South Africa Targets Payroll Fraud as Treasury Pushes Digital Systems to Curb Billions in Losses

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South Africa’s government has intensified efforts to tackle payroll fraud, with the National Treasury prioritising the rollout of digital payroll systems across state entities as part of its latest Budget Review. The move aims to curb what has been reported as more than R4 billion in annual losses linked to fraudulent payroll payments in the public sector.

The challenge, however, extends beyond government institutions. The Chartered Institute of Payroll Professionals estimates that South African businesses collectively lose around R100 million annually to payroll fraud, with many cases linked to manual and paper-based systems that remain vulnerable to manipulation.

While the shift to digital payroll platforms is widely viewed as a critical step in reducing fraud, experts caution that technology alone cannot eliminate the risk.

“There is no doubt that digital systems are better than paper-based payroll management. But a digital system only makes it much easier to track down and stop fraud. The organisation must still put the right measures in place, such as approval policies and oversight checks,” said Yolande Schoultz, founder of YSchoultz Attorneys and a payroll fraud specialist.

Payroll fraud typically occurs through methods such as the creation of ghost employees, manipulation of banking details, or collusion with former staff members whose records remain active in payroll systems. According to Schoultz, weak oversight is often the key enabling factor.

“There should be a chain of custody, such as someone signing off on salary calculations and doing spot checks to ensure everything is legitimate. But it’s amazing how often, even at large companies, the payroll administrator is working on their own and is the only one with proper access to the payroll system,” she said.

Common warning signs of payroll fraud include unauthorized changes to banking details, last-minute updates to employee records before payroll runs, excessive overtime claims, unusual system login patterns, absence of system locks during payroll processing, and reliance on manual data transfers between systems. While some indicators may appear harmless in isolation, experts warn that multiple red flags together can signal deeper issues requiring immediate attention.

Modern payroll platforms are increasingly being adopted to strengthen fraud detection and improve oversight. According to Sandra Crous, Managing Director of payroll provider Deel Local Payroll, technology provides tools for monitoring and control but must be supported by internal governance.

“There is no magical app that just changes how you operate. A payroll platform gives a business the tools to oversee and manage payroll through different layers, but the business must use those tools in accordance with its policies,” Crous said.

She explained that cloud-based payroll systems can improve transparency through audit trails, multi-user access controls, automated integration with financial systems, and employee self-service tools that allow workers to verify payslips and identify discrepancies early.

Experts note that payroll fraud is often a gradual process rather than a single large transaction, making it harder to detect without proper reporting systems and regular audits.

“You won’t spot payroll fraud if you keep looking for big changes and payments,” Schoultz added. “Most payroll fraudsters siphon money over a long time and across multiple bank accounts. But if you can access regular reports and integrate payroll data with other systems, it becomes much harder for people to commit fraud, and much easier to catch it if they do.”