Payroll fraud is costing companies an average of £40,000 every time it happens.
The Global Payroll Association has analysed occupational fraud data to understand how frequently payroll fraud occurs, how long a case tends to go on for without detection, and how much each instance of fraud costs the victim organisation.
Occupational fraud is fraud committed by an employee against their employer. This kind of fraud can be split into three main categories – asset misappropriation; corruption; and financial statement fraud.
The Association says that asset misappropriation is by far the most common form of occupational fraud.
According to a sample of cases examined in a report, Occupational Fraud 2024: A Report to the Nations, asset misappropriation occurred within 89% of all occupational fraud cases between January 2022 and September 2023. Corruption occurred in 48% of instances, and financial statement fraud was present in just 5%.
Payroll fraud is including in asset misappropriation, and it refers to instances in which employees steal money from their employer via the payroll processing system.
The Occupational Fraud 2024 report found that while payroll fraud accounted for around one in 10 (9%) instances of asset misappropriation, no other type of asset misappropriation goes unnoticed for a longer period of time than payroll fraud, with each scheme lasting an average of 18 months before anyone realises that something is wrong.
It is estimated that every month that a case of payroll fraud is allowed to continue costs the victim organisation an average of £2,217. Over the average 18-month period, this equates to a total loss of £39,907.
Melanie Pizzey, CEO and Founder of the Global Payroll Association, said:
“The payroll system is an essential part of every company and it’s an area that is becoming an increasing focus for fraudsters.
“What’s more, payroll related crimes tend to go unnoticed for far longer than any other type of asset misappropriation and while the average case leads to losses of around £40,000, one recent case saw an employee steal £350,000, and another saw company losses of £120,000.
“This is money that most companies, and especially SMEs, simply cannot afford to lose and, more often than not, it’s due to a lack of auditing and a lack of intervention or review from business owners and leaders.”
