Employee theft can take many forms and have a major impact on a business. In this lesson, you’ll learn what constitutes employee theft and discover some tips for preventing it at your business.

Types of Employee Theft

Terry has worked for years to get his business off the ground, logging long hours and building his reputation and a list of clients. He’s finally gotten to the place where he can afford to hire a few workers to help out around the store. Everything is great for the first six months, but then he notices a problem. It appears that cash and supplies may be missing, and there is at least one complaint from another co-worker about a colleague who is falsifying her time card.

Billions of dollars are lost across the economy every year as a result of employee theft. But, calling it ‘theft’ may conjure only images of an employee pocketing money from the cash register. While that is one type of employee theft that business owners encounter, it is not the only one. Here are some of the most common types of things stolen by employees:

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  • Money: This is the No. 1 asset most frequently stolen. It could be directly stolen or occur through charging customers more than the listed price for a product and stealing the extra cash.
  • Time: Theft of time occurs most commonly when an employee falsifies their time record, or is not performing work functions when at work.
  • Supplies: Employee theft of supplies can range from small items like paper to larger items such as computers.
  • Merchandise: Theft of items from store shelves is a serious problem.
  • Information: Disgruntled employees may steal proprietary information and secrets that could harm a business.

The National Federation of Independent Business describes the most common methods of stealing from the workplace in more formal terms:

1. Larceny or embezzlement: The taking of money or property with the intent to defraud the rightful owner.

2. Skimming: Theft of money before it has been recorded, such as an employee taking money for a sale and not ringing the sale into the cash register.

3. Fraudulent disbursements: This includes things like check tampering, payroll schemes, and expense reimbursement scams; essentially, it’s using a company’s internal processes for personal gain.

As you can see, employee theft is broadly defined as stealing or the use or misuse of various assets of a workplace without permission, regardless of the method used in the theft. There are numerous reasons employees steal from the workplace including low morale, revenge, a feeling of being underpaid, lack of consequences, or loose controls over inventory or processes.

Luckily, employee theft is preventable. Read on for some prevention tips to help stop would-be thieves in their tracks.

How to Prevent Employee Theft

1. Take a zero-tolerance approach to theft. Make it clear to new hires and all employees that theft is grounds for dismissal and possible legal action.

2. Pre-screen employees. Conduct background checks to look for signs of prior criminal activity, and call references who can vouch for an employee’s character.

3. Provide adequate supervision. Employees left to their own devices may see opportunities to commit acts of theft. Keep a watchful eye on employee activity and business processes such as cash register transactions.

4. Consider video monitoring. If you work in a retail setting, video cameras can help deter theft of merchandise and money from cash registers. An added benefit is that it will help prevent customer theft as well.

5. Improve your processes. Some internal theft occurs when one employee is given too much responsibility or access to procedures with no checks and balances in place.

6. Surprise employees with audits, both internal and external. Internal audits conducted by an employee look at business practices and financial records to mitigate risks; external audits by hired auditors offer the same service at a more independent level. Routine check-ins from the business owner or management can serve to help deter would-be theft by employees.

7. Watch the trash. A lot of merchandise makes it out of a business through trash removal. Employees may place merchandise in the trash to collect later, or may be funneling items to an accomplice waiting on the outside.

8. Create a reporting hotline. Give employees who suspect suspicious activities a way to report those instances confidentially. Empower your staff to help prevent theft and catch thieves in the act.

9. Know your employees. Develop bonds with your workers because research shows it’s harder to steal from someone you know well. Employees who are under stress, unhappy in their job, or suffering through a financial difficulty may turn to theft as an outlet. Knowing the signs, showing compassion, and finding other ways to help them can prevent a bad situation.

Lesson Summary

Employee theft covers the stealing of money, time, and merchandise from the workplace, with the intent of personal gain. It can happen through the acts of larceny, embezzlement, skimming or fraudulent disbursements. Luckily, in many instances, it can be prevented. Business owners should adopt a zero-tolerance approach to employee theft and put proper procedures in place, such as checks and balances, audits, and adequate supervision. Consider video monitoring and implementing a theft reporting hotline.