With companies already reeling from the onslaught of white-collar crime in its myriad forms, cyber-attack, fraud, collusion, money laundering, misappropriation, the list is endless; it’s little wonder that South African businesses feel under constant threat. And it’s been proven endlessly that only strict due diligence procedures, robust internal controls, continual risk assessment, and proactive approaches that produce proactive solutions are effective in this war of attrition.

The phenomenon of ghost employees is one of the most common, but also one of the most difficult schemes to identify and manage, most notably in bigger organizations where the labour force may be huge. It follows that failure to detect ghost employees can result in catastrophic financial consequences for any business. The recent PRASSA debacle is a classic case in point, where, following an anti-corruption operation (Operation Ziveze), where all registered employees were ordered ‘to show up” with their qualifications and employment confirmation, it was revealed that PRASSA had been paying salaries to no less than 3 000 ghost employees who had been registered on full salary since 2020.

Forensic specialists, XTND, believe that businesses are hugely vulnerable to this insidious threat. They report that ghost employees and time theft affect more than 50% of businesses, and that research shows payroll theft generally increases with the age of an employee, while 56% is perpetrated by women. They advise that despite there being few red flags to indicate the existence of ghost employees, businesses could go a long way in identifying this threat by:

  • Comparing payroll to Human Resources data.
  • Comparing payroll data with supplier financial data.
  • Checking for more than one person associated with the same bank account number.
  • Checking for employees not taking leave—ghost employees do not need leave.
  • Running constant third-party checks.
  • Implementing a proper appointment policy process for appointing anyone (including contract workers). This should include, but not be limited to ID verification and background checks.
  • Checking for the name and details of a worker that remains on the payroll but in different roles – especially contract workers.
  • Constant verification of contract workers.
Servaas du Plessis, CEO XTND, says “the bottom line is that the most cost-effective way of limiting fraud losses is to prevent fraud from occurring in the first place. Having developed fraud models which identify ghost employees, conflicts of interest and other payroll irregularities, we offer businesses a free ‘health check’ to evaluate and interrogate disparate business data through the Enterprise Insight Analysis System.” 

Using this easy checklist, businesses can evaluate their fraud prevention procedures.
  • Is an effective and truly anonymous fraud reporting mechanism in place?
  •  Is an effective integrity screening program for employees in place?
  • Does your data analytics have multidisciplinary insight and efficient tools?
  • Are all the dots connected in your payroll scheme?

If the answer to any or all of these questions is ‘No’, you may have a problem.