Payroll fraud can happen in almost any environment, but contract cleaning businesses are particularly susceptible. It’s easier to game the system when there are hourly employees who work off site, and with little to no supervision. 

“The janitorial industry has employees that never come to a headquarters or office,” says Hewick. “It’s really easy to lose track of that accountability mechanism when the corporate office may never see them.”

Additionally, due to the unglamorous work of cleaning, contractors often rely heavily on referrals from existing employees to develop their talent pool. When nepotism or preferential relationships happen, nefarious behavior is easier and more tempting.

“If managers are pulled too thin they can’t see when those lines are getting crossed,” says Hewick.

While janitorial services is a $61 billion industry, most companies in it are small. A mom-and-pop shop may struggle to make ends meet and might not have the budget to update to new technology or hire additional managers.

Using outdated time-tracking methods, like a physical timecard system, makes it much easier for buddy punching to happen. And without sufficient oversight, it’s also more likely a ghost employee could go unnoticed for months or years.

It’s tempting to think payroll fraud is something that happens to other companies. Getting too comfortable, however, can create the perfect environment for bad actions.

“In our industry, it’s easy to focus on what’s happening operationally and to take your eye off the other aspects of the company,”says Hewick. “If we’re cleaning the building well and the customer is happy and it’s within budget, it’s easy to think everything is great. If you stop paying attention, it would be very easy for somebody to do something.”

Fraud isn’t exclusive to “bad” employees, says Hewick. Tough economic times can motivate even “good” employees to act badly.

“You’ll always have people who just want to game the system, but you also have good people who get into situations and they do things they shouldn’t,” says Hewick. “Watch out for employees who are under extra stress. That’s when people will do things they might not normally have done.”

There are other signs to watch for, including unknown names on the payroll, labor costs that are higher than expected, an increase in customer complaints about lackluster results, and decreased employee morale or rumors among workers in the field.

“In a company that doesn’t have good HR and good business acumen, this problem probably exists. If nobody has ever questioned this, it probably exists,” says Cheddie. “Where there’s a will, there’s a way. That’s why we need to make sure our systems are as foolproof as possible.”

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