Learn about time theft and how to spot it if it’s happening in your business. We’ll also cover laws you need to know if you ever find yourself dealing with time theft.
Time theft is when an employee gets paid for the time they did not work, and it generally applies to hourly and nonsalaried employees. There are many ways employees can steal company time—and ultimately company money—by getting paid when they are not working, from taking extended breaks to modifying time sheets or having a co-worker punch in for them (buddy punching).
Fortunately, you can take action. One of the best things you can do to prevent and discourage time theft in your business is to implement time clock software. Electronic time clocks, like Homebase (an all-in-one employee scheduling, time tracking, and HR solution), offer employers the ability to better control their workers’ hours, saving the company time and money. Try the free plan for unlimited employees today.
Let’s explore the different forms of time theft, measures you can take to prevent it, and legal considerations you need to be aware of.
5 Ways Employees Steal Time at Work
1. Taking Extended Breaks
Many employees take extra or extended breaks during the day, leaving early for a break or coming back late. Employees may not have to clock out for short paid breaks—and when they take advantage of this, they steal time and money from your company by getting paid without working. This also decreases your company’s productivity by reducing the amount of time work gets done.
For example, if you pay an employee $10 per hour and they regularly work 40 hours per week but are taking an extra 12-minute break per day, you’re paying that employee $10 extra each week. For the year, that’s an extra $520 you’re paying to the employee without them working, and that’s before you factor in all the taxes you’ll pay for the higher wage.
When it’s just a few minutes, the employee thinks nothing of it—but that doesn’t make it right or fair to the company or other employees.
2. Working a Second Job on Company Hours
In today’s work climate, many people hold more than one job to supplement their income or follow their passions. If this is allowed in your company policies, it is not a problem when an employee works their second job outside of company hours.
However, it is considered time theft when an employee lets their side hustle bleed into their day job—delaying doing the work they’re getting paid for—or tandem-works the two jobs during the workday.
We recommend having a clear policy (typically part of your employee handbook) that outlines the types of jobs that are allowed, along with the intent that these additional jobs will not interfere or coincide with the employee’s workday with your company. Below is an example of the type of wording you may use:
A recent survey by Insuranks found that 93% of working Americans have a side hustle, something they do for income besides their main job. Of the survey respondents, 44% pursue side hustles primarily to make ends meet.
3. Modifying Employee Time Sheets
Many companies today still use pen and paper or spreadsheets for their employees’ time sheets. This “honor system” is ripe for not only innocent mistakes but employees taking advantage of their employer’s goodwill. Workers may exaggerate their hours, adding just a few minutes here and there.
Employees also frequently round their hours. For example, if they leave the office at 4:52 p.m., they may round that to 5 p.m. That may not seem like much, but it quickly adds up, especially if those extra few minutes push the employee into overtime.
This is also a concern when employees (or independent contractors) provide an invoice for the time spent working for your business. These invoices typically come in for payment with a whole number of hours reported (e.g., 20 hours for the week.) The likelihood is that the employee rounded their time to the nearest hour when reporting on their invoice.
To circumvent this issue, it is recommended that you track your employee hours and have a manager approve (or sign off) the hours logged before submitting them to payroll.
4. Buddy Punching
Employees can also game the system with the help of their colleagues—it’s called buddy punching. For example, an employee might be stuck in traffic, so they ask a colleague to clock them in on time, even though the employee doesn’t arrive for a while. This coordination between employees is time theft and results in economic losses for your company.
Another example is an employee who remains on the clock when they leave the office early. They have another employee clock them out at their scheduled time when they have not worked their full schedule.
We recommend you use an online time clock, such as Homebase, to prevent buddy punching. Homebase assigns unique pin codes to each employee that must be changed regularly; it also takes a photo of the employee who is clocking in and out.
5. Doing Personal Activities During Work Hours
Employees may have personal matters to deal with that constantly take their attention away from work. They may step outside and take personal calls, spend time on their phone sending emails and texts, or take a few minutes here and there looking at social media or corresponding with friends. Some employees may even be bolder and look for other jobs through company computers.
According to the Bureau of Labor Statistics, office workers put in an average of 7.8 hours of work time per day. It is estimated that remote workers put in an average of 5.6 hours of work time per day. The study found that remote workers spend a daily average of around two and a half hours doing household work (e.g., cleaning, laundry, etc.). When it becomes a serious time drain like that, it’s time for you to take action.
