Ghost Employment Ghost Employment

What is Ghost Employment: 3 Essential Things to Know

Ghost workers may perform tasks such as data annotation and labelling for AI, which are essential for machine learning models, but they may not be assigned duties related to the operation of the entity in cases of ghost employment violations. This illicit practice is usually undertaken for financial growth and to manipulate the perception of a bigger workforce within an organization.

In fact, ghost employment happens when individuals participate in a scheme to mislead the company’s role and human resource department. They do these activities intentionally, giving false information like personal details and educational qualifications to secure a place on the payroll. 

However, they never contribute to any meaningful labour tasks of the company. Alternatively, they sometimes plan with other individuals in the scheme to divert the ill-gotten funds for personal growth.

1. Types of Ghost Employment

Ghost Employment
Image by Sora Shimazaki/Pexels/Copyright2020

1.1. Fictious Employee

Fictitious employees showcase one of the common forms of ghost employment. In this case, fabricated identities are added to the company’s payroll and accounting activities. For the most part, people with no real association with the organization are together on the company payroll as if they were genuine employees.

1.2. Ex-employee

Ex-employees who leave the company or retire continue to appear on the company’s decentralized payroll processes. This could be due to administrative mistakes, oversight, or intentional manipulation.

Altogether, the ex-employees continue to take salary payments and advantages even though they do not exist and do not contribute to the organization’s operation. 

1.3. Conspiracy-based

Conspiracy-based ghost involves the active engagement of current employees in fraudulent schemes. Current employees can conspire with outsiders to add ghost employees to the company payroll. This can happen by sharing a portfolio of ghost salaries with the conspirators. 

Conspiracy can be tough and challenging to check as it may include insiders who have intimate knowledge of organizational procedures.

1.4. Identity Theft-based

What are 'ghost' job postings and how can you avoid them?

In most cases, the identities of unknowing individuals are put up for ghost employment without their prior knowledge or consent. This is known as the Identity Theft-based ghost employment method.

In conclusion, the motive behind using the method of ghost employment varies. Those who engage in it might seek to scam company funds, inflate the organization’s workforce to protect additional resources or maintain the pretence of growth, which can be beneficial for attracting potential investors. 

2. Motives Behind Using the Ghost Employment Method

Following the motive behind ghosts is complex and driven by many factors. So, let’s jump into various reasons why people are engaging in this deceptive practice: 

2.1. Financial Growth

Firstly, one of the primary objectives behind ghost employment is the pursuit of financial growth. Therefore, the people who are engaged in this fraudulent practice stand to advantage by receiving unearned payments and other employee profits.

Hence, these ill-gotten profits provide a steady income stream without the need for actual work in the company. In general, these employees sometimes collude with others to distract these illegal finds for personal uses by making it a lucrative endeavour for those engaged. 

2.2. Resource Dodge

Image by Startup Stock/Pexels/Copyright 2015
Image by Startup Stock/Pexels/Copyright 2015

Indeed, ghost employment is also motivated by a complete desire to manipulate an organization’s resources. By artificially amplifying the workforce, those who engage in this fraudulent practice secure an extra resource from the company or organization. 

So, this involves acquiring additional office space, tools, or budget-friendly allocation for the departments or team members. Due to this, a large workforce on paper creates a great impression of more productivity or growth, which leads to the allocation of additional resources. 

2.3 Facade of Improvement and Stability

One motive for using ghost employment is maintaining a facade of improvement and stability. Overall, most organizations sometimes strive to appear bigger and more successful than they are, as this is the best way to attract investors, lenders, and potential clients. 

Additionally, the exaggeration of a company’s employees can create an illusion of growth and financial stability. This kind of perception can be beneficial when asking for a loan, investment, or business partnership. 

2.4. Foster Loyalty 

In most cases, individuals who engage in ghost employment do so to take loyalty or favour from others within the company. For example, an employee can add a close friend or a relative member to the company payroll even if the individual does not exist or works in the company or organization.

In addition, this act forms a sense of indebtedness or fosters goodwill, potentially leading to a return in the form of personal or professional favours. 

2.5. Exploitation of Weak Internal Control 

Image by Rfstudio/Pexels/Copyright2020
Image by Rfstudio/Pexels/Copyright2020

Oversight in the company causes individuals to be involved in ghost employment methods. If an organization lacks rigid checks and balances in its payments and HR procedure, it becomes very easy for the employees or external actors to be able to manipulate the whole system for personal growth, 

So, this perception of low risks and high rewards can be essential causal factors. In short, employment is achieved by a combination of financial incentives, resource manipulation, a desire to create an illusion of success, and personal motivation. 

So, understanding the motives is vital for the company to integrate efficient measures to avoid and find ghosts, protect financial resources, and maintain the workforce’s integrity. 

Identify Common Ghost Employment Tactics

Steven Mostyn - Featured
Steven Mostyn

Ghost employment schemes typically involve individuals receiving payment for work they did not perform or for positions that do not exist. Common methods include:

  1. Fictitious Employees: Creating fake employee records to siphon off funds.
  2. Overpayment: Inflating salaries or hours worked to divert excess funds to unauthorized individuals.
  3. Kickbacks: Receiving kickbacks from vendors or contractors in exchange for awarding them contracts.
  4. Payroll Manipulation: Altering payroll records to divert funds to ghost employees.

