What is Ghost Employment?

Ghost employment means an employee that is only on paper, they may be a deceased employee still in the payroll system or an individual no longer with the organization but who is still receiving a paycheck. An organization must determine if they have ghost workers to keep the payroll department on track and protect their funds.

Many employers think that paying ghost employees would never happen to them. However, this is more common than most business owners assume. In fact, it is so prevalent that it costs organizations billions of dollars annually, whether by mistake or crooked bookkeepers and accountants working the system.

Those who make ghost employee accounts are generally composed of more than one fake persona, and just about all fraud instances begin small and grow over time. Keep in mind that normally a thief will be looking to steal as much as possible without being caught.

Red Flags

Employers should look for suspicious signs such as an unlisted Social Security number, multiple employees with the same Social Security number, an employee who does not have taxes or benefit deductions, or an employee with various address changes throughout the year are all red flags.

If two employees have the same bank account number, they could use multiple bank accounts for a ghost employee’s paycheck and split the proceeds. Employers must also look for multiple paychecks issued to an employee within one pay period, or an image of the payroll check shows that a different name endorsed it.

An employee who has received multiple pay increases within a single year or a bonus at a different time from the rest of the employees is another red flag. It is also smart to note if an employee hasn’t taken any paid time off for an entire year, or those processing payroll do not take any paid time off.


To help prevent ghost employment from becoming an issue, employers can implement internal protocols that permit several employees to review each processed payroll. Just one employee operating with no oversight heightens the likelihood of payroll fraud. Employers should also have a checks and balances system in place to avoid theft. Dividing payroll-related tasks among a few people is a smart course of action.

Other preventative methods to avoid ghost employment:

  • Implementing hiring protocols to check candidate Social Security Numbers and driver’s license or state identification number.
  • Frequently running all employees’ Social Security numbers through the Social Security Administration’s website. (E-Verify and or a background check may help).
  • Payroll processing tasks should always be delegated to multiple individuals.
  • Establishing a payment system that mandates employees to identify themselves.
  • Checking employees’ hours for variation, as too precise of hours could signal a ghost employee.
  • Remaining suspicious if an employee requests paper checks rather than automatic direct deposit and their personal file contains limited payroll information.

It is smart for business owners to regularly enforce payroll audits even if there are balances in place for each payroll processing event. It is also in the best interest of your clients to compare employee payroll file information to payroll processing records to avoid ghost employment instances from happening. By implementing specific protective measures, organizations can be proactive in preventing those who are trying to steal money from the business.

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