When a warehouse supervisor in Ohio noticed their payroll budget creeping up despite no new hires, they discovered something strange—three employees who hadn’t clocked in for weeks were still getting paid.
Meet the ghost employee: a fake or inactive worker who stays on the books, quietly collecting paychecks while no one’s looking. In retail—especially high-turnover operations—they’re more common than you’d think, and spotting them takes more than just an eagle-eyed payroll team.
Sometimes it’s a clerical error. Other times, it’s deliberate fraud. Either way, these phantom workers can quietly drain thousands from payroll if no one’s paying close attention.
What Are Ghost Employees?
A ghost employee isn’t a supernatural problem—but it can be just as invisible. In reality, it’s a fictitious or inactive person listed in a company’s payroll system who continues to receive wages or benefits without actually working. These “phantoms” often slip under the radar in large operations, draining resources while going completely unnoticed.
Here are a few common forms ghost employees can take:
- A completely made-up person with a fake identity.
- A real employee who resigned or was terminated, but was never removed from the system.
- A duplicate record for a legitimate worker, allowing someone to collect double pay.
“The companies that I dealt with were operating before advanced analytics became available—tools that could have flagged this type of fraud early on,” said Wayne Hoover, CFI, senior partner at Wicklander-Zulawski & Associates. “Back then, checks were still being written and handed out manually instead of via direct deposit. Today, you’d be able to run a report and see if a bank account number is linked to more than one employee.”
Why Retail Payroll Is at Risk
Retail operations—especially large warehouses and fulfillment centers—are a prime environment for ghost employees to slip through unnoticed. The combination of high turnover, complex systems, and fragmented oversight creates the perfect storm for payroll fraud to thrive.
First, the high turnover common in retail makes it difficult to keep accurate records. Employees are frequently hired, fired, or quit, and these changes aren’t always promptly reflected in HR or payroll systems. As a result, former employees or even fake identities can remain on the books, collecting paychecks despite not working.
The sheer size of retail operations further compounds the issue. With multiple departments—HR, payroll, security, and scheduling managers—working in silos, discrepancies can easily go unnoticed. Poor communication between these departments means that ghost employees can remain undetected for months, draining resources without raising any red flags.
Additionally, the increasing shift to remote work and the fast-paced nature of retail environments have made oversight more challenging. Physical headcounts are harder to verify, and without consistent checks, it’s easy for payroll discrepancies to slip through the cracks.
How It Happens: Exploiting the System
Ghost employees often slip through the cracks because of simple but dangerous weaknesses in scheduling and payroll systems. Here’s how fraudsters and careless employees can exploit these gaps:
- Manipulating Scheduling Systems
In high-turnover retail environments, it’s easy for managers or employees to create false shifts or leave former workers on the schedule. These false shifts can go unnoticed, especially in busy operations where schedules are constantly changing. - Insider Manipulation
Employees with access to HR and payroll systems can add fake workers or fail to remove terminated employees from the payroll. “I noticed that in the companies where I handled these types of cases, the manager was responsible for distributing paychecks to each employee on payday,” recalled Hoover. “This gave them complete control—and no one realized they were pocketing extra paychecks using ghost employees.” - Biometric Workarounds
In some retail operations, biometric timekeeping systems (such as fingerprint or facial recognition) are used to clock in and out. Fraudsters can bypass these systems by using fake data or “buddy punching,” where one worker clocks in or out for another. - Lack of Oversight
When HR, payroll, and security systems aren’t well integrated, discrepancies can go unnoticed. In large retail operations, where employees come and go frequently, missing or duplicate records are harder to detect. “I found that a lack of separation of duties was the biggest mistake companies made,” Hoover said. “Following that up with regular payroll reconciliations could have caught these issues much earlier.”
Spotting the Signs
Spotting a ghost employee starts with comparing records that don’t usually talk to each other such as payroll, scheduling, HR, and access logs. If someone’s collecting a paycheck but hasn’t been scheduled, clocked in, or seen on-site, that mismatch is the first sign something’s wrong. These gaps often show up during routine audits or when someone finally starts asking questions.
“We are back to office at our company, so the challenge isn’t too bad, but we do use card access reports and timekeeping systems,” shared another industry expert who asked to stay anonymous. “These systems help ensure accurate tracking of employee attendance and work hours, reducing the risk of payroll errors or fraud.”
Technology adds another layer of protection. Facial recognition and badge-in data can confirm physical presence, while payroll software can flag unusual patterns, like employees being paid without hours logged. But even the best tools won’t catch everything without a culture of accountability, where red flags are investigated and teams know what to look for.
Why They Do It
“One of the individuals I interviewed admitted he did it because he had gambling debts,” Hoover shared. “Another woman said she started the fraud to help cover medical bills for her grandmother.” Motivations vary. “There’s a wide range of reasons people commit theft—financial pressure, peer influence, spur-of-the-moment decisions, or even the belief that they’re owed more because they’re doing the work of two people without a raise.”
Understanding these drivers is key to building both better systems and better cultures—ones where employees feel heard, valued, and less likely to justify unethical behavior.
From Discovery to Prevention
Once a ghost employee is identified, time is critical. These immediate steps can mitigate the damage and prevent it from happening again:
- Freeze all future payments tied to the ghost record. Whether it’s a fake name or a missed offboarding, the goal is to stop the financial bleed immediately.
- Investigate the source. Dig into how the ghost made it onto the payroll—was it human error, weak system controls, or insider fraud? Bring in HR, payroll, and security to trace it back.
- Escalate when needed. If there’s evidence of deliberate fraud, involve legal or compliance, and consider law enforcement depending on the scale of the issue.
- Use it as a reset point. One ghost is rarely an isolated incident. Reassess your payroll processes, tighten system access, and retrain staff to close any gaps exposed by the incident.
Even one bad record can quietly drain thousands from payroll. The key isn’t just finding the problem—it’s building a system that makes it harder for fraud to happen in the first place. Strong oversight, cross-team visibility, and a little healthy skepticism can go a long way in keeping your headcount honest.
