If you’re a business owner, employee theft is one of the most serious threats to your enterprise. Employee theft covers everything from swiping office supplies to embezzlement. No matter the size or scope of your business, you are at risk for loss due to employee theft.
Employee theft is hard to ferret out because employees commit the crime for a variety of reasons. Some employees steal because they are irresponsible or dishonest; others might be in financial trouble and stealing is the only way to make ends meet; still, others may be reacting to an abusive work environment created by the boss, who uses theft as a way to control employees. The point is, there are many reasons why employees take what isn’t theirs.
The best way to handle employee theft is by making policies clear and communicating them to your staff. You can also reduce the opportunity for employee theft by managing your payroll efficiently.
When employees are caught stealing, the consequences can be serious. You might get rid of an employee or have to fire an employee. You may get sued by the business owner of the property stolen. And you could even face criminal charges of theft or embezzlement.
Just how damaging are employee theft crimes? Consider the following facts:
- Theft costs employers $52 billion a year in lost wages, stolen inventory, vandalism that prevents business, and damages to the company’s reputation.
- Theft costs corporations $32 billion a year in lower productivity, increased insurance rates on new equipment, and additional security measures on existing equipment because employees are afraid to work without supervision lest they fall victim to theft again.
- Theft of trade secrets can cost an organization millions of dollars.
- Thefts of property or products by employees cost employers more than $3 billion a year in lost inventory, damaged equipment, stolen money, and repairs.
- A study by the National Bureau of Economic Research indicates that employee theft is one of the most common causes of real estate vacancies and that employee theft causes less than 5 percent of all property losses on federally insured properties.
- The average annual loss due to employee theft is $8,500 for small businesses and $890,000 for large companies according to a report by the Rocky Mountain Institute.
- Theft by employees is more prevalent than identity theft, embezzlement, and corporate fraud combined.
- 62 percent of employee theft comes from people who are already on probation or parole for another crime.
- Thefts cost many American taxpayers over $100 billion each year in lost tax revenue, an amount that exceeds the total estimated cost of identity fraud in the United States.
- A study by the Center for Business and Economic Research at the University of Missouri-St. Louis found that 84 percent of employees have witnessed their co-workers stealing from their employers
Most employee theft is preventable. Take the following steps to minimize your risk:
- Pay attention to what’s going on in your business. Keep your eyes open for any unusual activity, especially in sensitive areas of the business, such as financial transactions and customer information.
- Set a good example. Employees tend to follow management’s lead when it comes to ethics and integrity in the workplace. If you expect a high level of accountability from your employees, then you must model that behavior yourself. If you disagree with certain policies or procedures at work, do not bend or break them when no one is looking — speak up about it openly and constructively with management or human resources.
- Make sure your employees know what is expected of them. The clearer the expectations, the fewer opportunities there are for your employees to take advantage of situations.
- Do not allow yourself to be pressured into giving anyone more money than what they are legally entitled to receive. If you do not pay attention to getting paid for all the hours worked, it is easy for an employee to justify stealing your money.
- Keep track of petty cash by counting it often and making sure only authorized people have access to it. Petty cash should also be kept in a secure place, preferably under lock and key.
- Get to know your employees on a more personal level. Find out if they are experiencing any financial hardships that could lead them to steal from the company; offer assistance when appropriate, without jeopardizing your business’ best interests.
- Create clear policies about what is considered acceptable behavior in the workplace, and make sure employees understand them. If a theft occurs, terminate the employee immediately.
- Keep your eyes open for unusual behavior by any of your employees that might indicate theft or embezzlement. Be vigilant in keeping an eye on the exits whenever possible.
- Set up a fraud hotline to let employees know which actions are unacceptable at work, especially if they are doing things you don’t think are appropriate.
- Ensure that all company money is accounted for and kept secure at all times.
- Clarify with your employees how their work is to be valued, so there is no opportunity for them to overbill you for their time.
It is clear that employee theft occurs mostly because employees do not realize the risks they are taking when they steal from their employer. You can take basic steps to minimize your risk of getting a thief as a worker by following the advice above.
Employee theft can be hard to detect and, as a result, it might be hard to prove in court. But you don’t have to feel helpless when it comes to employee theft.
Interested in reading more about employee theft? Cybercrime Asking Insiders to Plant Malware discusses another way that employees can cause harm to a buisness.
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