Manage Overtime Fraud with Intelligent Software and Internal Oversight

A driver stops on the way home to run errands while on the clock. An area manager is not on location to monitor employees coming and going. An hourly person who checks others’ timesheets is also padding her own hours. Employee theft can be costly, and labor is the costliest line on a P&L statement. Work hours and overtime must be carefully monitored to avoid excessive expense.

Most small business owners want to grow to be bigger business owners, and that comes with scalable growth and increased sharing of responsibilities with employees. One pain point for business of all sizes can be overtime fraud. We generally want to avoid the high cost of overtime in some states, anyway, but to be paying a dishonest employee who is claiming more hours worked is particularly painful. To mitigate risk and avoid overtime fraud, use good internal controls and intelligent management software.

Intelligent Software

Managing employee schedules and actual hours worked is easier with good management software. An employee who seems to have a higher portion of overtime can be more easily flagged when total hours scheduled vs. total hours paid is easily compared.

Travel and expense report software also helps protect a business owner. It simplifies record-keeping for the employee and the company, and it ensures that receipts are included and that approvals are secured from management before an employee is reimbursed.

The Human Element

Even with good software, online scheduling and simplified payroll and traceable hours, a human must be assigned the practice of routinely performing periodic internal payroll audits. With this person in place, dishonest employees are less likely to claim extra time or expenses when they know their chances are slim. Staying employed becomes more valuable that a few bucks that they might be able to slip under a non-diligent nose.

In smaller locations, a single person, most-often the owner, should oversee the payroll process from start to finish. And this person should be salaried to avoid any conflict of interest—no one wants the payroll manager supporting an environment of overtime fraud.

Prevent Fraud with Internal Controls

Falsified expense reports and overblown timecards must be controlled with more than software. Policies must first exist to limit opportunities for fraud. Large expenses over a set limit, for example, must be pre-approved. Overtime beyond a particular number of hours or percentage must be approved before the shift can even be scheduled. Scheduling software will help, but the policy must be in place first.

Owners and managers must then audit employees’ trends of hours worked. And those who process approvals for overtime and expenses cannot be the same person who issues checks. Creeping hours and expenses could indicate a dishonest employee.

We all want to grow our profits with trusted employees.
Utilizing effective management software and enforcing internal controls will help get us there without being victim to overtime fraud.

Author Profile Jon Forknell is the Vice President and General Manager of Atlas Business Solutions, Inc., a software marketing company specializing in employee scheduling software, including ScheduleBase employee scheduling software, and other business software solutions. In the past, Jon has been recognized by the U.S. Small Business Administration as a SBA Young Entrepreneur of the Year. Atlas Business Solutions was named as one of Software Magazine’s Top 500 Software Companies in 2004 through 2007, and 2010, 2013, 2014, 2016, 2017, and 2018.