Are your temporary employees fraudsters in disguise? In this article, we help you to understand and reduce the risks of temporary hires.
Whether it is hiring more baristas, cashiers, or security personal, SMEs often require extra pairs of hands at certain times of the year, such as during the summer months and during the festive season in November and December.
The four weeks leading to Christmas are particularly intense for retailers and eCommerce site owners. Constant streams of sale hunters and shoppers fuel sales and get the cash register ringing, to cope with increased demand, business owners often turn to temporary or seasonal employees. However, doing so brings potential risks that small businesses must be aware of.
What are the risks of hiring temporary staff?
Poor loyalty and performance – Often tied to a fixed-date employment contract, temps may lack the loyalty and dedication of permanent employees. With a leave date in a few weeks’ time, temps are less likely to take pride in their work and may perform poorly. As a result, they can become a liability.
Undertrained staff – Temps require training in order to fulfil their job function. Incomplete or poor training leaves temps unable to meet the required standards and therefore, reflects poorly on your company.
Illegal workers – Never rush the hiring process. With the influx of illegal immigrants in the news, businesses in London must ensure that they only employ those with a right to work in the UK to prevent company losses and bad press. Businesses can be charged up to £20,000 per illegal worker under their employment, which can be devastating and hurt your bottom line.
Internal fraud – Small business owners must understand the danger of internal fraud. Fraudsters can pose as temporary employees in order to steal your inventory or to access business data for their own financial gain.
Those seeking to infiltrate businesses in the disguise of a temporary employee pose a serious risk to all businesses looking to hire. According to Action Fraud, internal fraud cost UK businesses £88 million between 2017-18, double the figure for the year before.
Why are small businesses particularly vulnerable to internal fraud?
Often lacking resolute accounting controls, effective anti-fraud measures, suitable technology and enough staff to split financial duties evenly, SMEs present a natural target for fraudsters to make a quick buck by deceiving the owners and employees. Their tricks include:
- Tricking the company into paying them a large sum of money by using fake invoices or a fraudulent identity.
- Stealing stocks. They may after high-value items or items that are small and easy to conceal.
- Stealing sensitive data and sell them on the black market.
- Taking control of the system remotely and ask for ransom.
When it comes to accounting fraud, business owners also need to keep a lookout for:
- Billing fraud – creating false payments to oneself.
- Cash theft – pocketing the money instead of registering cash transactions.
- Expense reimbursement fraud – claiming embellished or false expenses.
- Bribes and kickbacks – paying others for company information or favours.
How to reduce the risks of temporary hires
As a small business owner, you can take steps to reduce the risk of hiring temporary staff and keep your business safe.
1. Pre-employment background screening
Screening potential employees reduces the chance of hiring criminals or fraudsters. Don’t cut corners – it’s crucial that employers screen temps as if they are applying for a full-time position. We recommend you:
- Run a DBS check to check for criminal records. Go to the gov.uk website for more information on these.
- Obtain references from previous employment.
- Interview each candidate thoroughly.
- Use a DISC (Dominance, Influence, Steadiness and Compliance) personality test which can help to reveal typical behaviour.
2. Hire from current employee referrals
Hiring temps recommended by current employees can minimise the risk of hiring fraudsters or incompetent workers. However, this can only work if your existing employees are trustworthy. Another option is to re-hire former reliable temps.
3. Provide complete training
Training temps well reduces the risk of incompetent workers in your business and enables them to perform as required, helping your business survive the seasonal demand.
4. Withhold access to important company information
Restrict access to data and stocks. Temporary employees should not be given access to the same sensitive business data as senior executives, only what they need to fulfil their job function.
5. Use Anti-Fraud measures
Small business owners must proactively look to prevent fraud and have a series of anti-fraud measures in place including:
- Employee training on how to stop fraud.
- A company handbook on fraud.
- A warning against fraud in temporary employment contracts, containing details of company expectations, as well as details of ‘fraud’, ‘theft’ and ‘bribery’ and the consequences of violating your terms.
- Reward whistleblowers who keep a lookout and report any internal fraud.
TaxAgility is here to help small businesses in London
Small businesses in London really feel the pressure during busy periods when business transactions are higher than normal. While our small business accountants may not be able to recruit temp staff for you, we can certainly relieve you from bookkeeping and accounting duties, giving you more time to focus on your business.
Give us a call on 020 8108 0090 if you need a helping hand on:
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This post is intended to provide information of general interest about current business issues. It should not replace professional advice tailored to your specific circumstances.