Staffing Management

Employee time theft: How to uncover and prevent it

By Rick Bell

Mar. 4, 2021

If you discovered that one of your employees was stealing equipment, you’d likely reprimand or even terminate that person. Employee time theft should not be treated any differently.

Time theft can result in big losses for your organization. The American Society of Employers estimates 20 percent of every dollar earned by a U.S. company is lost to employee time theft.

You may have surveillance cameras to prevent employees from stealing property. But what are you doing to deter your employees from doctoring a timesheet or punching in for a colleague who is running late?

It’s estimated that 30 percent of business failures are caused by employee theft or embezzlement, and the U.S. Chamber of Commerce estimates that 75 percent of employees steal at least once. While employee time theft is not the physical removal of a business owner’s property, it nonetheless escalates labor costs and robs a company of precious financial resources. 

Here’s how you can identify and prevent employee time theft in your organization.

Contents

What is employee time theft?

Employee time theft is what happens when an employee gets paid for time they didn’t work. 

It’s primarily applicable to hourly employees more so than exempt employees. One survey points out that 43 percent of hourly workers said they exaggerated the amount of time worked during their shifts.

One of the more egregious cases of employee time theft involved a U.S. Postal Service employee in Washington, D.C., who claimed $40,000 in wages for jury service that the employee claimed lasted 144 days. The theft investigation revealed that the employee actually had been discharged from jury duty on the first day of service but forged court papers to persuade his employer to pay him for what turned out to be a very long vacation.

timeclock, schedule, timesheet rounding

Ways that employees steal time

Time theft is pervasive and not exclusive to any single industry. Employees who are stealing time can get creative in the lengths they go to avoid work.

Falsifying time cards: Falsification of a time card occurs when an employee provides inaccurate data about their working hours or causes others to provide misleading information. This typically occurs with manual timekeeping systems or tracking employee hours with a time clock.

Buddy punching: An employee clocking in or out for a co-worker constitutes buddy punching. A 2018 estimate pegs the cost of buddy punching at over $370 million in payroll costs annually. Additionally, businesses lose 5 percent of their annual revenue to employee fraud, and buddy punching is fraud. 

Unauthorized or extended breaks: Employees deserve their breaks. They are required by law. But there is room for abuse. A lunch break constantly extends an extra 15 minutes, or cigarette breaks also become a longer break for a trip to the coffee house. A survey by e-cigarette maker Halo stated that the average smoker wastes around six days a year on work smoke breaks.

Constant phone calls/use of social media: Phone calls on the clock are inevitable. When it happens consistently, it can be considered time theft. A report by Udemy.com found that 62 percent of people surveyed spent at least an hour of the workday looking at their phones.

Personal activities on company time: You may experience employees who have no problem with a personal activity while on the clock. They will run their side business. Excessive socializing between coworkers is a chronic problem. An employee may run their errands while working. Or, they may decide that it’s time for a nap.

Uncovering employee time theft

You suspect employees are stealing time off the clock. Now you need to do a little sleuthing to confirm that your suspicions are correct. 

Time theft is not always easy to spot. Educating your HR managers and supervisors for signs of stealing time is one step. Their awareness may be the biggest deterrent you’ll have to prevent employee time theft. 

They can spot the physical act of buddy punching. Also, look for noticeable increases in unauthorized overtime. Monitor employees’ break clock-in and clock-out times. 

While it seems obvious, FLSA standards say that an employer is required to pay an employee only for the hours worked. You should communicate that time theft is not tolerated and there are penalties for those who violate the policy.

That said, time theft is hard for employers to prove. Carefully pursue any enforcement and tread deliberately when conducting your inspection into employee time theft.

If you refuse to pay for the hours worked because you think they were falsely reported, you could be drawn into a costly wage-and-hour lawsuit for back pay.

And, if you respond to the lawsuit with a claim of employee time theft, it could be considered as retaliation against the employee. Be sure you have a good faith and reasonable basis to file the claim to avoid retaliation. 

You are much more susceptible to wage-and-hour and overtime lawsuits with lax time-and-attendance policies or unsophisticated timekeeping practices. Business owners are turning to automated time tracking solutions to monitor employee hours. 

Real-time solutions like Workforce.com’s time and attendance system crack down on time theft and streamlines the payroll process. Automated solutions also provide your managers a worry-free system so they can focus on running a business and not hovering over a time clock.

track employee hours

How you can prevent employee time theft

Now that you know what to look for, here are four solutions that you can use to prevent employee time theft.

1. Use an automated time clock solution

Paper timesheets are the simplest way for employees to steal time, and physical time clocks allow for multiple excuses: “So-and-so lost their time card, so I loaned them mine,” or “I lost my swipe card.” 

With time clock software, you can prevent fraudulent time theft, early clock-ins and prompt employees to clock back in via mobile apps when their breaks are over.

Time and attendance software like Workforce.com makes buddy punching virtually impossible. Proactive alerts and messages immediately notify employees and administrators of any errors or discrepancies to incorrect time cards. 

