How Bank Accounts Expose Payroll Fraud in South Africa: the Human, Political and Social Costs behind the Crisis

In South Africa, Payroll fraud may sound like an abstract corporate crime, but its impact runs far deeper than a manipulated spreadsheet. In South Africa, it reshapes household budgets, weakens public confidence in government, distorts business competitiveness, and drains scarce public resources that should be strengthening communities.

The scale of the problem is staggering. The Public Servant Association estimates that ghost employees, which are individuals who do not exist or no longer work for an organisation but remain on payroll, are costing the public purse nearly R4 billion. In the private sector, the Chartered Institute of Payroll Professionals says payroll fraud siphons at least R100 million annually from businesses, accounting for around 10% of all business-related fraud cases.

Yet behind those astronomical numbers lies a surprisingly simple truth: most payroll fraud is not masterminded by elite criminals. Instead, it is perpetrated internally, often through basic manipulation of employee information. The ripple effect of Payroll Fraud, hurts government, families and workers. Because Payroll fraud is not just a corporate inconvenience, it steals from the system and real people.

When funds leak out of a payroll system: Legitimate employees face delayed or incorrect payments, which can tip families into debt, school-fee arrears, and rental defaults. Public-sector losses translate into fewer teachers, nurses, and frontline workers, straining households already burdened by rising living costs. While in small businesses, where payroll margins are thin, fraud can force retrenchments, salary freezes, or the cutting of critical benefits. Every rand misdirected through payroll fraud is a rand taken away from a real worker or real service. The human cost is invisible but enormous.

How simple bank account checks reveal fraud. Payroll criminals rely on manipulating employee profiles, adding ghost workers, editing banking details, or diverting irregular payments from freelance and contract roles.

The common thread is banking detail manipulation, says Yolande Schoültz, founder of YSchoültz Attorneys. She explains – “for payroll fraud to work, money must be misappropriated and paid into a fraudulent bank account. That requires a change in banking details”. Fraudsters often avoid forging documentation. They rely instead on the assumption that no one will manually review the following:

• New employee records,
• Termination records, and
• Changes to accounts receiving infrequent or variable payments.

This is where organisations can fight back. Monthly checks comparing bank account changes to original bank confirmation letters or onboarding documents, can expose irregularities quickly. “Even if that’s the only verification you do, you are still mitigating payroll fraud” – says Schoültz.

Organisations should be alert when they see these warning signs, because they are signals of payroll fraud:

• New employees with no banking documentation,
• Terminated employees whose profiles remain active,
• Bank account changes for employees paid irregularly,
• Multiple profiles using the same bank account,
• Banking details changed just before or after payroll runs,
• Account changes with no request forms or supporting documents,

Even light-touch spot checks can be highly effective, and quarterly audits make fraud patterns unmistakable.

Some business consequences are a hidden-drain in growth and competitiveness. As for some companies, payroll fraud is not a mere accounting irregularity, it is a crisis competitiveness. Some of these drains power fraud to birth consequences such as: Lost profits that could have been invested in expansion, innovation, or staff development. Operational instability as managers struggle to reconcile payroll discrepancies. Lower investor confidence, especially in sectors plagued by governance concerns. Higher audit and compliance costs

Some of the small/medium-sized enterprises (SMEs), which is a vital sector to employment in South Africa, are disproportionately vulnerable because they often have limited internal controls and rely on outdated payroll systems.

The political fallout engenders public distrust and governance failures. In the public sector, payroll fraud cuts far deeper, inflaming public anger over wasteful expenditure. The R4 billion ghost-employee scandal fuels distrust in government efficiency, especially in departments already struggling with service delivery; political pressure on ministers and DGs to tighten payroll governance; and weakened public morale among frontline workers whose departments are accused of mismanagement.

Every ghost employee represents a teacher not hired, a police officer not deployed, or a clinic nurse not appointed, etc. Eroding faith in the state’s capacity to deliver. Why the problem persists, could be as a result of structural weaknesses in payroll oversight.

Note, two weaknesses keep payroll fraud alive:

1. Confusion about payroll governance: payroll teams often sit awkwardly between HR and finance. “Should payroll be part of HR or finance?” Schoültz asks. “It’s both, but financial oversight must lead. Yet many payroll departments operate too independently”. This independence creates blind spots.

2. Outdated payroll software: many organisations still rely on systems that are more than a decade old. These platforms lack role-based access control; have weak reporting functions; do not integrate with HR or auditing tools and limit remote oversight by senior management.

Using modern payroll tools as an anti-fraud shield: according to Sandra Crous, MD of Deel Local Payroll, modern payroll software is a game-changer. “If the head of HR or Finance can log in remotely and generate reports, you remove that isolation” – she explains. “They don’t need to go through payroll staff to see what is happening”.

With role-based access, only authorized staff can change banking details. Managers can independently verify changes. And irregular account switches, become much easier to detect. Combined with routine checks on new hires and terminated employees, the system becomes a powerful deterrent.

The social dimension hosting a crime hidden in plain sight. Payroll fraud rarely makes headlines because it doesn’t involve dramatic heists. Yet, socially it is one of the most corrosive forms of corruption because it drains critical public revenue, normalizes unethical behaviour inside institutions, undermines fair business competition and erodes morale among honest employees.

In a country battling unemployment, inequality and tightening public budgets, payroll fraud is more than an economic offence, it’s a social injustice.

Payroll fraud may lack sophistication, but its cumulative impact is devastating for families, businesses, government finances, workers and social trust. A surprisingly simple safeguard exists; check the bank account details. Use the following combination with modern payroll software, clear oversight, monthly verification processes and do periodic audits. With this, organisations can dramatically reduce their exposure.

In a time of heightened scrutiny over corruption and waste, rooting out Payroll Fraud is a financial necessity with a civic responsibility that strengthens the social and political fabric of South Africa.