Everyone’s heard of “Bob in Accounting,” but nobody knows who he is. It’s a long-time trope in TVs and movies, but in the real world, not knowing who your employees are can mean big trouble for your small business. According to World Wide Specialty Programs, nearly 30% of small businesses have a ghost employee and don’t even realize it.

Defining the Ghost

You’ve probably heard of shell companies. These fake companies are used to funnel funds and make illegal payments to CEOs. A ghost employee is essentially a shell on a smaller scale. The fake employee looks real on paper and can go unnoticed for months in some businesses. In reality, someone else is fraudulently accepting the ghost employee’s paychecks. Most of the time, the ghost is a completely made-up person, but sometimes a real person’s identity is unknowingly involved.

Creating a Ghost

Thieves create ghost employees in several ways. Sometimes, an actual employee leaves the company but someone keeps them in the payroll for several extra pay periods and takes the money. Other times, an employee goes on leave without pay but someone marks him as present and takes the money. Finally, some people create entirely fake identities and maintain them in the accounting system to intercept paychecks made for the fake person.
If you suspect a ghost employee on your company’s payroll, consider whether the person has few or no deductions, as this is a common sign. Get rid of and prevent the problem by ensuring payroll procedures are implemented legally and properly and never allowing the same person to run every part of payroll. A crime insurance policy will also help in the event that someone does steal from your business.