What exactly is time theft and how much is it costing your business?
What is Time Theft?
Time theft is when an employee accepts pay for time they have not actually put into their work. From fudging timesheets to using work time for play time—whenever employees are on the clock but not on the job, they’re stealing time. Time theft can be hard to detect. It comes in many forms and many levels of severity. Employers pay the price via inflated payroll and lost productivity.
What is the Cost of Time Theft for Your Business?
While it’s hard to get a handle on the losses caused by time theft, one study estimates that it costs U.S. employers more than $400 billion per year in lost productivity. 10 and 15 minutes here and there add up to big losses over time.
Furthermore, 74% of employers experience payroll losses related to buddy punching (when one employee punches in for another). According to Nucleus Research, these losses average 2.2% of gross payroll, and that’s just one form of time theft.
What Is Time Theft Costing You?
Consider this: The average employee steals 4 hours and 5 minutes every week according to the American Payroll Association. It’s shocking, but it’s also consistent with a seminal time theft survey conducted by Robert Half International, which found that employers lose about 4.5 hours per week per employee.
In fact, three out of four employees will steal something—products, intellectual property, work time, you name it—from their employers, according to a study by the U.S. Chamber of Commerce. The study concluded that U.S. employers lost $20-$40 billion as a result of employee theft in 2012. And that 75% of the thieves will never be caught.
Other Employee Time Theft Statistics
- $50 billion is stolen annually by employees of U.S. businesses
- 7% of annual revenues are lost to fraud or theft
- 75% of employees have committed at least one act of theft from employers
- 37.5% of employees have committed theft at least twice
- 33% of business bankruptcies have gone bankrupt as a direct result of employee theft
- It takes an average of two years before instances of fraud are detected
Employee Theft Policy Sample
If you want to implement an employee time theft policy for your business, here is a sample policy to help you structure it:
[Business Name] places equal value on all employees and their respective property, while expecting employees to reciprocate through the value of the company and its assets. In accordance with these expectations, we will not tolerate employee theft of any kind under any circumstance, which can include fraudulent reporting of time cards, theft of money, products, information, tools, inventory, or any other item that the company, another employee, a business partner, or a customer possesses.
In an effort to prevent theft, we expect employees to immediately report any and all incidents of theft to HR representatives or supervisors, along with any acquired information or data pertaining to that incident. We reserve the right to utilize video and audio recording tools, including cameras and software, to effectively detect employee theft and identify the parties involved.
Below you’ll find examples of the different types of employee theft that we consider prohibited:
- Employees are not permitted to take physical money, customer credit card information, or company checks unless authorized to do so with proper documentation.
- Employees are not permitted to take any products without providing payment, which includes samples and other inventory, company supplies and equipment, or returned/broken items.
- Employees are not permitted to give away any services or products without prior authorization, which can include giving free items to family and friends, taking samples without approval, or providing free services to anyone without payment and documentation.
Employees who are caught breaking any federal or state law will be terminated without warning. This can include employee theft of private or company property, or any falsification of timekeeping records.
We may also file a police report along with a potential lawsuit against the offending employee with a request for compensation for all stolen products, funds, assets, or inventory.
We will also conduct an investigation of all claims of theft to help protect employees against false accusations, and will then discipline employees making false accusations.
Reporting Time Theft
As relayed in the sample policy above, reporting employee time theft and other types of theft immediately is crucial to resolving the issue and identifying the offending employees. Failure to report observed incidences of employee theft can result in repercussions for both the observer and the offender upon detection of an incident.
While every employer has to deal with time theft, it’s especially challenging for companies with a distributed workforce. So, even if you hire carefully and manage scrupulously, chances are you have some percentage of workforce theft in your midst, and that likely includes time theft.
[i] The Kentucky CPA Journal, Fall, 2007, “Biting the Hand that Feeds: The Employee Theft Epidemic” by Terrance Daryl Shulman, JD, LMSW, ACSW, CAC, CPC