These methods vary in complexity and detection difficulty. Fictitious employees and overpayment schemes can be relatively simple to execute but may raise red flags if payroll records are scrutinized.

Kickbacks require collusion between employees and vendors, making them more complex and harder to detect without thorough investigation. 

Payroll manipulation can be sophisticated, involving alterations to computerized systems, posing a challenge to detect without robust internal controls and audits.

Implementing strict oversight, regular audits, and whistleblower mechanisms are key to detecting and preventing ghost employment schemes.

Steven Mostyn, Chief Human Resources Officer,

Aseem Jha - Featured
Aseem Jha

As a legal process outsourcing company, we’ve encountered various methods employed in ghost employment schemes.

Common practices include creating fictitious employees on the payroll, submitting fraudulent timesheets, or exploiting lax oversight in remote work arrangements.

The complexity of these schemes can vary significantly, from simple falsification of documents to intricate networks involving multiple parties colluding.

Detection difficulty often hinges on the sophistication of the scheme and the effectiveness of internal controls.

In our experience, we’ve assisted clients in uncovering ghost employment through meticulous scrutiny of financial records, cross-referencing with employee attendance logs, and conducting interviews to verify personnel existence.

Additionally, leveraging technology such as data analytics and AI has proven instrumental in detecting anomalies indicative of ghost employment.

By staying vigilant and employing a multi-faceted approach, we can help mitigate the risks associated with such fraudulent activities.

Aseem Jha, Founder and Head of Customer Delivery, Legal Consulting Pro

3. Negative Consequences of Ghost Employment  

Overall, ghost employment carries major consequences both for a company that becomes a victim of the fraudulent practice and for individuals engaged in it. 

3.1. Financial Loss for the Company 

Ghost results in financial loss for the affected company. This loss stems from many factors: 

3.1.1. Salary

The company pays a salary and also offers advantages to ghost employees who never contribute to actual work. It drains financial resources, which can be passed down for the right operational expense or investment in development. 

3.1.2. Resource Misallocation

Ghost Employees: How They Infiltrate Companies and Drain Profits

Overall, manipulating the company’s workforce size through ghost employment leads to resource misallocation. In general, a company’s allocation of resources based on a fictitious headcount leads to inefficiency and resource waste.

Being engaged in ghost employment leads to legal consequences for both the company and the individuals involved: 

3.2.1. Criminal Charge 

In most cases, perpetrators of employment can face criminal charges, including fraud, embezzlement, identity theft, and scams. Based on the fraud level, individuals engaged in the scheme are subject to imprisonment and fines.

3.2.2. Regulatory Penalty 

Regulatory agencies impose fines and sanctions on companies found to be included in employment practice, especially if they fail to integrate appropriate internal controls. 

Implement Strong Hiring Practices

Justin Turner - Featured
Justin Turner

Ghost employment, also known as phantom employment, is a type of occupational fraud where individuals are listed on the payroll but do not work for the company. This can occur due to various reasons, such as falsified timesheets or collusion between employees and management.

One of the first lines of defense against ghost employment is to have strong hiring practices in place. This includes conducting thorough background checks and verifying work history and references. 

By doing so, organizations can ensure that the individuals they are hiring exist and have relevant qualifications. Organizations should regularly review and update their employee records to ensure they are accurate.

This includes checking for duplicate or inactive employees, verifying employment contracts, and ensuring that any changes in employment status are properly documented. 

Ghost employees often have falsified timesheets or use a proxy to clock in and out of work.

To prevent this, organizations should implement stringent timekeeping controls, such as requiring employees to physically sign in and out, using biometric scanners, or implementing electronic time-tracking systems.

Justin Turner, Founder and CEO, Turner Home Team

Ensure Payroll Checks and Balances

Kimberley Tyler-Smith - Featured
Kimberley Tyler-Smith

Be thorough and have a system of checks and balances. We regularly review payroll data to check for inconsistencies, like employees with no tax deductions or missing information.

We also conduct audits to ensure everything adds up. Prevention is key, though. We start by thoroughly checking references and backgrounds during hiring. 

We keep employee records up-to-date and separate duties—no one person should handle all aspects of payroll. Finally, keeping an eye on employee turnover can help. If a lot of people are leaving the company all of a sudden, it might be a sign that something fishy is going on.

Kimberley Tyler-Smith, VP of Strategy and Growth, Resume Worded

Final Words 

In summary, ghost employment is a term for a fraudulent and exploitative practice with slight to severe consequences. 

It results in financial losses for the company, legal problems for individuals, a tarnished reputation of both the individual and the company, and a negative impact on the workplace, morale, and culture. Eliminating and addressing this issue is important for a company’s financial health and ethical integrity.

Guest Author: Saket Kumar

Last Updated on by Saket Kumar


  • Anjali Raj Singh

    Anjali Raj Singh is a content writer. She is an expert in writing different niches like lifestyles, gaming, fashion, beauty, food, travel etc. She has written several lifestyle related contents for Icy Canada site. Her writing also ranges from lifestyle related contents to helping people deal with day to day and general life issues.

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    Tahsina is a graduate and freelance content writer and editor. She has a penchant for crafting compelling content. An avid reader, Tahsina deeply appreciates the nuances of the English language and will leave no stone unturned when it comes to rectifying grammatical errors. She has previous experiences in content writing and editing, which has furnished her with various SEO techniques and plagiarism-free writing abilities, and is looking forward to putting her skills to good use.


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