Page 93 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
reports for managers that highlight timekeeping irregularities.
Finally, it’s essential to review the employee hours loaded
into the payroll software to the amounts listed on employee
time sheets to ensure that there have been no errors in the
rekeying of hours data.
• Require approval of all overtime hours worked by hourly personnel.
One of the simplest forms of employee fraud is to return to
the company after hours and clock out at a later time, or have
another employee do it on one’s behalf, thereby creating false
overtime hours. This can be resolved by requiring supervisory
approval of all overtime hours worked. A more advanced
approach is to use a computerized time clock that categorizes
each employee by a specific work period, so that any hours
worked after his or her standard time period will be automati-
cally flagged by the computer for supervisory approval. It may
not even allow an employee to clock out after a specific time
of day without a supervisory code first being entered into the
computer.
• Require approval of all pay changes. Pay changes can be made

quite easily through the payroll system if there is collusion
between a payroll clerk and any other employee. This can be
spotted through regular comparisons of pay rates paid to the
approved pay rates stored in employee folders. It is best to require
the approval of a high-level manager for all pay changes,
which should include that person’s signature on a standard pay
change form. It is also useful to audit the deductions taken
from employee paychecks, since these can be altered downward
to effectively yield an increased rate of pay. This audit should
include a review of the amount and timing of garnishment
payments, to ensure that these deductions are being made as
required by court orders.
• Require approval of all negative deductions. A negative deduction

from a paycheck is essentially a cash payment to an employee.

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