Some people consider theft to be taking physical property without the owner’s consent. But as a business owner, you know that definition is too limited. Employees can commit theft without taking things. They can steal time.
Time theft definition: Accepting pay from an employer for time not actually worked.
Time theft can result in huge losses for your company. You may have surveillance cameras, physical security, and access control solutions in place to curb employee theft, but even with those loss prevention measures, time is often still easy to steal. And inaccurate or untruthful information on time cards can be costing you thousands of dollars, limiting productivity, and stifling your ability to run a profitable business.
Types of Time Theft
Employees can commit time theft in a variety of ways:
Buddy punching: Employees have other employees punch the time clock for them when they are late or absent from work. As a result, you pay them as if they were actually on the job during that time.
Late starts/early finishes: Employees may punch in but not get to work immediately or wrap up their day early, but wait until the official end of the shift to punch out.
Unauthorized overtime: Employees may punch the time clock before the shift starts or far after their shift is over. You may be paying for them to sit in the breakroom and have their morning coffee or to unwind before their evening commute.
Long breaks: Employees can extend 15-minute breaks into much longer periods of time, especially if you don’t have processes in place to enforce them.
Personal activities at work: The activity of an employee on a manufacturing line may be easy to monitor, but how about an employee sitting at a computer? Much of their day could be spent browsing the internet or reading social media posts.
Potential Cost to Your Business, According to Time Theft Statistics
Your first impression may be that an employee adding 10 minutes here or there doesn’t make that much of a difference. But consider this:
If an employee routinely adds 10 minutes to each time card, over a five-day work week, that’s 50 minutes — almost an hour — of nonproductive time you’ve paid for. If that employee works 50 weeks each year, the time clock theft grows to about 41 hours — more than a week’s worth of work. If your total labor costs are $30 per hour, time theft by that one employee costs you $1,230 each year.
If one employee has fallen into the routine of adding time and receives no punishment, it’s likely others have noticed and assume there aren’t any time theft consequences. As a result, they may commit time theft as well. If 10 employees at the same pay rate all add 10 minutes to their time cards each day, it would add up to an annual cost of $12,300 in additional labor costs — for zero productivity.
Research shows this is all more than just theoretical. A recent survey found 43 percent of employees commit time theft by padding their time cards, 45 percent by recording inaccurate times, 23 percent by buddy punching, and others by using work time for personal activities or frequent breaks. Moreover, time theft statistics show one-quarter of employees falsely report the amount of time they’ve worked between 76 percent and 100 percent of the time.
Software Advice also asked how much time employees are stealing in a single shift. Employees responded:
- 1 to 10 minutes: 25 percent
- 11-20 minutes: 41 percent
- 21-30 minutes: 14 percent
- 31-60 minutes: 14 percent
- 61+ minutes: 7 percent
It’s likely that the problem of time theft is costing you more than you may think.
Time Theft Laws
Although you are the victim in time theft, as a private employer, you may have a difficult time making your case. The Fair Labor Standards Act (FLSA), you are required to pay for the hours the employee works — which they report to you on a time card or time sheet. If you refuse to pay for hours you suspect were incorrectly or falsely reported, the employee could file a suit against you for two times their back wages, as well as attorney and court costs.
FLSA also prohibits employers from retaliating against employees who have filed a claim that they haven’t received all the wages that you owe them. So if you respond to an employee’s lawsuit with a counterclaim for fraud or time theft, it could be considered retaliation under FLSA, unless you can prove the employee was intentionally committing fraud.
To support any claim you make, it’s important to systematically follow and document these steps:
- Conduct a thorough investigation
Findlaw.com says a fair and accurate investigation should follow specific guidelines. Someone other than the person who discovered the theft of time should investigate it, you need to maintain strict confidentiality, you should get expert help from a CPA, and attorney, or other professionals, and the investigator should interview the employee, in the presence of witnesses, after all other evidence and information have been collected.
- Discipline the employee
Get the advice of legal counsel when deciding whether to suspend the employee, place them on probation, or terminate employment.
- Seek restitution
Working with your attorney and insurance company, you may be able to recover losses. Examine your insurance policy to see if loss from time theft is covered and follow procedures for filing a claim. Your attorney may advise you to pursue litigation to recover losses in civil court or through the criminal justice system.
The Best Way to Deal with Time Theft is to Prevent It
It’s difficult to deal with time theft and recoup losses after the fact, but time theft doesn’t have to be a cost of doing business. There are systems and processes that empower you to prevent these losses from occurring in the first place:
- Enact policy and have employees commit to integrity when reporting the time they work. Detail the procedures you expect employees to follow when tracking and reporting their time. Also explain time theft punishment — and stress that those consequences are unavoidable.
- Upgrade to automated timekeeping. Eliminate manual processes that employees can manipulate and move to a system that automatically tracks time when a person is at their workstation. These systems also generate reports that let you monitor employees’ schedules and identify bad habits such as taking long breaks or starting late. And with biometric identification via fingerprint or retinal scan, only the employee can clock in or out.
- Provide mobile access for managers. Invest in a system that gives your managers visibility into the workforce from their smartphones or tablets, so they can see who is on the clock at any given time.
- Limit access to the internet and social media. Why give employees distractions that can interfere with their productivity? Use solutions that restrict employees’ internet use to the websites they need, and not those that would tempt them to commit time theft in the office.
- Respond. One of the best deterrents to time theft is to show your employees that you are serious about time theft — and you are watching. Address concerns immediately and appropriately to stop theft of time before it turns into thousands of dollars of losses.
It’s Time to Pay Attention to Time
If you can’t say that you’ve reviewed reports for the last pay period and you paid for exactly the amount of hours your employees actually spent on the job, you are probably the victim of time theft. If you aren’t vigilant to monitor employees’ time, there are often employees who will take advantage of the fact that you’re too busy or that you choose to turn a blind eye to accurate time cards.
Putting processes and technology in place that enforce accurate time reporting can, in some instances, pay for themselves by eliminating the inflated labor costs you now incur. They can also help you create a better work environment where there is no question of integrity and mutual trust can grow.
For advice on ways to ensure accurate time and labor management, as well as solutions for payroll, HR, compliance and benefits, contact the team at Paypro. firstname.lastname@example.org | 631.777.1100