No business owner wants to contemplate that an employee may steal from the company. Unfortunately, organizations across the United States are living with the consequences of employee theft.
Despite the potential legal ramifications, some are finding new ways to engage in illegal workplace activity and steal from their employers. Internal theft is on the rise--and store owners aren't always sure what to do about it.
Thankfully, management is finding creative ways to mitigate and eliminate any fraud schemes. Here is an overview of employee theft and the best practices to prevent it.
What is Employee Theft?
1. Types of Employee Theft Employee theft refers to any stealing or misuse of an employer's property for personal use and without authorization. The property encompasses valuables other than just money, including-
Time theft is when an employee is paid for unworked hours. This occurs by manipulating timekeeping data, or not working while on the clock.
Supplies Employees often take office supplies such as notebooks or computers. Restaurant supply stealing may involve taking silverware or plates.
Money Workers who steal from the cash register, commit credit card fraud, falsify checks, or engage in any other fraudulent activity that financially harms the company are stealing from an employer.
Merchandise theft includes stealing any products or services that the business plans to sell to its customers.
Information Workers who steal or share private company information such as designs or trade data are engaging in employee theft.
Because there are so many ways for one person to commit theft, employers have to use resources effectively to protect the most valuable assets.
On one hand, it's less than ideal to create a culture that makes workers afraid to borrow a pencil or use a scrap piece of paper. On the other hand, business owners are obligated to protect their assets and intellectual property because theft causes severe damage.
2. Why Does Employee Theft Matter? Though it may be timely and costly to protect valuable assets, there are several reasons why it's important for a small business to do so. Here are some eye-opening statistics to consider-
According to the Better Business Bureau and law enforcement statistics, 30% of businesses fail because they experienced employee theft or embezzlement.
The U.S. Chamber of Commerce found that 75 percent of employees steal at least one time.
In the United States, worker theft causes a loss of $50 billion annually.
A typical business loses 5% of its yearly revenue to theft.
22% of worker fraud causes businesses to lose over 1 million dollars.
The FBI asserts that occupational fraud is the fastest growing crime in the U.S.
Small businesses are especially impacted because they have fewer resources to protect their assets and recover from a financial loss. Creating a zero tolerance policy by utilizing all of the protective mechanisms at one's disposal is essential to avoid becoming another statistic.
How to Prevent Employee Theft
Here are the best practices to prevent occupational fraud and theft-
1. Use Careful Hiring Practices Make sure to perform background checks and drug tests for all new hires before they begin working. Those who struggle with addiction are statistically more likely to steal to feed their habit.
Obviously, some circumstances warrant giving a person a second chance. A potential new hire with a misdemeanor from 20 years ago is different than an individual with a long pattern of criminal behavior.
The point is to be cautious and practice good judgment. Don't hire someone that has a higher chance of financially harming the organization.
2. Implement a Buddy System It's more likely that theft will occur if one employee is left alone in the shop for long periods. Implement a buddy system for the opening and closing shifts to create accountability and decrease temptation.
Ensure all refunds or voided sales are witnessed by another worker or management. Avoid pairing close friends together for the opening/closing shift, or to observe the other's transaction(s).
3. Utilize a Surveillance System A surveillance system is one of the most effective ways to prevent theft before it happens and hold thieves accountable.
Place a camera in a section(s) of the store that captures all essential work activities. Remember to also put a surveillance system in the storage room, stock loading areas, and point of sale station(s).
Use a high-definition video or a camera that integrates with facial recognition technology. This can authenticate a worker's identity from a far distance or at an unusual angle.
4. Keep an Eye on Trash Removal Many employees hide stolen merchandise in the trash area and retrieve it after their shift is complete. Because few want to go near the dumpster, many thieves think this is the most clever place to hide stolen merchandise.
Only allow employees to carry the trash out at certain times of their shift. Implement the buddy system or use a manager to watch those who take out the trash. Finally, reduce opportunities by utilizing see-through garbage bags and locking dumpsters.
5. Create an Employees' Report-Reward System Implement a policy in an employee handbook to report suspicious behavior through text, email address, or phone. It is much less likely that employees will steal if they know that others will report them.
Use a reward system for those who report legitimate criminal activity. Offer a Starbucks gift card, a bonus, or some other type of incentive.
6. Form Relationships with Workers It's harder to steal when an employee knows his/her employer. There is less accountability when management isn't familiar with their workers' habits, schedules, or personalities.
Talk to workers and make sure to know all of their names. This will not only prevent stealing, it will improve morale and help employees feel valued in the workplace. Happier employees tend to be more loyal and less likely to steal.
Here's what to remember about employee theft-
Employees can steal money, time, supplies, merchandise, or information from their employers.
Employee theft causes bankruptcy, financial loss, litigation, and other problems. It is one of the fastest growing crimes in the United States
Preventing theft can be timely or costly, but the benefits outweigh any inconveniences or expenses.
To prevent occupational fraud/theft, use good hiring practices, implement a buddy system, set up a surveillance system, monitor trash removal, create a report/reward system, and form relationships with employees.