Employee theft is a significant concern for businesses across the U.S., with companies losing over $50 billion annually due to dishonest employees. While the losses can add up quickly, knowing the laws around employee theft and taking proactive steps to prevent it can help safeguard your business. In this post, we’ll break down the types of employee theft you may encounter, explain the relevant laws, and provide practical steps to reduce the risk of theft.
Understanding Employee Theft Laws
To effectively prevent employee theft, it’s essential to understand the legal framework surrounding it. Employee theft typically falls under state law and can be classified into various categories, including:
- Larceny: Taking property without permission.
- Embezzlement: Misusing property that the employee is legally authorized to access.
- Fraudulent reporting: Misreporting sales or transactions to conceal theft.
- Skimming: Pocketing cash while recording lower amounts in the system.
- Theft of information: Stealing confidential business data.
- Collusion: Employees working together to steal from the business.
While federal laws apply in some cases, such as theft involving government property or interstate transactions, most employee theft cases are handled at the state level. Understanding the different types of theft can guide your next steps in addressing theft effectively.
Common Types of Employee Theft
Let’s look at five common forms of employee theft and how you can prevent them:
1. Time Theft
Time theft occurs when employees are paid for hours they didn’t work. This can include improperly logged timesheets, “buddy punching” (when one employee punches in for another), or claiming unearned overtime. While it might seem like a small issue, time theft can lead to significant payroll discrepancies over time.
To prevent time theft:
- Use your POS system to track clock-ins and clock-outs accurately.
- Cross-check recorded hours against actual work activity, like completed transactions or tasks.
- Rotate auditing responsibilities among managers to detect inconsistencies.
- Train employees on proper timesheet procedures and make it a regular part of their training.
With consistent monitoring and clear systems in place, time theft can be detected early, saving your business both time and money.
2. Theft of Supplies
Employees may also steal office or store supplies, leading to increased costs for replacement items and potential delays in fulfilling orders. While small, the cumulative effect can be significant.
To prevent and track supply theft:
- Keep track of supplies issued and used by each employee.
- Perform regular inventory checks and require employees to sign a supply usage policy.
- Monitor POS inventory logs and investigate any irregularities, particularly with high-use items.
- Implement security measures, like cameras in storage areas, to deter theft.
Tracking supplies and implementing clear policies helps create an environment where theft is easily spotted and addressed.
3. Money Theft
Money theft is often the most direct form of employee theft. It includes actions like skimming, under-ringing items, or direct cash theft. Even small amounts taken regularly can quickly add up.
To prevent and address money theft:
- Require employees to log into the POS system for each transaction.
- Regularly reconcile cash drawers and track transactions by employee.
- Be on the lookout for suspicious activities like voided sales, refunds, or partial payments.
- Consider using cameras at cash registers to monitor activities and provide a record of events.
With proper cash-handling protocols and monitoring, you can keep track of money and reduce the chances of theft.
4. Merchandise Theft and Employee Shoplifting
Employees may take items for personal use or abuse employee discounts, making internal theft easier than external shoplifting. It’s essential to monitor merchandise closely and ensure that no items leave the store without proper documentation.
To prevent merchandise theft:
- Use your POS system to track sales, returns, and employee discounts.
- Restrict access to high-value items and implement clearance checks for any returns or discounts.
- Require managerial approval for certain transactions to prevent unauthorized actions.
- Use surveillance cameras and monitor delivery areas to ensure nothing leaves the store without being documented.
Regularly monitoring these areas can help detect suspicious behavior and prevent theft from employees.
5. Theft of Confidential Information
Theft isn’t always about tangible goods. Employees can steal valuable business information, including customer data or internal reports. This type of theft can be equally damaging to your business as the loss of physical goods.
To protect confidential information:
- Limit access to sensitive data based on employee roles.
- Use strong passwords and track login activity to detect unauthorized access.
- Monitor unusual activity in sales, inventory, or financial reports that could indicate misuse of data.
- Secure both physical and digital files, ensuring confidential information is stored and handled properly.
Implementing strong security protocols and tracking access to sensitive information will reduce the likelihood of data theft.
Preventing Employee Theft in Practice
To proactively prevent employee theft, it’s crucial to conduct regular checks, track activities, and maintain detailed records. Below is a checklist for routine monitoring:
| Check Frequency | Actions |
|---|---|
| Daily | Reconcile cash drawers and verify sales match POS records. Review voids, refunds, and employee discounts. Spot-check inventory, especially high-value or frequently missing items. |
| Weekly | Perform inventory audits, including surprise counts. Compare POS sales data to stock movement reports. Review security footage of critical areas like registers and storage rooms. |
| Monthly | Audit employee access logs for unusual activity. Review trends in returns, discounts, or cash discrepancies. Ensure security cameras are functional and recordings are securely stored. |
These regular checks will help identify theft early and maintain clear documentation for any necessary actions.
Handling Employee Termination
If you discover repeated theft or misconduct, addressing the issue directly with the employee is the first step. Document discussions, outline expectations, and offer the chance to correct behavior. If there’s no improvement, termination may be necessary. When doing so, remember to:
- Keep written records of coaching and warnings.
- Document policy violations and gather any witness statements.
- Prepare a separation letter with details on final pay, benefits, and company property return.
- Ensure all documents are stored securely to maintain confidentiality.
By following these steps, you ensure that you handled the situation fairly and legally.
Take Control of Employee Theft with the Right Tools
Employee theft can take many forms, but by understanding the types of theft, being aware of your legal obligations, and implementing the right monitoring practices, you can effectively manage this risk. Modern POS systems help track inventory, sales, employee activities, and sensitive data, providing you with the necessary tools to spot irregularities early and address issues promptly.
