Spot bad actors early to run a tight ship, says Shaun Brookes of Buddle Findlay: 'There's a whole range of dishonesty'
Whether it’s big or small, employee fraud is a crime. At the big end, the Christchurch District Court recently ruled against a director who issued $668,393 of phoney invoices in an effort to save his business.
At the small end, the Employment Relations Authority ordered a woman to return to her former employer $9,641 in overpayments.
The overpayment was a payroll error. It escalated to a legal matter when the payee stopped returning calls about a refund.
It might never be possible to stop fraud, but close attention to detail can put HR on the scent before things spiral.
“There’s a whole range of dishonesty,” said Buddle Findlay special counsel Shaun Brookes. “And with some employees there can be an element of self-justification.”
Brookes has heard it all, from purchases on the company credit card that are in no way related to work to deciding it’s OK to take damaged stock home.
“They’re often not picked up,” he said. “But sometimes when they are found out by chance, you will see a real history of it. It might have started small and because the employee got away with it, they think it’s fine. It creeps in over time.”
Fraudulent behaviour can range from the clearly deceitful, such as false invoicing and taking cash without ringing a transaction through, to things that are a wee bit less clear.
“Fuel cards is a big one,” Brookes said, “where an employee will say they grabbed the wrong card when they were filling up the [spouse’s] car.”
Fraudsters are creative in their scale and methods. “You see it across a whole spectrum of jobs,” he said.
HR can be effective in stemming fraud by conducting reference checks and asking the right questions about job applicants.
“Getting the right people at the start is important,” he said. “Often, there’ll be cases where people are dismissed for a similar type of prior behaviour, then they appear somewhere else and that behaviour continues.”
If an applicant won’t provide a referee, HR should ask why not. If an employer offers a few perks, it’s happy for workers to cash in on, such as reasonable use of a fuel card, HR should make sure that is clearly explained to successful applicants at the outset.
“That’s where HR comes in, making sure there are clear policies and procedures and the employees know what they are, so they know the boundaries,” Brookes said.
No organisation may ever be completely immune to fraud, but Brookes has a few tips:
“When we see these cases go through the courts, there is often a gambling problem, or addiction problems and problems at home,” Brookes said. “Knowing your staff and what they are going through and providing support can help.”
A popular incentive, of course, is to make sure all staff are paid fairly for the work they do and are happy at work.
“Those are things HR can take the lead on,” he said.
Serious fraud can threaten a company’s operations and its future. If serious fraud is suspected, it is important to do some detective work, he said.
“Before you put the allegations to a particular person, you want to make sure there is something in it,” said Brookes, who has seen cases where anonymous tip-offs within an organisation deserved further investigation before accusations were aired.
“You want to take some steps [to make sure it’s not] just a disgruntled employee who’s been looked over or something like that,” he said.
Sophisticated fraud may require external expertise. “You might want an accounting firm to do a full audit of that aspect of your business to try to identify any issues,” he said, and consider suspending an employee’s access to parts of a business.
“If you’re going to do that, you may need to consult with them first, but you’ll need to consider whether doing that will cause any harm or loss of evidence.”
