Handling Losses Due to “Time Theft”

Employees clocking in a few minutes early or clocking out a few minutes late may seem fairly innocuous, but those minutes here and there add up quickly. They also constitute a common form of employee theft: time theft.

Time theft occurs when employees receive compensation for time they did not actually work.

A report commissioned by the American Payroll Association (APA) suggests companies can lose as much as 7% of their gross annual payroll to time theft. The same report indicates approximately 75% of U.S. businesses experience losses to time theft. With a problem this pervasive, businesses should have an understanding of how time theft works and how it can mitigated or potentially prevented.

What is Time Theft?

Software Advice, a tech consulting company, conducted a survey of American workers and found:

“When asked whether they ever exaggerate the number of hours they worked on a shift, close to half of respondents (43%) say they have done so at least once.”

This proportion of employees stealing can present a significant source of losses over time.

Of the individuals who responded indicating they stole time from employers, the survey reports:

“The most common method is by recording inaccurate times (45%)—either on paper or digital time sheets, or by clocking in early or out late. Other common methods of ‘stealing time’ include conducting personal activities while on the clock (reported by 43%) and taking frequent breaks (42%).”

A less common, more overtly fraudulent, form of time theft is the practice of “buddy punching,” in which one employee has a coworker clock them in or out for a shift they did not actually work.

Responding to Time Theft

Responding to time theft is certainly a challenge many companies face. However, they are not without options. Forensic accounting firms, such as SDC CPAs, have extensive experience investigating time theft.  However recouping losses to time theft can be difficult. Prevention can be both easier and more effective. Biometric time clocks – those requiring a fingerprint to clock in and out – can help mitigate practices such as buddy punching and misrepresenting hours worked. Reinforcing messages to let employees know that time theft will not be taken lightly, may also make employees less likely to pad their hours.

Companies like SDC CPAs see time theft claims all too often. Being aware of the possibility of time theft is the first step for business owners. Strong prevention measures and oversight can also help to mitigate or prevent time theft losses.



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