When an employer hires a new employee, the employee is required by law to complete tax forms, which are then integrated into the employer’s system for paying the employee. Payroll is the list of people working for a company. However, many people use the term to refer to the sum total of money paid to an employee on a weekly or bi-weekly basis. Criminal fraud can occur when completing payroll. A person commits fraud when they act in a way that is intended to deceive another person. The deceptive act is done by making a false representation of some fact. The fact causes another party to rely on the misrepresentation to their legal detriment.
Payroll fraud is the theft of money from a business by fraudulent means while using the payroll processing system. Theft is the wrongful taking and carrying away of property of another. The property is taken with the intent to permanently deprive the individual. Payroll fraud can be committed by an employee or company.
Yes. An employee can request an advance on their paycheck, which is money that would be paid on an upcoming paycheck that is given to the employee before that paycheck is issued. If the employee fails to repay the advanced amount, it is considered payroll fraud.
In addition to failing to repay an advance, an employee can also commit payroll fraud by:
- Buddy Punching: This occurs when one employee arranges with another employee to punch a time clock or record hours to show they worked. In reality, the employee did not actually work those hours.
- Altering Pay Rate: An employee works with a payroll clerk to increase their hourly wage in the company’s payroll system.
- Paycheck Diversion: An employee takes another employee’s paycheck, then cashes the check. The employee who cashed the check keeps the money.
- Billing of Unauthorized Hours: An employee pads their own time sheet in small increments that go unnoticed by supervisors.
One way an employer can commit payroll fraud is by having ghost employees. The payroll staff will create a fake employee in the payroll records or keep a terminated employee as active. They alter records to show checks being made out to the ghost employee, but keep the money for themselves.
Payroll fraud cannot only result in criminal penalties, but also the loss of a job or career. Thus, it is critical to fight any accusations or charges of this type of fraud. If you have been accused of payroll fraud, seek advice and counsel from a criminal lawyer.