How to Save Labor Costs by Combatting Ghost Employees in Hospitality

Even the most diligent hospitality brands that strive to hire great people can fall victim to employees trying to game the system. Larger organizations with complex payroll systems, decentralized management, and high turnover are particularly susceptible to fraudulent activity, including ghost employees.

A ghost employee refers to someone recorded on the payroll system, but who does not actually work for the organization. This could be a fictitious person or a real individual who doesn’t actually perform any duties for the company. Left unchecked, ghost employees can cost operators thousands of dollars. Additionally, ghost employees may inflate tax liabilities, compelling businesses to pay taxes on wages that don’t correspond to actual work performed.

With rising operational costs, from inventory to labor and minimum wage increases, hospitality operators are focused on finding effective ways to cut expenses and ease financial burdens. Preventing ghost employee schemes is one way to help reduce the risk of losing money. 

Ghost employee schemes are not just a financial drain; they also erode trust within an organization, compromise the integrity of payroll and financial reporting, and can significantly damage a brand’s reputation when exposed. This risk is heightened for hospitality brands using traditional timekeeping and payroll systems that are often reliant on manual inputs and oversight that can be manipulated or bypassed, allowing for fraud to occur under the radar.

Moreover, the legal and compliance risks associated with inaccurate payroll records can result in hefty fines and legal penalties, further emphasizing the need for a more secure and transparent system. The difficulty lies not just in detecting ghost employees but in implementing preventative measures that do not overly burden genuine employees or managers. This delicate balance of security and efficiency is where many solutions fall short, necessitating a more sophisticated approach tailored to the unique dynamics of the hospitality industry.

Strategies to Combat Ghost Employees in Hospitality

By conducting regular audits of payroll records and employing secure timekeeping systems that require unique identifiers for each employee, operators can significantly reduce the risk of ghost employee fraud. This involves a thorough verification of new hires during the onboarding process, including identity checks and background screenings.

Use secure timekeeping systems that require a unique identifier for each employee, such as a PIN, RFID badges, or biometric data such as facial ID to clock in, to reduce time theft and buddy punching. Set up flags for anomalies in attendance, such as repeated late clock-ins or early clock-outs, which might indicate fraudulent activity. 

Additionally, enhancing internal controls and segregation of duties within the payroll and human resources departments will help by adding multiple checkpoints. By dividing responsibilities related to payroll processing and requiring multiple approvals for changes, operators can minimize the risk of fraudulent activities going unnoticed. Implementing an anonymous reporting system for employees to report suspicious activities can also help uncover potential fraud.

Educating managers and supervisors on the signs of fraud, alongside regular training on company policies regarding time theft and the consequences of fraud, can empower leadership at all levels to act as the first line of defense against ghost employees. Regular reviews and updates to these processes, based on evolving best practices and technological advancements, ensure that the organization remains agile and capable of responding to threats effectively. 

How Harri’s Workforce Management Platform Saves Operators on Labor Costs and Fraudulent Activity

Harri’s suite of workforce management tools provides an advanced, integrated approach that directly addresses the outlined challenges through state-of-the-art technology. This ensures operations are secured against potential financial and reputational damage. Harri’s tools are specifically designed for hospitality operators to mitigate the risk of ghost employees, streamline processes, and enhance overall workforce efficiency. By integrating these solutions, operators can build safeguards for their business and support a transparent, accountable workforce management environment.

Biometric Time Clock Integration

Harri’s use of facial recognition technology through its TeamHub app prevents “buddy punching,” where one employee clocks in for another. This feature ensures that only present employees can clock in and out, eliminating ghost employees who might otherwise be paid for hours they didn’t work.

Mitra QSR came to Harri for help on lowering labor costs and reducing buddy punching. The team saw quick adoption of Harri’s biometric recognition technology within the timekeeping app, with over 70% of punch records leveraging the technology which greatly reduced time theft. “Our team loves it!” said Pushpak Patel, CEO at Mitra QSR. “The flexibility and ease of access it offers our crew has been hugely positive for their overall experience.” In addition, Fair Workweek Premiums paid out decreased by nearly 13% year over year. Patel added, “we’re especially pleased with how Harri has streamlined compliance for us.”

Real-Time Alerts and Permissions for Shift Management

The platform provides real-time alerts and changes to managers about employee punch behaviors, such as early or late clock-ins. Additionally, it administers permissions and rules for managing shifts, including early, late, or unscheduled shifts. This level of oversight and control prevents the manipulation of time records, further protecting against ghost employee fraud.

Integrated Compliance Tools

Harri offers tools that help manage compliance with wage and hour laws. By surfacing alerts for unscheduled shifts, missed clock-ins or outs, and overtime, Harri helps ensure that time records are accurate and reflect actual employee work hours, further mitigating the risk of ghost employees.

MPSquared Subs, a Jersey Mike’s franchisor, relies on Harri to reduce the time and cost associated with managing compliance. “I tried to rationalize the idea of managing compliance manually by spending a lot of time every week to determine if employees clocked in and out of their break when they were supposed to or if we made a change and denoted it, that we’d remember to pay them out for that premium,” shared Kevin Gancarz, Director of Operations. “I can’t even quantify or imagine all of the soft costs it would have required to successfully keep track of something like that without having a system like Harri. Their system really provided all that we needed to prevent and notify us when compliance-related issues would occur within the flow of work.”

Comprehensive Timesheet and Punch Management

By integrating scheduling and time and attendance data, Harri provides a single system of record. This integration allows for close monitoring of employee attendance and time worked, reducing the likelihood of paying non-existent employees. Digital timecard adjustments also require employee agreement, adding another layer of verification.

Communication and Feedback Tools

Engaging real employees through direct communication channels, including alerts, messages, and surveys, Harri ensures active participation from the workforce. This engagement is not only key to employee satisfaction but also serves as a verification mechanism to confirm the presence and activity of employees, thereby deterring the possibility of ghost employees.

By embracing secure, transparent, and efficient practices—ranging from rigorous employee verification and secure timekeeping systems to advanced tools like Harri’s biometric integration and real-time management capabilities—operators prevent the costly pitfalls of ghost employee schemes and also foster a culture of accountability and trust. In doing so, you protect your brand’s reputation, ensure legal and compliance safeguards, and ultimately, secure your bottom line. 

Learn more about how Harri can help protect you from fraud and leaking labor costs. Schedule a demo today.

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