Ghost employees have become an increasingly popular issue for businesses

Signs Your Organization Is Haunted… By Ghost Employees

Imagine hearing about a person who supposedly worked in your office without ever having seen them. It would be confusing, awkward and frankly, a bit unnerving. It might even sound like the premise for a thriller.

But this is an everyday reality for many companies throughout the world. They dole out paychecks to employees listed on their payroll who don’t physically work there or perhaps don’t exist.

They’re known as “ghost employees”, and they’re a big deal. The majority of companies simply refuse to believe this problem exists in their company but according to recent study published by Forbes, 27% of companies have documented payroll fraud that goes undetected for an average of 36 months.  The scary part is that this doesn’t account for the undocumented cases that are yet to be found. It’s important to know the signs of payroll fraud and proactively look for signs of issues like ghost employees.

How Ghost Employees Stay On Payroll

A ghost employee situation often takes the form of a scheme – a deliberate act of fraud. For example, an embezzler may issue payroll checks to real employees at a company who may either be absent during a pay period or no longer work at the company.

They may also create a fictitious employee (organizations of all sizes are at risk) and issue checks to the non-existent employee. The embezzler would then forge endorsements in the names of the ghost employees and deposit the funds into a personal account.

Schemes of this nature are often perpetrated by individuals in the payroll department (or those who have access to it), which serves as an ideal means of pocketing company funds without others noticing.

Signs of Ghost Employees

Ghost-busting an employee (and those responsible for the scheme) takes a systematic approach and persistence. More importantly, it takes proactive monitoring to prevent this in the first place.

Unlike the ghosts seen in movies and T.V. shows, ghost employees don’t appear in overt ways. Staff members of payroll departments have to remain on the lookout for them. It boils down to looking for hidden trails that ghost employees and their creators leave behind.

For example, in the case of one company, Chester Electronics Inc. (CEI), the company’s CFO discovered that the owner (who happened to be her brother) was creating ghost employees when she decided to check the fronts and backs of physical canceled checks from previous fiscal quarters on a whim.

She went on to further investigate the checks and then discovered her brother was endorsing and allocating them to ghost employees, using real people’s information. That created major legal issues since the victims of the scheme suffered tax hiccups. Had she not have investigated the checks on her own, her brother would have continued to get away with his crimes.

The lesson? Detecting a ghost employee requires proactive monitoring since the signs aren’t always overt. In fact, evidence of a ghost employee may only surface years later if someone has tax reporting issues because of embezzlement that took place at their expense.

With that said, you can find red flags if you proactively monitor your employees and payroll. A few examples of things to look for include:

  • An employee on payroll file who is not on the employee master file
  • An employee with no address, phone number or HR file
  • An employee number that appears out of sequence with other employee numbers
  • Payroll summaries that don’t match funds issued
  • Multiple direct deposits going to the same bank account under different names
  • Multiple employees with the same bank account numbers
  • Employees who’s age is beyond a reasonable working age (e.g. 85 years old)

Following the Trail Of a Ghost Employee

    • Match active employees with those listed on payroll – Have more than one individual (both in and out of payroll departments) verify that paychecks are going out to real employees and no one else.
    • Update payroll and employee master files after employee leaves – As soon as an employee leaves or is terminated, ensure that payroll is updated to reflect their departure.
    • Put processes in place that require documentation and authorization from management before adding an employee to payroll – Ghost employees are often entered when certain people are given too much free reign. Quell this by enforcing a strict policy of having to get the green light to add new employees from upper management.
    • Create a paper trail using direct deposit and/or similar methods – Ghost employees and their perpetrators are counting on their colleagues to be oblivious. Having a direct deposit system allows you to keep track of banking and financial info if you decide to monitor paychecks more closely in the future.
    • Use a comprehensive data analytics tool – A data analysis tool such as our GLAnalytics solution offers proactive reporting to detect possible ghost employees. It does this by identifying incomplete or inaccurate employee data or the total avoidance of using vacation time or company benefits.

    Bring Ghost Employees Out of the Dark & Into the Spotlight

    A ghost employee can easily slip your detection if you aren’t on the lookout for their presence. And ignoring the possibility of their presence is what they’re counting on. That’s why keeping track of your company payroll processing habits are a must.

    Eliminating ghost employees should start with controls that filter out the cracks embezzlers use to create fake profiles in the first place. Leading companies (big and small) are putting proactive monitoring tools such as our GLAnalytics solution in place to put a hard stop to these widespread illicit activities. Other examples of the benefits of the GLAnalytics solution as it relates to payroll include, but are not limited to, the identification of:

    • Unapproved pay raises
    • Bonus or commission payments made at odd times of the year
    • Excessive overtime
    • Missing employee information
    • Excessive part-time hours
    • Duplicate employee payments


  • The worst mistake you can make is believing that it won’t happen to you.  Be proactive in your thinking. At a minimum, you will uncover non-fraudulent data entry errors that happen in all companies and cost a lot of money and time.

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