A mobile tracker app also empowers managers to follow employees in real time from anywhere and continue tracking when an employee clocks in. Workforce.com’s mobile time clock app helps you manage employees’ time and administer digital timesheets, payroll, budgeting and labor compliance reporting. 

You also can track remote employees’ locations via their GPS clock-in. These tools work everywhere and show you their exact location at a glance. You can restrict their clocking in or out at your job site or see where an employee who always has an excuse for being late is actually spending their time.

Staying on top of time theft helps you maintain your labor budget and shed unnecessary overtime. Using an automated time clock solution makes managing employee work hours simple and efficient. 

2. Create clear, specific time and attendance policies

An often-cited Robert Half study found that the average employee steals roughly 4.5 hours from their employer each week.

You may realize this. But do your employees? If they don’t, then you need to clearly and concisely spell out your time and attendance policies. Ensure your team knows why you are implementing the policies and what is expected of them.

The first thing to do is consult with your employment law attorney regarding local, state and federal time-theft regulations. An employer can work with you to develop clear, consistent policies regarding clocking in and out procedures, break periods and cell phone and social media use while clocked in. It’s crucial that employees fully understand their work-related responsibilities and know what they should be doing when there are lulls in the workday.

Immediately incorporate these policies into your employee handbook. All hourly and salaried employees must review and sign a document stating they have read and understand the policies in the handbook. Also, post reminder signs in high-traffic areas and send alerts through mobile apps so employees can see them. 

3. Follow through on procedures and disciplinary actions

You don’t want to punish employees. It’s costly, emotionally draining for all involved and can suck the morale out of a workplace. But you need preventative measures in place should you discover evidence of time theft. 

Develop and communicate in your handbook the disciplinary procedures to deal with time theft. This may include a program in which you initially issue a verbal warning, followed by a written warning or establishing a performance improvement plan that’s ultimately followed by suspension and concluding in termination. 

If it reaches that point, Findlaw.com states that if an employee is suspected of stealing time, it’s up to you to conduct a fair, accurate investigation. Someone other than the person who discovered the theft of time should investigate it, strict confidentiality must be maintained, and you should enlist expert help from a CPA, an attorney or other relevant professionals.

Compliance with wage-and-hour laws is a headache and difficult to track. Constantly turning to a labor law attorney quickly gets expensive.The laws, regulations and ordinances can be overwhelming, and a wrongful termination suit is costly. Workforce.com’s compliance platform ensures simplified and automated compliance to federal, state, and local labor regulations.

compliance, wage and hour , overtime

4. Develop employee morale to deter time theft

It’s often said that happy employees make for happy customers. But unmanaged stress and poor working conditions leads employees to disengage and question the trust between them and their bosses.

High turnover is a big indicator that you have an employee engagement issue. Widespread time theft is another sign of low morale and lost productivity, which has an effect on your bottom line. Employees — many of whom make minimum wage — are more likely to commit time theft if they feel that their companies aren’t being fair.

Time theft also can lower morale when employees see their coworkers getting away with it. As turnover grows, productivity drops and malaise sets in across your staff.  Don’t be surprised if your once-happy customers voice their disappointment and take their business elsewhere.

When employees care, their loyalty and productivity increases. Implement a system of employee rewards and recognition. Grant time off — or add in an extra shift — for shift workers who excel in their roles. Creating a culture of honesty, transparency and trust helps prevent time theft.

Business owners can help reduce time theft by reimagining their workplace processes. A manual timekeeping system can lead to skepticism on both sides that there is cheating taking place. Physical time clocks don’t fare much better.

Technology should play an important role in preventing time theft by creating a workplace that promotes fairness and transparency. To create a workplace culture built on trust and equality, empower your managers with a powerful set of tools to set schedules, build communication between both sides and become more accessible and reliable.

Today’s employees are comfortable using technology to buy a car or visit their doctor virtually. Why not incorporate it into the workplace? 

An automated time and attendance solution from Workforce.com eliminates early clock-ins, stops extended breaks and prevents the scourge of buddy punching. You’ll accurately track time worked when your employees clock in and out and watch technology play a role in creating the time theft-free workplace.

Effective workforce management is about having complete oversight of your operations. Provide your managers with an attendance solution that stays on top of employee productivity and prevents employee time theft from a computer or mobile device.

It’s important to take the steps to eliminate employee time theft from your company, and there are many ways to do it. Knowing why time theft occurs and taking preventative action against it helps organizations detect its presence and take immediate preventative action against it. 

Time theft doesn’t have to just be a cost of doing business. It’s difficult to deal with time theft and recoup losses, but Workforce.com has the systems and processes that empower you to prevent time-theft losses from ever occurring again.

You can start preventing any current or future employee time theft immediately. Build your culture, track employee hours and crack down on time thieves with Workforce.com’s best-of-breed employee scheduling software. Start a free trial today.

Rick Bell is Workforce’s editorial director. For comments or questions email editors@workforce.com.

About Workforce.com

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