Employee theft is an escalating problem, with a detrimental impact on businesses across the United States.
The shocking reality is that approximately 95% of businesses are affected by employee theft, with an estimated 75% of employees having admitted to stealing from their employers at least once.
This alarming trend costs employers up to $50 billion annually. These statistics stress the urgent need for employers to proactively combat employee theft.
In this comprehensive guide, we'll delve into the causes and types of employee theft, and provide you with effective strategies to safeguard your business assets. By the end of this blogpost, you will have a deeper understanding of the issue at hand, and have the necessary tools to initiate a robust theft prevention strategy.
Understanding the Root Causes of Employee Theft
Addressing employee theft begins with understanding its causes. The reasons behind these unauthorized actions can vary greatly, but often include:
Personal Financial Issues: Unexpected expenses and mounting debts can push an employee to steal from your organization.
Job Dissatisfaction: Employees who feel undervalued and underpaid may justify stealing from the business as a means to balance out what they see as an unfair situation.
Opportunity: Weak internal controls or inadequate security measures can create opportunities for employees to commit theft. They may see this as a "once in a lifetime" opportunity.
By understanding these triggers, you can implement preventive measures to minimize the occurrence of employee theft in your business.
Identifying Different Types of Employee Theft
Employee theft can take many forms, from subtle forms of time theft to more blatant acts such as money theft and inventory theft. Understanding these various types of theft can help you tailor your prevention strategies more effectively.
Inventory Theft: This is when an employee steals a company's stock or inventory, including office supplies, computer software, retail merchandise, and medical devices. Inventory theft can occur at any stage of the inventory management cycle or supply chain stage and is a significant cause of business failure.
Data Theft: Data theft involves stealing information stored on corporate databases, servers, and devices. The perpetrators often target confidential or proprietary information that can be used for financial gains or to tarnish your business's reputation. The stolen data can range from online passwords and bank account information to medical records and social security numbers.
Service Theft: This type of employee theft occurs when an employee uses a business service for personal gain without the employer's permission or without paying. An example is when employees allow their friends or family to use employee-only memberships.
Payroll Theft: Payroll fraud is usually committed by staff like HR, payroll, and finance professionals with authorized access to data. It involves an employee stealing information or money from your company's payroll system.
Money Theft: Money theft involves a worker physically stealing funds from your company. This type of employee theft may occur in many forms, for instance, an employee may overcharge customers and take the overcharge, or steal money from a tip box or petty cash.
Time Theft: Employee time theft occurs when employees record more time than they work. This type of employee theft is common in hourly employees.
Implementing Robust Measures to Deter Employee Theft
Preventing employee theft requires a combination of strategies. Here are some key steps you can take:
Establish a Zero-TolerancePolicy: The first step in reducing employee theft is to create a clear policy that outlines the company's position on theft. Your policy should include the following elements:
Company policy on theft: A clear explanation of what constitutes employee theft, with a focus on theft types relevant to your industry.
Commitment to investigating theft: Detail your active measures to detect and investigate theft. Also, provide information on how you handle such cases, especially if another employee reports the matter.
Repercussions of employee theft: Clearly state the consequences of theft, which could include termination and legal action.
Know Your Employees: It is critical to know who you are hiring. Performing background checks before extending a job offer can help you learn about their criminal and employment histories, education, driving records, etc. Moreover, it's important to check, and if possible, contact references to gain insights about their past behavior and work ethics.
Encourage Reporting of Theft: Create an effective reporting system that allows anonymous and confidential reporting. This system should enable both internal (co-workers) and external (customers and clients) parties to report theft cases without fear. Having multiple channels for reporting theft, including a physical dropbox, phone, or email, can encourage more people to report suspicious activities.
Conduct Regular Audits: Regular audits can help detect discrepancies and other issues in your business transactions. Unannounced audits can be particularly effective as employees will be less likely to steal if they know an audit could happen at any time. Consider hiring an external auditor to ensure the impartiality and thoroughness of the audit. Your audit should focus on areas like payroll, HR compliance, inventory, supplies, register cash, financial records, and vendor files.
