Q: What happens when compensation monitoring goes awry?
A: Benefits fraud
B: Costly consequences
C: Negative public disclosure
D: All of the above and more
If this was a multiple choice question, the answer is D: All of the above and more.
A real-life example for this response comes from the Baycrest Centre in Toronto. In July 2019, the centre announced that 150 employees were terminated from the organization (resigned or let go) as a result of their participation in a long-term benefits fraud scheme. Allegedly, these health-care employees had defrauded their benefits plan of millions of dollars over the past eight years.
Click here to read about the allegations of benefits fraud at the Baycrest Centre.
Unfortunately, benefits fraud is not something unique to one particular organization or sector. In 2016, the Toronto Transit Commission (TTC) hit the media headlines with a very similar and significant employee benefits fraud problem.
Click here to read about the TTC’s benefits fraud investigation.
In fact, the benefits industry continues to deal with increasingly creative approaches by employees who participate in fraudulent benefits activity resulting in losses of billions of dollars.
Click here to read about the impact of employee benefits fraud on the insurance industry.
As noted in the articles, benefits fraud is theft. It is stealing. It is exactly like taking money from someone else’s wallet without their express knowledge or permission.
Unlike other crimes, however, it is rare that perpetrators of benefits fraud are charged with a criminal offense. Until recently, it was also rare for employers to act on what was sometimes perceived as an act of ‘entitlement’ on the part of employees. This perceived inaction on the part of employers does not come from a lack of interest or an act of conscious negligence. It may come from a lack of rigour in monitoring or systems controls which must be included as part of effective compensation management planning.
Not all employees steal from their employer. That is a fact. Some employees do steal from their employer. That is also a fact. Who pays for the consequences of stealing from their employer in the form of benefits fraud? We all do. That is the ultimate and most costly fact. Good compensation planning should take all of these facts into consideration, both positive and negative, in a proactive way so that the actual benefits of an organization’s benefits plan provide support and assistance for those who need it the most.
Discussion Questions:
- What types of monitoring systems or controls would you put into place as the Compensation Manager in these types of situations?
- The Baycrest and TTC articles state that this type of benefits fraud has been going on for years. How would you go about changing the organizational culture and a possible ‘entitlement’ approach in each organization?
- Is benefits fraud a ‘victimless’ crime? Explain your rationale