinds of business organizations in UAE. An employee can fake a back, neck, or joint or bone problem in order to milk an insurance company and employer out of tens of thousands of dirhams. There are a lot of employees that were found to be in the act of collusion as they perpetrated accidents at their place of work. There are cases wherein they’re injured at home; however, they claim falsely that they’ve sustained the injury while working. This is where they qualify for more lucrative benefits from workmen’s compensation insurance in UAE. Unfortunately, it is always the employer that is the victim.

Here is how you can safeguard your organization:

• Maintain CCTV cameras in your place of business in order to capture accidents;
• Receive several medical opinions with certain injuries;
• Insist that the injuries are reported as soon as possible

How to Prevent Falsified Salary Fraud in UAE

Falsified salaries involve staff members claiming wages for hours that they have not worked or making false claims on timecards or timesheets in some fashion. Payroll or accounting personnel with access to payroll systems are able to manipulate rates of salary or hours worked. They can also add false expense reimbursements to their pay. There may even be an opportunity in paying bonuses even when none is warranted. 

Another type of abuse would be stacking hours in maximizing or creating overtime work hours and pay. They borrow from a week in order to combine hours with another week.

Here is how you can prevent falsified salary fraud in UAE:

• Utilize sophisticated time systems or clocks which require unique passcodes for each employee, which have to be entered whenever employees clock in;
• Executive approval for all kinds of bonuses;
• Supervisor or manager approval for all timesheets or timecards, including overtime;
• Executive approval for all paychecks;
• Mandatory vacations for all those with responsibilities related to payroll with another employee conducting payroll functions in their absence;
• Restrict the number of people that can modify rates of employee wages, grant benefits, add employees, etc (the individuals should have records checked regularly as well)

How to Prevent Having Ghost Employees in the UAE

This kind of payroll-related fraudulent activity occurs when a non-existing staff member is added onto the company’s payroll and another staff member benefits from receiving the ghost employee’s wage. A ghost employee can be one that has never existed or is someone that is no longer working for the organization but has intentionally been left on the company payroll. With this kind of payroll fraud, it’s more prevalent with large corporations where there are weak internal controls and there are a lot of employees.

Here is how to prevent it:

• Inspect the payroll database randomly, especially for employees that have no deductions e.g. healthcare withholdings;
• Cross reference the company’s payroll roster for a duplicate address;
• Conduct a regular audit of company payroll in which all staff members have to sign physically and show proof of identification in order to receive a pay stub

How to Prevent Commission Schemes in the UAE

Commission schemes are often committed by the sales department wherein employees exploit the weaknesses of their employer’s commission policies. An example of this is when commissions are paid for sales that aren’t adjusted for credits and sales with credits may begin appearing. A commission may be paid during the time of the sale rather than during the time of payment. This is when an organization finds its bad debts increasing. Just like falsified wages, a commission scheme can benefit an employee through inappropriate increasing his or her salary.

Here is how to prevent it:

• Review financial correlations. Check if sale commissions have increased when the sales are actually dropping.
• Check if you are recovering commissions that have been overpaid to salespeople or paid for a canceled transaction.
• Check the commission policy of the organization in order to determine whether or not they’ve been modified in reflecting the changes of the business.

If you want to know more about payroll processing in UAE or payroll fraud, contact us here in Payroll Middle East today!