Payroll Fraud

An occupational fraud, generally committed by an employee, manager or company insider with access to a payroll system, that diverts an employer's funds through the payroll process itself, commonly by adding a fictitious or ghost employee to the payroll and directing their pay to an account the perpetrator controls, inflating hours or a pay rate above what was authorized, or continuing to pay a former employee after termination. The Association of Certified Fraud Examiners classifies payroll fraud as one of the more common categories of occupational fraud in its recurring Report to the Nations, and notes that a payroll scheme often runs undetected for a comparatively long period because it can be structured to generate a series of individually modest, recurring payments rather than a single large theft. Payroll fraud is distinct from wage theft, in which an employer, rather than an employee or insider, unlawfully withholds wages properly owed to a worker; payroll fraud runs in the opposite direction, from employer to a dishonest insider.