Recruiters financially exposed
Recruiters financially exposed as recession leads to surge in timesheet fraud risk
Outdated paper timesheet management systems are leaving recruitment companies exposed to growing financial risk as the recession leads to a surge in workplace fraud, warns giant precision, the software solutions provider to the recruitment industry.
According to giant precision, a small but growing number of contractors could be tempted to falsify timesheets to compensate for declining take home pay and job security as the recession deepens. Timesheet frauds involving highly paid contractors can potentially run into five-figure sums.
In the first half of 2008 worker fraud cost UK businesses 77 million, almost eight times more than the 10 million it cost in the first half of 2007. More fraud cases were tried in courts in 2008 than at any time since 1995 and it is expected 2009 will exceed 2008.
Matthew Brown, Managing Director of giant precision says: Paper timesheets are particularly vulnerable to fraud. As take home pay and job security declines during the recession an unscrupulous minority of contractors may be tempted to falsify timesheets, so prevention is absolutely vital.
Cases of timesheet fraud can often run into five figure sums before they are uncovered. In one famous case a few years ago a contractor even faked his own death to escape an agency which was chasing him for 10,000 hed defrauded them of!
He adds: The cost of recouping money from a fraudster can be a deterrent to recovery. It can cost thousands of pounds before even getting a court order, so it makes sense to stop the fraud before it happens.
Frances Lewis, Partner at leading commercial law firm Blake Lapthorn, says: Even if a fraud is of sufficient value to be worth pursuing through the legal system there is the potential for the costs to quickly escalate. It is also possible that the contractor may have moved abroad, which can make it difficult to issue legal proceedings against him or her. Even if charges are successfully brought, the contractor may not be in a position to return the money immediately which can lead to more protracted negotiations. If these are taken together, the costs can quickly exceed the value of the fraud itself.
According to giant precision, paper timesheets are vulnerable to fraud for several reasons. Firstly, it is very easy for workers to claim for more hours than they have actually worked. This sometimes involves resubmitting previously authorised timesheets with the dates changed to reflect the extra period of work. Secondly, paper timesheets only require a signature from an authorised supervisor, which is susceptible to being forged.
According to giant precision, online timesheet management systems can reduce timesheet fraud by as much as 95% compared to paper-based systems.
Frances Lewis comments: Automated online systems, which are secure and have the right person in charge of authorising timesheets, really help to minimise fraud and cut down the element of human error involved in a manually operated system.
Matthew Brown adds: The majority of timesheet frauds are not very sophisticated and are very easy to prevent with robust timesheet management systems in place. If a supervisor has to log-on to a password protected portal to authorise contractors timesheets, common frauds such as forging signatures or resubmitting previously authorised timesheets, are eliminated. Even if the supervisor is colluding in the fraud, with all the data online and accessible higher up the management chain, it is much easier to detect this type of fraud than with a paper based system.