Finding out that your employees are stealing from you can be a hard pill to swallow. But the reality is that employee theft (or internal theft) affects businesses of all sizes and can greatly reduce your bottom line.
That’s why it’s crucial that you take steps to bolster your business security solutions and mitigate the opportunity for employee theft.
The most obvious type of employment theft is when staff take a physical item that belongs to the business. This could include, but is not limited to, cash, a product, office supplies or even tools. But employment theft comes in many different forms.
In this guide, we look at everything you need to know about employee theft, including the most common types of employee theft and the methods you can implement to stop it from occurring.
Common types of employee theft
Employment theft is the misuse or misappropriation of company resources. This can be tangible, like stealing a product from the shelf, or intangible, such as stealing company time. In fact, the definition of employee theft is so broad, many businesses don’t even know that what they have witnessed is theft.
To help ensure your business is not being taken advantage of, here are some common forms of employee theft.
Product theft
Product theft is the more well-known form of employee theft and happens when employees take items from your business. This can include “free” food at a restaurant, products in a retail environment or even office supplies. In most cases these items are stolen for personal use, but in other instances, they are stolen for resale.
While the items may be small, eventually the losses will add up. Not to mention employees will often get more confident and begin to steal more expensive items if their actions go unnoticed.
Skimming
Skimming is a type of employee theft where your staff member takes cash before it's entered into the books. Skimming often looks like simple human error until the employee starts increasing what they take. Usually one of the first signs of skimming is cash register imbalances.
Some skimming schemes are more complicated and harder to spot. In some instances, your employee may try to offset the missing amount by applying a coupon code to a purchase but charging the customer the full price. Skimming can also be covered up by deleting a paid invoice.
Under ringing
Under ringing is another common form of employee theft. When under ringing, your cashier will charge your customer for the proper number of items purchased but ring less items into the till and then they pocket the cash difference.
Under ringing can be hard to spot as you won’t notice anything is wrong until you spot an inventory discrepancy when the product runs out or you’re performing an inventory check.
Sweethearting
Sweethearting, is a form of theft where your employee gives their friends and family free merchandise or discounts (also known as discount sharing). Some employees will even be as brave as to offer the discount or freebie to complete strangers.
Sweethearting is often covered up by voiding scans, failing to scan items or giving a refund without taking back the item. Overriding prices is also a common form of sweethearting.
If you have an employee who is sweethearting, you may see inventory shortages or a high number of voids, overrides and applied discounts.
Time theft
This theft isn’t related to physical property but wages. It happens when employees arrive late, leave early or take long breaks while you are compensating them. This form of fraud is harder to spot because you must catch your employee in the act.
How to protect your business from employee theft
For employee theft to occur, three things are generally needed:
- Motivation – Your employees feel they have a reason to commit a theft. This can include real financial burdens such as increased debt or high medical costs, addictions such as gambling or perceived financial need felt by someone who has a desire to buy items they can’t afford.
- Rationalization – The employee must justify their theft to reduce the guilt they would otherwise feel. Common rationalizations often include replacing a bonus, believing they are underpaid, feeling under-appreciated for the work they put in, or telling themselves that the business won’t miss it.
- Opportunity – Employees are in a situation where they have the opportunity to steal. Opportunity is created when your employees have access to assets and information and can take it without being discovered. Unsecured inventory, unsupervised staff and lack of surveillance are good examples of creating an environment that is advantageous to employee theft.
How to prevent employee theft
Unless you catch an employee in the act … the problem with employee theft is that it could be mistaken for human error. At the same time human error could be mistaken as employee theft.
That means you can’t just assume all discrepancies are employee theft. If you do, you could create an environment that results in high turnover. You could even create the rationalization that employees need to commit theft (i.e. “If my boss thinks I am a thief anyways, I may as well take this”).
Any discrepancies need to be properly reviewed before concluding what happened. That being said, there are things you can do to help reduce accidental discrepancies, identify discrepancies sooner and prevent theft.
1 - Do inventory counts more frequently
While the thought of doing multiple inventories counts a year sounds tedious, it can be incredibly helpful in deterring internal theft. This is because doing inventory counts more often will help you discover discrepancies sooner. That means you can more easily track down the cause, as it will be more recent.
For example, let’s say you, as the manager, approved throwing out a broken or defective item that would not be sellable. Chances are you keep track of this, but if it was a busy day, you may accidentally forget to write it down. Six months later you probably won’t remember this. But if you see the discrepancy within a couple of weeks or months of it happening, you’ll likely remember and know it wasn’t employee theft.
Regular inventory counts will also show your staff that you are staying on top of inventory, creating accountability and deterring theft. If you don’t have the time or resources to do full inventory counts, focus on high value items and items that regularly have discrepancies in your annual inventory.
2 - Implement internal procedures that deter employee theft
There are a number of internal procedures you can implement to help deter employee theft. Here are some examples of procedures for you to consider:
- Ensure you have enough staff on busy days so that your team doesn’t get overwhelmed. If you are understaffed, you can increase the risk of errors and provide an opportunity for staff members to steal.
- Don’t let staff share tills. This can provide your employees with an opportunity to steal cash without you knowing who caused the shortage.
- Require manager approval before an employee can override a price, void a transaction or refund a product. That way they can ensure every step was followed.
- Don’t allow staff to transact with family members and friends. When possible, have related customers deal with a different staff member or a manager.
- Provide proper supervision of staff to ensure that they are working during working hours and not taking advantage of your business.
Once you know what procedures you’re going to implement, record all of them, keep them up to date and train your employees on them. This will help prevent process errors and create accountability that will help deter theft.
3 - Foster a positive company culture
We mentioned early that staff need a rationalization to steal from their employer. More often than not, rationalizations come from negative working environments in which staff members feel unappreciated.
If you aren’t giving back to your employees, and there’s an atmosphere of mistrust, then staff members will be far more likely to steal from your business. Showing appreciation, providing positive feedback and recognizing professional behaviour will all foster a positive environment and increase loyalty.
Rewards and bonuses for going above and beyond will also help ensure employees are happy. As a result, they’ll be significantly less likely to steal at work.
4 - Manage cash
While cash has become less common over the past couple of years, more and more people are returning to it as they try to manage their finances. That means your business may have a large quantity of cash on site.
A secure point-of-sale system with access control will significantly reduce the chance that cash will be stolen. Minimizing the cash you keep on-site will protect your business even further.
5 - Install managed access control
To help manage employee theft, you want to manage access. There are two major types of ways to manage access.
- The first is digital. This means that you should limit access to bookkeeping records to your accounting staff. If your team needs to use your accounting software for other purposes, limit what modules they have access to. For cashiers, limit the types of transactions they can do without approval. This will prevent them from being able to alter transactions for their benefit.
- The second form of access control is physical access control. This includes locking high risk or high value items up and limiting who can get to them. One of the best ways to manage physical access is through keyless entry.
Keyless entry limits employee access to specific rooms or spaces, while also minimizing the risk and cost associated with lost or stolen keys as access can be turned off digitally. Not only that but its unique reporting system will ensure you know which employees were in which room at any given time. You’ll know exactly who committed a crime, and when it was committed.
As an added bonus, keycards will track when employees check in/out and enter/leave the premises so that you don’t have to depend on them to provide the correct time card information.
6 - Implement a verified security solution
To help stop employee theft, install a verified security system. This will give you oversight of your business even when you can’t be there. And it won’t only deter employee theft but prevent customer theft and other crimes, as well as increase your staff and businesses safety in an emergency.
Interested in learning more about how verified video can help you better secure your business and mitigate the risk of employee theft? Contact Sonitrol Western Canada today.
