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:
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.
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.
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 there is a lot to consider, including:
The Overall Hours Stolen
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.
The Risks of Setting a Precedence
If one employee has fallen into the routine of adding time and receives no punishment for time stealing, 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 timecards each day, it would add up to an annual cost of $12,300 in additional labor costs — for zero productivity.
The Different Types of Time Theft
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.
The Amount of Time Stolen Each Shift
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.
Supporting Your Claim
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.
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.
Common Penalties for Employee Time Theft
Time theft is a type of payroll fraud. Although there aren’t federal rules regulating how your company deals with time theft, you can decide the punishment and action taken to resolve the issue. Some suggestions might include:
Because of a lack of rules regulating employee theft punishment, you have the authority to fire workers for stealing time. However, you must ensure you aren’t violating the employment contract or that you are at risk of being accused of illegal discrimination. Having a written time theft policy employees must read, and sign helps avoid retaliation from the employee in question.
You can also go through a warning process in which you first inform the employee in writing of the issue, conduct a formal discussion with the manager and HR representative, and then proceed with termination if the theft continues. This also provides an opportunity to discover if there is something else going on. For example, a fellow employee might be “buddy punching” for the employee without their knowledge. Warnings provide an opportunity to investigate further and avoid issues with an employee who is, in fact, innocent.
Suspension Without Pay
Workers can also be suspended without pay, but determining how long they are suspended can present issues. Considering the amount stolen and the frequency of time theft can help determine a fair time of suspension.
Although there aren’t federal or state rules regulating time theft, if you find the total wages stolen exceed that of felony theft, the employee has, in fact, committed a felony crime. In this case, you can decide if you wish to press charges.
Detecting Time Theft
There are a few ways you can help detect time theft, including:
The easiest way to detect time theft is to use clocking software. This makes it harder for employees to fake hours compared to paper timesheets and outdated punch clocks. You can establish time rules to identify off-times/hours to detect when an employee delays clocking out or tries to clock in too early. You can also block employees from clocking in from their mobile phones when running late or taking longer breaks or lunches.
Remote workforce management software allows you to log work and activity or take random screenshots to monitor online behavior. You can also run URL reports to detect someone on the clock surfing the internet, answering personal emails, using social media, etc. This software also works well to maintain higher standards of remote work productivity.
Keeping an eye on workstations allows you to take note when an employee “disappears” for long periods of time. The same software used to monitor remote workers can be used to monitor inactivity at workstations to find workers who might leave their desks when it’s not their break or lunch.
Track Phone Calls
Company phones should not be used for non-work-related activities that keep employees from completing their tasks. Consistent and prolonged phone usage for personal matters can indicate an employee is stealing time, not attending to their duties, and instead being paid to socialize, shop, look for new jobs, or even conduct freelance work.
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.
Pay Attention to Time Thieves
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 New York-based team at Paypro. [email protected] | 631.777.1100