Ghost workers bleeding South African firms as payroll fraud costs $6m annually

Payroll fraud is quietly emerging as one of South Africa’s most costly corporate crimes, draining more than $6 million (over R100 million) from businesses each year, and experts warn that many companies remain oblivious to the danger.

• South African companies lose over R100 million ($6 million) annually to payroll fraud, surpassing losses from armed robberies.
• Legal expert Yolande Schoültz says firms often uncover payroll fraud only by accident, sometimes after years of losses.
• Fraudsters use ghost employees and weak internal controls to siphon salaries into personal accounts.
• Experts urge monthly audits and independent annual ID checks, while tech firms push for automated payroll systems to curb abuse.

According to the Chartered Institute of Payroll Professionals (CIPP), the country’s firms are losing more money to payroll fraud than to armed cash-in-transit robberies, exposing a critical blind spot in internal financial systems across the continent’s most industrialised economy.

At the heart of the problem are ghost employees, fictitious or long-departed workers who continue to receive salaries that are secretly diverted into fraudsters’ accounts.

“They don’t realise it’s happening, and it can cost them millions,” said Yolande Schoültz, a legal expert and founder of YSchoültz Attorneys, who has investigated several payroll fraud cases.

Schoültz cited one incident where a company lost over R7 million after discovering 13 ghost employees had been on its payroll for years. Most cases, she added, are only uncovered by accident, often when a routine audit or whistleblower exposes inconsistencies.

Payroll fraud outpacing armed robberies

Experts note that the problem persists partly because payroll functions often fall between departments.

“One issue is who has oversight: is payroll part of finance or human resources? It should be both.

“But payroll is often left alone. As long as people are paid, nobody asks questions,” Schoültz explained.

This lack of scrutiny allows fraud schemes to thrive quietly. In some cases, perpetrators are dismissed rather than prosecuted, only to repeat the crime in another company.

Modern payroll systems could offer a fix

Sandra Crous, managing director of Deel Local Payroll, believes modern technology can close these loopholes.

“There are amazing capabilities in modern payroll systems such as automated reporting, remote administration, and alert systems that inform different stakeholders,” she said.

Experts recommend monthly audits of hiring and termination records, alongside annual face-to-face ID checks by independent parties.

“An independent annual face audit is the best way to know if there are ghost employees,” Schoültz advised.

For African firms battling rising fraud and shrinking margins, experts say the lesson is clear: payroll needs the same vigilance as cash flow.