No matter what industry a company is operating in, there’s no denying that employees are an organization’s biggest asset. Their work ensures the smooth flow of operations and is the biggest contributor to a company’s success, highlighting the importance of hiring only competent, collaborative, and honest individuals.
Fraudulent staff with ulterior motives not only hinders a company’s growth but may also disrupt organizational stability. Even with improved screening and background-checking processes, employee theft remains a persistent threat to organizations.
Understanding employee theft is important to help navigate away from such threats. Research shows that employee theft costs businesses in the United States more than $50 billion annually. Knowing this, improving security may allow your company to avoid major losses.
What is Employee Theft?
Employee theft can be defined as individuals who deliberately steal goods, money, and other resources from their company for personal gain. If left unattended for a long period, these acts can cause financial losses, harm your company’s reputation, and disrupt organizational stability.
Companies that offer financial services had the highest number of employee theft cases and total revenue loss, at 18% and $120 million, respectively. Despite the high probability of employee theft, less than 30% of organizations have implemented or upgraded their security technology to detect fraud.
Employee theft is common in the workplace. With 75% of employees having stolen during their employment period, understanding the dangers of employee theft serves as your first line of defense to minimize or prevent it from ever taking place.
What are the Different Types of Employee Theft?
Most people assume that employee theft is exclusively related to money. Employee theft goes beyond just financial means and can also include the stealing of ideas, services, and confidential data.
1. Payroll fraud
Payroll fraud is when an employee takes funds through the payroll processing system. Normally this is committed by employees who attempt to create an inaccurate report on time worked. This type of fraud leads the employer to pay the employee for time they didn’t work. Employees can commit payroll fraud through buddy punching and timesheet padding.
This type of theft occurs when employees take money from funds originally entrusted to be in their care. Typically, these funds are used for company initiatives and projects, and the people designated for their care must ensure the money is used responsibly and effectively.
3. Inventory theft
Inventory theft occurs when an employee steals a product during its inventory management cycle. Usually happening in the retail sector, this cycle spans from when your company receives the said product from its original supplier to when a customer returns the item. At this point, an employee can steal the product to use or sell to others.
4. Service theft
Some organizations grant their employees certain benefits just by being employees. When signing employment contracts, you may find benefits like gym memberships or discounts as part of your employment package.
Service theft takes place when these privileges are abused by employees, meaning they let people who aren’t associated with the company use these facilities or sell discounts or memberships for additional income.
5. Data theft
Data theft incidents occur when an employee takes a company’s confidential information by accessing its computers and other technology systems. In addition to taking data information, this type of fraud also includes deleting, altering, or sabotaging company records in hopes of negatively impacting your company.
How to Stop Employee Theft?
Employee theft can’t be fully eradicated, but mitigating it as much as possible should be a top priority. Improving policies and processes can help significantly in reducing these types of incidents.
1. Build a strong Know Your Employee (KYE) process
A strong KYE process will keep your organization safe from fraud. It enables you to conduct effective background checks, making it much easier for you to calculate the level of risk associated with your candidates. Mitigating employee theft starts through recruitment so consider optimizing your hiring processes with our employee verification software.
2. Develop and implement employee policies regarding theft
One of the easiest measures you can take to prevent employee theft is to set policies. Here your business can state what constitutes employee theft and the consequences that result from such stated theft. Once employee theft is detected, investigations and potential damage control procedures should be implemented.
3. Conduct routine financial audits
Regular audits are a great way for your business to keep up with the budgets or expenses an employee may have had for a certain period. Ultimately, regularly conducting them may expose and pinpoint discrepancies.
4. Monitor for suspicious activity
While companies should have a level of trust in their employees, that doesn’t mean they should be complacent regarding the company’s well-being. Implementing web monitoring software, while seemingly unnecessary to some, can help add another layer of security in pinpointing potential employees participating in employee theft.
Aside from web monitoring software, management can also monitor their employees based on their spending patterns, financial activity, and working hours. Regularly doing this can help your team recognize if an employee is engaging in fraudulent activity.
5. Use an electronic time clock
To reduce the amount of time-related employee theft, your business can invest in electronic time clocks during shifts. With management in charge of its settings, you can limit employees from editing their shift schedules and clock-in and out times and can prevent others from clocking in on their behalf.
6. Issue login credentials unique to each employee
Unique login credentials act as a paper trail special to each employee in your company. Compared to when you have shared credentials, managers and supervisors can easily pinpoint who sought access to systems and information unrelated to their jobs.
7. Closely track inventory
If your business is in retail or is involved with selling goods, routinely tracking inventory can easily show any odd behavior or missing products throughout its life cycle from supplier to shelf. Any discrepancy in volume or increase in defective or damaged units can lead managers to suspect a form of employee theft happened somewhere during the handling process.
8. Practice good bookkeeping
Diligent bookkeeping can help make it easier to detect employee theft. Likewise, procrastinating your bookkeeping practices can lead to a messy and disorganized workflow, affecting any indications of employee theft. Holding off on this important operational step can allow employees opportunities for participating in theft.
Stop Employee Theft
Employee theft has no preference in industry requiring precautionary measures to help your organization mitigate the harm.
Ultimately, the best way to prevent identity theft is by following best security practices. Conduct background checks and implement robust KYE processes when hiring employees to ensure that the individuals you’re absorbing won’t cause harm to your organization.
If you’re looking to bolster your company’s recruitment processes, we’ve got you covered. Supplementing your background checking process with our KYE software will ensure that you hire the right individuals for your organization.
Contact us today to learn more about our employee verification solutions.
"*" indicates required fields