Payroll fraud is quietly siphoning about $6 million from South African businesses each year – surpassing losses from armed cash-in-transit heists – yet many companies remain unaware of the threat, legal and payroll experts have warned.
According to the Chartered Institute of Payroll Professionals, South African companies lose more than R100 million annually to payroll fraud – a figure that underscores the need for vigilance in an often-overlooked department.
Often driven by ghost employees and weak internal controls, these schemes can go undetected for years, costing firms millions before red flags emerge.
According to Yolande Schoültz, a legal expert who has investigated numerous cases, most companies only uncover payroll fraud by accident.
“They don’t realise it’s happening, and it can cost them millions,” said Schoültz, founder of YSchoültz Attorneys.
She cited a case in which a company lost over R7 million through 13 ghost employees over several years.
Ghost employees – either fictitious or former staff never removed from payroll – are among the most common tactics.
Fraudsters often redirect salaries to personal accounts or manipulate irregular payment schedules to siphon funds.
In many cases, perpetrators are quietly dismissed rather than prosecuted, only to repeat the fraud elsewhere.
Despite the scale of the problem, payroll oversight remains fragmented.
One issue is who has oversight: is payroll part of finance or human resources? It should be both, with finance being primarily responsible. But payroll is often left alone. As long as people are paid, nobody asks questions.
Sandra Crous, managing director of payroll provider Deel Local Payroll, said modern payroll platforms offer tools to mitigate these risks, including automated alerts, role-based access and real-time reporting.
“There are amazing capabilities in modern payroll systems such as automated reporting, remote administration and alert systems that inform different stakeholders,” Crous said.
“You can expand and streamline payroll processes so that people in finance or HR have passive visibility over payroll events.”
Experts recommend monthly audits of hiring and termination records, and annual face-to-face ID checks conducted by independent parties.
“An annual face-to-face audit is very effective. Have people come with their ID books and match them to a payroll list,” Schoültz said.
“An independent annual face audit is the best way to know if there are ghost employees. It also works to check employee movements every month, to check the terminations and new hires.”
JN/APA