Employee theft refers to the stealing or improper usage of a company’s money, physical and intellectual property, services and time by an employee.  Whilst no employer wishes to believe their workers would steal from them, the reality is that employee theft causes businesses to lose $50 billion a year and results in 1 in 3 bankruptcies. 

In fact, research suggests that employers are increasingly reluctant to believe their employees are stealing and this is actually contributing to the problem. In order to protect your workplace from the consequences of employee theft, it’s important to acknowledge its potential existence and understand what you can do to prevent it.

Forms of employee theft

In order to broaden your understanding of employee theft, it’s important to first recognise the various forms it can take.

1. Monetary theft

In businesses that deal with a lot of cash, like those within the retail industry, monetary theft is the most common type of employee theft.

Examples of how this can occur include:

  • Overcharging and pocketing the difference
  • Keeping the cash when customers use it to make purchases
  • Stealing directly from the register

2. Inventory theft

Any business that sells physical products is at risk of inventory theft. Employees can find means to pocket items for their personal usage or even to sell externally for profit. A 2018 study found that employees were responsible for about a third of a business’s inventory shrink. 

3. Time theft

Time theft refers to when employees are paid for hours they did not actually spend working.

This can include:

  • Entering the incorrect number of hours worked
  • Intentionally not working when they are required to be doing so (i.e. personal online shopping at work)
  • Falsely entering when one clocked in and out at work
  • Lunch breaks that greatly exceed the contracted time

4. Intellectual property theft

Theft of intellectual property is when an employee steals data that is confidential in nature such as trade secrets and passwords. Research shows that one in four employees leaving an organisation steals data on their way out. Whilst this data is typically the employee’s own documents and not always done with malicious intent, it puts the company at risk for harm if the employee decides to use it for personal gain or it ends up in the wrong hands.  

5. Services theft

Service theft typically occurs in businesses that don’t offer products tangible but rather perform tasks that clients pay them for such as airlines and banks. When employees manipulate the authority they have by using these services for their own purpose or without clearance from management, service theft has occurred. When it goes unchecked, it can eat into company resources, funds and time.

6. Payroll theft

Payroll theft occurs when employees handling payroll duties or any form of financial task abuses their authority and steals. For example, this can mean writing cheques for imaginary employees or cashing in cheques that are for other employees.

Consequences of employee theft

Employee theft causes far-reaching consequences that impact not only the employer but other employees in the workplace. Some examples are described below.

Financial losses:

These can change the expected growth of the company and force it to reconsider its ability to meet its current goals within the projected time period. Furthermore, having an incidence of theft occur pushes an employer to conduct workplace investigations, instil tighter security and introduce anti-theft programs. Funding for this may take away from budgets previously allocated to important company initiatives such as marketing or employee bonuses which can create further financial strain and unhappy employees in the future.

Negative work environment:

When major employee theft has occurred, there can be a near immediate shift in the workplace culture and amidst employee relations to one that is more tense, suspicious and hostile. This could make it difficult to promote an open and inclusive work environment that encourages trust and collaboration as the relationship between management and employees becomes strained. Over time, this can decrease the morale of employees by making them feel mistrusted, which in turn decreases their loyalty and commitment to the company. 

Stricter security:

Rapid and sudden changes to a workplace’s security following a case of employee theft can serve to pose issues for the existing employees.

Imposing restrictions on employee access to company property and data, particularly in the number of hurdles they must jump through when accessing information can be detrimental and cause undue hassle in completing day-to-day tasks and make collaboration and teamwork more difficult. Additionally, increasing the number of security cameras, company computer and phone security and tracking their every move is not always helpful in actually preventing theft whilst simultaneously causing undue employee stress. It can also cause the company to go over the budget allocated for security in a certain time period which can have financial consequences in other sectors of the organisation.

What can you do to prevent employee theft?

With over 75% of employees stealing from their employers at least once, it’s near impossible to catch every single instance.  However, implementing certain measures to inhibit its occurrence allows an employer to feel safer and protect the more important assets of a company.

Implementing these measures, especially when incidences of theft have occurred, is important because failing to do so can encourage even more instances of theft.

Prevention methods include:

  • Employee training programs that communicate the company’s anti-theft policy and the potential consequences of failing to abide by it
  • Make sure that all relevant criminal checks are conducted before hiring. Consider asking for employer references in your application process so you may speak to them
  • Inclusion of employee theft in the contract whereby its different forms are accounted for with their corresponding consequences.
  • Do not attempt to underpay or overwork employees as it strains their loyalty and encourages negative behaviour such as stealing
  • Put a comprehensive security system in place, one that monitors not only the physical workplace but also company laptops and web systems
  • Strengthen the company’s workplace investigation process to reach accurate conclusions and avoid false accusations

Additionally, having strict and thorough bookkeeping requirements for employees to adhere to also aids in preventing theft, particularly when it comes to money. Practices such as ensuring that all transactions, reimbursements and payrolls are checked and signed by more than one authority decrease the opportunity for theft to occur. On the occasion that employee theft does take place, it makes it far easier to monitor and trace the movements of the lost money within the organisation.

Hence, employee theft is a lot more common than perceived and can take place in many different ways within an organisation. Its consequences can shape how a company is able to grow and develop and negatively influence its work culture by fostering distrust. Making sure that you have practices in place to discourage employees from stealing will limit how theft impacts your company over the long term.