Employee theft takes a big toll on companies. Contrary to what you might think, employee theft goes beyond stolen cash. Business ideas, supplies, data, and time are all things employees can take. Workplace thieves are typically motivated by financial need or revenge. A Tesla employee sabotage is an example of how revenge can result in major losses for a company.
However, there are ways to prevent employee theft if you’re proactive and know the red flags. Below, we’ll go over types of theft, the signs, and ways to prevent employee theft. You can also jump to the infographic below to learn all about employee theft.
What is Employee Theft?
Employee theft is when an employee steals assets from an employer. Assets include money, stocks, inventory, supplies, or time. Employers should stay on the lookout if items are misplaced, miscounted, or seem off.
Types of Employee Theft
There are many ways employees can steal. Knowing the different types gives businesses a better idea of what red flags to watch for. Even the smallest companies have assets employees can pocket. Here are a few types of employee theft.
- Time theft: Extra long lunches or long water cooler chats with coworkers is a form of theft. Time theft costs companies a lot if employee productivity doesn’t match their pay. TSheets found that 49 percent of U.S. employees who track time admit to time theft.
- Larceny: This type of theft includes stealing tips and an employee’s personal property. Larceny can also result in damaged employee morale and stakeholder trust.
- Intellectual theft: Stolen ideas and secrets fall under this category. Companies can lose their advantage against rival companies if thieves leak information.
- Data theft: Stolen data has big consequences if sensitive information falls into the wrong hands. IBM reports that the average cost of a data breach in the U.S. is $3.92 million.
- Skimming: Skimming occurs when someone steals money before it’s logged. For example, a cashier who pockets money from the cash register before it’s logged is guilty of skimming.
- Illicit records and disbursements: Authorized employees can fake unauthorized checks and false receipts. This can lead to money laundering and legal trouble.
- Embezzling: Embezzlement happens when an employee steals something they were authorized to access. For example, an accountant taking money from the accounts he or she manages falls under this category. Hiscox found that companies lose an average of $357,640 in embezzlement cases.
- Abuse of power: Misusing authority can result in theft and other dishonest acts. Letting non-employees use employee discounts is one example of this. SheerID reports that employee discount abuse can be as high as 35 percent.
How Do You Spot Employee Theft?
You can spot employee theft by keeping tabs on your most valuable assets to look for strange changes in amounts, locations, or your employees’ behavior. The Association of Certified Fraud Examiners (ACFE) 2020 Reports to the Nations found that only 2 percent of occupational fraud cases are found by confession. So, it’s up to employers and trustworthy employees to know the signs. Here are a list of signs to spot employee theft:
- Poor work ethic and attitude: Disgruntled employees may steal if they want to “get back” at their employer. The FBI warns businesses about the threat of revenge theft.
- Odd working hours: Starting early or leaving late gives employees opportunities to steal while they’re alone.
- Missing products, supplies, files: Misplaced files and supplies are a red flag. Digital files found in the wrong folders and servers are other signs to watch out for.
- Unusual discrepancies with finances: Examples include uncategorized spending, unknown vendors, and missing money.
- Mismatched lifestyle choices: Business owners should watch for employees living beyond their means. If their salary doesn’t match, it may be a sign of theft.
- Defensiveness or hesitation to change or turn over work: Employees may not be open to change if their job function or are gives them the opportunity to steal.
- Favoritism towards a vendor or customer: Employees might be colluding with others to extort assets from your company.
How Does Employee Theft Affect Companies?
95 percent of all businesses fall victim to theft in the workplace. The same ACFE report mentioned earlier found that fraud cases last 14 months before they’re discovered. These cases result in a loss of $8,300 per month. The ACFE also found that the median loss per case was $125,000 and organizations lose about five percent of revenue to fraud each year. Employee theft statistics illustrate how theft can greatly impact your business.
What Causes Employee Theft?
Employee theft happens because of spite, opportunity, and a lack of consequences. Employee theft can happen with any employee including managers or low-level workers. Here’s why employee theft occurs:
- Opportunity: Hayes International found that retail workers have more opportunities to steal when there are less associates on the floor. The ease of selling stolen goods also makes stealing tempting. The study also found that thieves find shoplifting low-risk since they’re normally considered misdemeanors.
- Need: Employees may steal to make ends meet and curb financial stress. Some may also believe that stealing is okay if it doesn’t make a difference for the company. A survey by The Interview Guys found that about 24 percent of employees thought it was acceptable to steal if the company had multiples of an item and wouldn’t notice it was missing. About 21 percent stole because they weren’t paid enough and about 17 percent stole because they couldn’t afford to buy the item.
- Spite: Like we’ve mentioned, unhappy employees may steal to get back at their employers. Security company Allied Universal considers troubled or wronged employees high risk.
How to Prevent Employee Theft
Business owners can prevent employee theft by hiring the right employees, having clear policies, and cutting down opportunities. Here are some steps to take to prevent employee theft in your business:
- Set an example: All eyes are on you as a business leader. Leaders can easily discredit policies if they fail to follow them. A study published in Frontiers in Psychology found that leading by example had positive effects on cooperation from followers at the group and individual level.
- Protect sensitive information: Employees shouldn’t have access to all files, but Kaspersky found that more than a third of people have accidentally found confidential information of their coworkers like salaries and bonuses.
- Maintain employee morale: Keep a pulse on your employees and address grievances right away. Hearing them out can cut down on disengagement and animosity. The same Interview Guys survey mentioned earlier found that about 13 percent of employees stole because their boss was rude.
- Set clear policies: Set expectations for employees with transparent policies. Explaining employee theft, the consequences and ways to report it are a few things to include. Gallup found that only about half of workers know what’s expected of them at work.
- Get a fidelity bond: A fidelity bond protects you and your clients from dishonest employees. This includes when an employee steals or embezzles.
- Minimize any other opportunities: Create a system of checks-and-balances so that no one has too much power. This is especially important now that many offices are working remotely. A doctoral study from Walden University found that separation of duties, multiple eyes on accounts and installing system and physical access controls are a few ways small businesses are mitigating employee theft.
Employee theft is preventable if you keep an eye out for the signs and take the right steps to prevent it. Understanding the types of theft is also crucial to know what to look for when auditing your assets. Take a look at our infographic below to learn more about the impact of employee theft.