Case Study: Payroll Controls Audit for a Staffing and Manpower Company
Identifying ghost employees, quantifying payroll leakage and strengthening workforce controls
Executive Mandate Summary
Key Transaction & Governance Challenges
- •Payroll costs had increased over 12 months without a corresponding increase in client deployment requirements.
- •The company lacked a systematic monthly process connecting employees receiving salaries with active client deployments or an approved bench list.
- •Fourteen employees had no HR files, attendance records, deployment history or manager confirmation.
- •Multiple unverified employee accounts showed common banking characteristics, including shared branches, clustered account-opening dates and shared mobile details.
Northrop Execution Architecture & Methodology
Executive Mandate Overview
A staffing and manpower company with Rs 38 crore annual revenue and approximately 680 employees had experienced a sustained increase in its payroll-to-revenue ratio. The business suspected that salary increments did not fully explain the increase.
Northrop conducted a 14-day payroll controls audit to reconcile payroll with actual workforce deployment and identify potential payroll leakage.
Payroll-to-Deployment Reconciliation
The payroll register was reconciled against active client-site deployment records. Twenty-three employees appeared on payroll without current deployment assignments.
Nine were verified as legitimate bench employees. Fourteen had no HR file, attendance record, deployment history or manager who could confirm their employment.
Bank Account Analysis
Northrop analysed the salary accounts associated with the 14 unverified employees. Six accounts shared a common branch, three had been opened within the same week and two shared a mobile number registered for SMS alerts.
These indicators were used as part of the broader verification process rather than as standalone evidence of wrongdoing.
Physical Employee Verification
Field verification was conducted at the addresses recorded in HR files. Eight addresses were valid residential locations but residents did not recognise the employee names, four addresses were invalid and two corresponded to the residential address of a current HR executive.
Verifiable Institutional Outcomes & Value Realized
- Fourteen payroll records lacked sufficient evidence of genuine employment or deployment.
- The 14 employees received approximately Rs 10,000 per month for an average of eight months, resulting in Rs 11.2 lakh of identified leakage.
- Of the initial 23 employees without active client-site assignments, nine were verified as legitimate employees between assignments.
- Monthly payroll-to-deployment reconciliation was introduced, preventing salary processing for employees outside approved deployment or bench lists.
Pratham Sharma
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