Employee fraud is costing businesses worldwide billions – including in South Africa – and some experts call the rampant theft a global financial pandemic.

Speaking with eNCA, CEO of forensic investigative services company CS Forensics, Christo Snyman, said employee fraud is very likely the most common form of financial fraud in South Africa.

These types of employee fraud (fraud committed by an employee against the employer organisation) include:

• Asset misappropriation – typical theft cases such as loading a false beneficially on the company’s account, theft of cash, and submitting false disbursements;
• Corruption; and
• Financial statement fraud – over and understatement of financials.

“To put it into perspective, a study on 2,000 employee fraud cases around the world and over 400 in Southern Africa revealed any given business is losing around $117,000 per case (roughly R2 million), equating, on average, to about 5% of company revenue,” he said.

As a real-life example, Snyman noted a recent case in Cape Town – where a woman working as the payroll manager at a company would keep employees that would leave on the payroll for three months longer and divert the salaries to herself.

What’s worse is, once she was found out, she was let go, only to commit the same type of fraud at another company. Snyman noted that these types of crimes are not being taken seriously enough, and companies now need to pay attention when hiring staff.

He said to avoid these types of crimes in South Africa, companies must conduct proper background checks, check with previous employers, and do a credit check as well. “Employee fraud is rampant everywhere, and it should be considered a pandemic,” he said.

Another type of fraud costing businesses billions

Sick leave fraud is costing South African Businesses as much as 17% of their payroll every year, and the reality is now that employers are advised to view all medical certificates provided by employees with some circumspection as this type of fraud is becoming rife in the country.

Speaking with Newzroom Afrika, labour analyst Tony Healy said there is an “extraordinary amount of sick leave fraud in South Africa, and employers would be amazed at the level this type of fraud has reached. It has gotten to the point where it has become a business to some people”.

He explained that there are admin and receptionist staff in doctor’s rooms stealing whole pads of blank scripts and selling sick notes from home as a side hustle.

Healy said this dishonesty is all too common, adding that he believes that nearly 50% of all medical certificates handed to employers today are fraudulent.

This isn’t far off Occupational Care South Africa’s (OCSA) numbers, which estimate approximately 40% of all employees claiming sick leave are not physically ill and that South African businesses are losing as much as 17% of their payroll every year due to absenteeism – unfairly punishing already cash-flow strapped employers.

The OCSA further noted that absence from work costs the South African economy between R12 billion and R16 billion per year, and, on average, 15% to 30% of personnel is absent on any given day.

According to Healy, among other stresses in the business environment, employers have to view sick leave certificates with a degree of circumspection and take the administrative burden of validating them more often.