Nothing rocks the world of HR quite like a scandal, especially when it involves employee fraud – and in the national government at that!

The Philippines’ central bank began investigating monetary board officials after a whistleblower tipped off that at least four “ghost employees” were purportedly still receiving pay despite no longer reporting for duty, along with two supervisors who allegedly orchestrated the fraud on their behalf.

Recovering the salaries of ghost employees

All staff members in question were said to be part of offices serving two Monetary Board Members. MBMs are appointed by the Philippine president and not under the jurisdiction of the central bank.

“We’re doing a post-mortem on this; on what else we can do that will prevent this in the future,” said Eli Remolona Jr., the governor of the Bangko Sentral ng Pilipinas.

While five of the six individuals had already resigned from BSP between February and March, the cases against them will continue. The proceedings include administrative disciplinary measures, BSP officials said.

Such irregularities were deemed “unprecedented in an organisation that upholds integrity and professionalism at all levels,” the central bank said.

Governor Remolona said BSP is working to recover the hefty salaries taken by the ghost employees.

“We acted as fast as we could,” the central bank governor said. “But also we have to observe due process.”

Loopholes in compliance and the need for stricter evaluations

In an independent case analysis of the scandal, Eva Sisles and Jimbo Fuentes of Xavier University Ateneo de Cagayan pointed to “significant weaknesses” in BSP’s compliance.

“The BSP can improve its regulatory landscape by strengthening internal controls. They must implement strict employment laws, conduct frequent payroll and attendance audits, and establish a strong program to protect whistleblowers,” Sisles and Fuentes said.

“Additionally, the use of technologies for payroll irregularity detection, such as biometrics, in attendance tracking will effectively deter the occurrence of dishonest personnel. It guarantees that every employee is aware of the rules and the consequences of noncompliance; it is also essential to establish an environment of transparency and accountability within the company,” they added.

Ghost employees and other types of employee fraud: Lessons for HR

Dealing with ghost employees and similar types of fraud presents significant challenges for HR leaders, particularly in maintaining integrity and trust within an organisation. Here are five key points HR leaders should be wary of in such situations:

1. Strengthen internal controls. It’s essential for HR departments to have robust internal controls that include regular audits of payroll and attendance records. These controls help in identifying discrepancies early and prevent the potential for fraud. Automated systems and technologies like biometrics can play a crucial role in enhancing the accuracy of these records.

2. Vigilance in hiring and monitoring processes. HR should implement strict hiring processes that include thorough background checks and verification of employee credentials. Continuous monitoring and evaluation of employees, especially those in sensitive or high-responsibility positions, can help detect anomalies that might indicate fraudulent activities.

3. Whistleblower protection programs. Establishing and promoting a strong whistleblower protection program is vital. Employees should feel safe and supported in reporting any suspicious activities without fear of retaliation. This promotes a culture of transparency and accountability.

4. Educational programs on compliance and ethics. Regular training sessions on compliance, ethical standards, and the legal repercussions of involvement in fraud can deter employees from engaging in dishonest practices. Awareness programs can also enlighten staff about the signs of fraud and the importance of reporting it.

5. Observance of due process. While it’s important to act swiftly once fraud is detected, HR must also ensure that any investigative and disciplinary processes respect the rights of all parties involved and adhere to legal standards. This helps maintain fairness and protects the organisation from potential legal repercussions.