Secure Your Systems: Limiting access to certain computers, software, and information can help prevent data theft and other types of fraud. For example, not all employees should have access to your payroll software. Instead, limit access to one or two members of the HR department or other trusted personnel.
Provide Financial Counseling and Support: Given that personal financial issues are a common reason for employee theft, providing financial counseling and support can be an effective preventive measure. This could be in the form of seminars on financial management, access to financial advisors, or assistance with debt management.
Implement Strong Internal Controls: Strengthening your internal controls can help minimize opportunities for theft. This includes having checks and balances in your financial processes, requiring manager approvals for certain actions, and separating duties so that no single employee has control over an entire financial process.
Use Security Technologies: Security cameras, alarm systems, and inventory management software can deter theft and help you identify the culprits if a theft occurs. In addition, using data monitoring software can help prevent data theft by detecting unusual data access or transfer activities.
Provide Regular Training: Regular training sessions can educate employees about the different types of theft, the company's policies regarding theft, and the consequences of stealing from the company. These sessions can also provide a platform for employees to ask questions and discuss any concerns they may have.
Conduct Regular Audits: Regular audits can help detect discrepancies and other issues in your business transactions. Unannounced audits can be particularly effective as employees will be less likely to steal if they know an audit could happen at any time. Consider hiring an external auditor to ensure the impartiality and accuracy of the audit. The audit should focus on payroll, HR compliance, inventory, supplies, register cash, financial records, and vendor files.
Install CCTV Cameras: Visible security cameras can act as a deterrent for employee theft. Ensure the cameras are placed in key areas where theft is likely to occur, such as stockrooms, cash registers, and entrance and exit points.
Secure Your Systems: Limit access to certain computers, software, and information. If an employee doesn't need access to a specific computer, file, or software, don't grant them access. For example, access to payroll software should be limited to a few individuals in HR or finance roles.
While the above strategies can significantly reduce employee theft, it's crucial to remember that no measure is foolproof. Theft can still occur, but having these systems in place makes it less likely and easier to detect when it does happen. It's essential to maintain a culture of integrity and transparency in the workplace, which starts from the top down.
Leaders must model the behaviors they wish to see in their employees and create an environment where honesty is valued and rewarded.
In addition to these preventative measures, businesses can also invest in insurance to protect themselves from losses due to employee theft. This insurance can cover a variety of situations, including theft of money, securities, or other property. It can also cover losses resulting from forgery or alteration of checks, drafts, promissory notes, or similar written commitments.
It's also worth noting that addressing employee theft is not just about punitive measures. It's equally important to create an environment where employees feel valued, appreciated, and fairly compensated.
Disgruntled employees are more likely to engage in theft, so focusing on employee satisfaction can be a proactive measure in reducing employee theft.
Finally, businesses should also consider the benefits of investing in employee training on ethics and integrity. Such training can help employees understand the importance of honesty and the severe consequences of theft.
It also emphasizes the company's commitment to maintaining a high standard of ethics and integrity in the workplace.
Preventing employee theft also involves the optimization of scheduling and hours registration. Shiftbase, a cutting-edge SaaS solution, empowers businesses with a robust employee scheduling and hours registration system that keeps you in control and helps to minimize vulnerabilities. By effectively managing your employees' schedules, you can limit opportunities for time theft and ensure that your business operations run smoothly.
Beyond that, Shiftbase provides transparent hours registration, enabling you to monitor work patterns and quickly identify any discrepancies that might indicate theft.
As an HR manager, you need tools that make your job easier and protect your company's assets. So why not take Shiftbase for a spin? Start your free 14-day trial of our premium plan today, and experience firsthand the transformative effect Shiftbase can have on your business. Click here to get started! Your journey towards a theft-free workplace begins here!