Employee theft is very common, and the global cost of employee theft was estimated at $50 billion each year in the United States. A whopping 38% of the cost is estimated due to stealing inventory, according to the Association of Certified Fraud Examiners (ACFE).
Retailers are especially hard hit. Employee theft statistics are scary, and according to the 2019 National Retail Security Survey published by the National Retail Federation, retailers with 500 or fewer locations had an average dollar loss of $1,377 per dishonest employee in 2018. But, it’s not just retailers who battle employee theft. Employees in office settings take office supplies such as notebooks, pens, and computers, and restaurant employees steal silverware and plates. Then employees who work from a cash register have the opportunity to skim the cash drawer, steal credit card numbers, and falsify checks.
As hard as it is to believe that so much is being stolen from business owners, it is estimated that up to 75 percent of all employee theft and occupational fraud goes unnoticed. So if you think your business is immune to financial loss, you are probably wrong…
There are several types of fraud, illustrated below:
- Stealing company or client information
- Embezzlement
- Stealing inventory and merchandise
- Stealing company assets
- Time theft where the employee is using employer time to work on a side business
- Payroll schemes where employees overstate their hours worked
- Stealing business funds or financial data
- Check and payment tampering
- Stealing money paid in error by customers and client companies
- Billing schemes where employees set up false vendor accounts and bill for services
- Diverting the employer’s payroll system to have direct deposits made into the employee’s personal bank account
- Improperly reporting sick leave and vacation time to increase their expense reimbursement
- Overstating mileage and travel expenses
- Stealing trade secret information or internal data theft
Don’t assume that well-paid employees will resist the temptation to steal or that trusted employees will report others who steal. Also, don’t assume that new employees are more likely to steal than those with the most seniority. Remember that things change in our employees’ lives just like they do in ours. Increased debt load from a child in college, strained personal relationships, an addiction, or pressure from peers could all change a long-time, trusted employee’s attitude.
Ways to Stop Employee Theft
The good news is that theft usually occurs as a result of a breakdown in company procedures and accountability. Do you lack a system for checks and balances? Are employees not following clearly defined procedures? Are you paying enough attention? Use the situation as a wake-up call to re-examine the way you do business. Here are some tips:
Educate employees on what stealing is. Clearly define what stealing company resources looks like and that workplace theft can be grounds for dismissal or legal action. Add to your company policy clearly stating what stealing from the company includes and the consequences for this type of behavior.
Establish a system of checks and balances. This could be as simple as assigning two employees to approve each expenditure or having one employee handle the incoming cash while another handles the outgoing cash. Be sure that these transactions are properly recorded in your accounting books, not just on paper but with invoices issued, so there is no question about who received
Do background checks on your employees. In a hurry to find workers, some employers will go on a “gut” reaction or assume that because someone is a friend or relative of a current trusted employee, the same must be true of the new prospect. Sometimes that theory works; sometimes, it doesn’t. Check everyone out thoroughly. Nothing is foolproof, but doing some research should keep you from making an obvious mistake.
Also, don’t assume that well-paid employees will resist the temptation to steal or that trusted employees will report others who steal.
Work with your employees to create a plan to discourage theft. Allow them to help design policy, checks and balances, and consequences. Provide a confidential forum to speak about their suspicions without fear of repercussion. Ensure that employees know that management and ownership are subject to the same rules and processes as anyone else in the company.
Utilize a surveillance system. If employees think they can get away with stealing from you, they will.
Realize that theft often occurs when employees are under personal financial stress. Create an environment in which they can come to you with such problems. Incentives such as bonuses for high productivity or sales can also help deter theft.