How to Prevent Time Theft
The best way to combat time theft is to prevent it with policies, tools, and procedures. You might think you just need to install office cameras or spy software on your company computers and, while you can do that, it doesn’t eliminate the core problem.
Create Attendance Policies
An attendance policy is an important piece of communication letting your employees know when they’re expected at work. It may also include a time theft clause discussing how it is against company policy to modify your own timesheet or clock in or out for someone else.
When your employees violate the policy by showing up late to work, you’re able to hold them accountable per your policy.
Use an Electronic Time Clock or Time Tracking Software
The best way to eliminate time theft is to use software that prevents it for you. With an electronic time clock system, you can prevent your employees from having a colleague clock them in or restrict them from changing their own timesheet. Employees clock in and out electronically with their own unique login information, creating a trail that, unlike pen and paper, can only be modified with your approval.
Time clock software can:
- Restrict where employees can clock in and out
- Prevent buddy punching
- Require regular time tracking updates on projects
- Restrict employee’s ability to modify their time sheets
- Run detailed reports on employee productivity, attendance, tardiness, and labor costs
Boost Employee Morale
A solid company culture will help prevent time theft because employees will be engaged, driven, and want to work. When you have a positive culture, it’s magnetic. This makes employees feel respected and more likely to respect your policies in return, including rules against time theft.
When you boost employee morale, it can have a trickle effect that leads to increased productivity, reduced turnover, reduced absenteeism, and better customer service.
Because managers set their employees’ schedules, they’re the best ones to monitor whether an employee is stealing time. Managers should receive training on how to review all time sheets prior to the employee getting paid. They may not catch everything, but a manager will be able to spot glaring errors that could be an example of time theft by an employee. Catching it before your team runs payroll gives you the chance to speak with the employee to gauge whether it was intentional or accidental and take appropriate action.
Some managers are diligent, whereas others are inattentive and sign off on time sheets without verifying whether an employee actually worked. Simple training on employee management can help managers stay on top of their time tracking duties.
EXAMPLE: You run a business with 100 employees and dozens of managers who approve timesheets.
- Over two years, one of your inattentive managers approved the timesheets of an employee without verifying whether they really worked.
- The employee manually entered the timesheets into a spreadsheet that he gave to the manager every two weeks. The employee only worked five days per week, but the manager didn’t notice that they routinely added hours for days they didn’t work.
- During the course of a routine HR audit, the employee’s timesheet discrepancy was uncovered.
- Because of the length of time this was going on and the number of hours the employee falsified, your company overpaid them $65,000 plus thousands more in employment and business taxes.
- It is time to consider terminating the employee and disciplining the manager.
You may not want to get involved in a time-consuming legal battle with a now-former employee, but that’s a substantial amount of money your company has lost, and other employees may take advantage of the situation if you don’t make clear that your company will not stand for this type of behavior.
Establish a Process
Through a robust performance management process, you can reduce and prevent time theft. When employees have regular and structured check-ins with their manager, the manager is immediately aware of any issues in the employee’s performance. If they’re consistently not meeting their goals, that could be a clue that they aren’t spending their time on work.
Proving an employee is stealing time is hard to do, but conducting regular performance reviews helps with two things:
- It alerts you that the employee might be stealing time because they aren’t meeting goals.
- It creates documentation for potentially terminating the employee.
That second point is important because you may need to cut ties with an employee who you suspect (but can’t prove) has been engaged in time theft. By documenting their underperformance, you have a non-discriminatory and legitimate business reason for terminating them.
Related: Check out our guide on how to conduct a payroll audit to ensure your payroll process complies with labor, accounting, and tax laws, and reduces occurrences of fraud, embezzlement, and wage theft.
Time theft itself is not actually a crime. While you may be able to sue your employee to recover losses, you will need to provide clear evidence that the employee falsified their time sheet and you overpaid them. In most cases, litigation simply is not worth your time and money. If, however, an employee has stolen lots of time, then you may consider a civil lawsuit to attempt to recover substantial funds paid to the employee.
When you suspect employees of time theft, there are few options for you. By taking steps to ensure employees understand the expectations you have for them, following the laws, and working with your managers to hold employees accountable, you can shift your culture to one where time theft ceases to exist.
Add to the mix the right time clock software, like Homebase, and you can take control of your employee’s time, proactively uncovering and eliminating time theft. Homebase offers a free unlimited scheduling plan for businesses with a single location.