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Employee Theft And How To Prevent It

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Preventing employee theft can seem like a daunting task. You have built trust with the people you rely on to run your business, and taking preemptive steps to stop internal theft can feel like betting against them. But neither you nor your employees must think this way.

Theft in the workplace can harm the business owner and employees alike. Better security procedures help clarify job descriptions, ensure job longevity, establish better workflow, and create procedures that contribute to a better feeling of workplace security.

When you stop an employee stealing, you protect your business, which protects jobs. But internal theft can come in many forms, all of which have different ways of being prevented. What is the best way to combat the different types of employee theft?

Employee theft often includes fraudulent or improper handling of:

  1. Cash
  2. Supplies
  3. Timesheets
  4. Funds
  5. Benefits

FAQs

How do you prevent employee theft?

The perceived risk of getting caught provides the best deterrent for all theft. In the case of internal theft prevention, focus on hiring, physical access control, and response. Vet your new hires, do not provide keys or codes until trust is solidified, and respond when trust is violated.

Can I fire an employee for stealing?

Documented theft in the workplace is one of the best reasons to dismiss an employee. But for any firing, there is always the risk of retaliation in the form of a wrongful termination lawsuit. Make sure you have video evidence showing the employee theft clearly, so there is no doubt.

What is the difference between larceny and embezzlement?

Embezzlement is defined by the U.S. Department of Justice as “the fraudulent appropriation of property by a person to whom such property has been entrusted, or into whose hands it has lawfully come.” Larceny requires “felonious intent” at the time the property is taken.

Is all employee theft considered embezzlement? 

Because employees are trusted with property and funds by virtue of their job, most forms of employee theft fall under the category of embezzlement. However, your employees can also use their knowledge of the company to steal things they should not have access to.

1. Stealing Cash

An employee’s access to cash is going to vary depending on the business. In terms of retail security, protecting petty cash will be imperative. If you are not making cash deposits at the end of every business day, you need either a safe or lockbox.

Even if you invest in something manufactured by one of the top safe brands, the risk of employee theft remains as long as a worker is expected to open the safe to store the loose cash. Cash can also be intercepted before storage or deposit.

When you have an employee stealing cash, detection is key. The sooner you can discover the issue, the less money you are going to lose. Check your recorded sales against your deposit slips as frequently as possible.

Even if only a little is being stolen, chances are this is not the only type of employee theft perpetrated. If you are running a predominantly cash business, you may accumulate vast stockpiles of cash before it is possible to make a deposit, which may be the target of larceny.

Security Tips:

  • Store cash reserves in a safe worth at least 10% of the average cash value inside.
  • Limit access to cash by keeping codes and keys in the hands of fewer employees.
  • Deposit cash when reserves exceed a given threshold.
  • Document the path of cash flow from transaction to storage with security cameras.

2. Misusing Supplies

Even though there is rarely a financial benefit for an employee stealing supplies, the cost of getting stationery supplies, bathroom products, or snacks can add up. This is not necessarily a fireable offense, but the costs can add up if the behavior is not stopped.

When you calculate the RIO of your security, consider that certain security devices purchased to protect higher-value items can also protect supplies. You can change storage procedures to have frequently stolen or misused supplies kept in more secure locations.

The tricky thing about guarding supplies is that it can disincentivize the use of protected materials. This can come in the form of malicious compliance or excuses centered around the decreased convenience of a task due to the need to request certain materials.

One of the most important tips for safe buyers is to not store items inside a safe that need to be accessed throughout the day. The more a safe or any secure location is opened, the less secure it is. So storing frequently needed supplies with valuables can increase the risk of theft.

Security Tips:

  • Double-dip with existing security and store at-risk supplies with more valuable items.
  • Do not lock up at-risk supplies that are needed several times during a shift.
  • Plan not to buy stockpiles of supplies and replace items as needed.
  • Weigh the risk of lower productivity from limiting convenience against replacement costs.

3. Falsifying Timesheets

Whether it is taking undocumented breaks, multiple lunches, late arrivals, lying about overtime, etc., timesheet fraud costs a company money. Though this fraud is not always considered when preventing employee theft, it can be stopped and detected with the right security measures.

Documentation is key with this type of employee theft. If your security cameras are not protecting your property by documenting all entrances and exits, it can be very difficult to verify employee arrival times. An employee should be visible leaving and entering the building.

Though you can use a camera pointed at the time clock, monitoring ingress and egress is the most airtight way to prove actual hours worked. Also, if there is a way into your building without being seen, that can be exploited for other types of employee theft.

This is a very unique type of employee theft because it is lowering the efficiency of the business, as well as overcharging you for service. It should be noted that timesheet fraud is a good indicator that a worker is engaged in other forms of employee theft.

Security Tips:

  • Use cameras to document all entrances and exits as well as the time clock.
  • Someone not seen leaving or entering is an indication of an undocumented entry point.
  • Undocumented entry points assist other types of employee theft.
  • Investigate all timesheet fraud cases for other methods of employee theft.

4. Diverting Funds

There are several ways for an employee to divert funds, some of which are more easily detected than others. The most common diversion is recording purchases incorrectly and pocketing the difference. More advanced methods can take the form of contractual nepotism.

It is hard to know what kind of line items in your business security budget will help with this without conducting a risk assessment. How are your funds allocated, and by who? If products are shipped or thrown away when damaged, how is it verified?

Verification channels must be assessed for weaknesses. The people who work through a process long enough find the flaws in it, so do not be afraid to ask for feedback on what can be improved. Your team is the primary line of defense against internal theft as well as the risk.

It may seem counterintuitive to have your employees think about how to get away with theft in the workplace, but dishonest people are going to find the flaws anyway. Similar to the ethics of lock picking, the preemptive discovery of weakness is key to preventing the use of that exploit.

Security Tips:

  • Create channels for employees to report problems in company spending.
  • Perform random verification checks on damaged products, shipments, and spending.
  • Investigate outside contractor relationships with current employees.
  • Share purchasing responsibilities between several workers for checks and balances.

5. Inappropriate Use Of Benefits

Whether it is extending employee discounts to friends or using access to equipment to provide free services, this still falls under the umbrella of employee theft. The trick to prevention is clear expectations more than physical security measures.

When everyone on a team knows what is acceptable, they cannot be convinced to disregard the undesired behavior of other workers. The key is to respond immediately to any instances of this kind of employee theft, as inaction is often seen by other workers as tacitly condoning.

The implication that you allow these behaviors are most detrimental for this type of employee theft. Workers are most likely to misuse benefits because it is not clearly theft to them. They can be under the misconception that though something cannot be encouraged, it is acceptable.

Locks and documentation can help in certain instances if machinery or supplies need to be checked out or tied to a work order. You can also force transactions involving employee discount purchases to be verified by another worker. Have a blend of passive and active security.

Security Tips:

  • Clarify what is not an acceptable use of company time, resources, etc.
  • Respond immediately to any passing remark that undermines proper procedure.
  • Lock up or create check-out procedures for inappropriately used resources.
  • Require another worker to verify the use of benefits and discounts before use.

Final Thoughts

Though we have covered a lot, there is some basic information you can take away about internal theft. The trends for preventing and responding to employee theft revolve around training, documentation, reporting, and access control.

Workers need to know what improper behavior looks like and have a way of reporting it. A business owner must be able to document theft and restrict access to vulnerabilities such as cash reserves and other valuables by restricting keys and knowledge of codes.

If you need help setting up any security for your business, see if United Locksmith is in your area. Whether you are rebuilding your office security or commercial door lock replacement, United locksmith has the tools and training you need.

Category: Commercial, Safety & Security


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