25 Oct 2018

Clayton Utz Fundamentals of Financial Crime 07 Timesheet falsification

There are generally two types of timesheet falsification – an employer underpaying staff and the employee overstating time on their timesheets – and this type of fraud is more common than we may think.


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Daniel Heywood: One issue that's gained a lot of public attention recently is timesheet falsification. Now that can take two forms. One is on the employer's side when the employer is actually underpaying staff and the second is the employee's side where the employee is overstating the time that they've spent at work in order to get incentives. I'm here with Deepak today and he's going to take us through some examples of this happening.

Deepak Pillai: The example you mentioned of employees committing wage fraud, we've seen this actually occur in franchisee agreements which you would have seen recently in the media as well. We found that franchisees have essentially had two common ways that they have been committing this employee underpayment. The first one we've seen is where they've kept two separate records: they've got the employee to actually say that they've worked ten hours and that information is then provided to corporate and then they're paid accordingly for that ten hours that they've put in the books, but on the side they've actually rostered them on for 20 hours and therefore they're only being paid half the rate that they're actually supposed to be paid.

The other method that we've also seen is what we call a cashback scheme where they are paid the correct amount based on the hours that they've worked, but then the franchisee will actually get the employee to pay them back some money and they usually do this because they might have some employees that are visa-sponsored or they're threatening them with a loss of their job if they don't actually pay that money back.

We've had then clients ask us how could they have identified these from their franchisees and what we've told them is there is a couple of controls that they could have put in place to help them identify these issues.

Firstly, data analytics could have helped them. They get a lot of information provided to them from their franchisees. Corporate can then actually run some analytics and identify some red flags where particularly some of those franchisees might actually be committing employee underpayments.

Secondly as well a random audit process would potentially help uncover this as well. This was a particular issue that was common across the industry and people were aware of it, so some things like random audits could have helped identify that.

Dan you also mentioned employer perpetrator fraud. What are some examples you've seen of that?

Daniel Heywood: So we were recently out at a logistics company that was facing significant pressure from a regulator they were almost getting shut down. Now the problem was there that drivers are spending too long on the roads and those drivers were breaking their legislation around how long they can actually spend on the roads. We were able to do an investigation to identify that drivers weren't actually spending that much time on the roads: they were actually overstating that time. We were able to look at things like payslips, swipe cards and vehicle logs to identify that they weren’t actually driving as long as they said they were.

One control that we recommended going forward is a zero tolerance policy towards that type of fraud. From the top down they should be demonstrating that that isn't accepted within their organisation, and telling all the employees that.