Learn about time theft and how to spot 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 time they did not work, and it generally applies to hourly employees and nonsalaried employees. There are many ways employees can steal company time and, ultimately, steal company money by getting paid when they are not working.
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 new 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 company time and money. Try the free plan for unlimited employees today.
4 Ways Employees Steal Time at Work
1. Taking Extended Breaks
Many employees take extra or extended breaks during the day. An employee may leave early for a break or come back late. When it’s just a few minutes, the employee thinks nothing of it.
That doesn’t make it right or fair to the company or other employees. When an hourly employee takes advantage of not having to clock out for short paid breaks, they steal time and money from your company by getting paid without working. They also decrease your company’s productivity by reducing the amount of time they’re getting their work done.
2. Working on Other Jobs or Homework
In today’s work climate, many people hold more than one job. A recent survey found that one in three American workers has a side hustle, something they do for income besides their main job. And, another 61.1 million workers plan to start a new side hustle this year.
These people are following their passions and looking to supplement their income. But many times, that takes control of their day, and they may let their side hustle bleed into their day job. I’ve also witnessed some employees doing homework on the clock. It’s one thing if that’s allowed, but it’s time theft when an employee delays doing the work they’re getting paid for to complete homework.
3. Modifying Employee Time Sheets
I see many companies today still using pen and paper for their employees’ time sheets. This “honor system” is ripe for not only innocent mistakes but also employees taking advantage of their employer’s goodwill. Workers may exaggerate their hours, adding just a few minutes here and there.
Employees frequently round their hours, as well. If they leave the office at 4:52 p.m., for example, they may just 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.
Employees can also game the system with the help of their colleagues—it’s called buddy punching. 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 some time. This coordination between employees is time theft and results in economic losses for your company.
4. Doing Personal Activities During Work Hours
According to a recent survey aptly titled “Digital Distraction and Workplace Safety,” workers spend about two and a half hours each day on their phones or computers doing something unrelated to work. So, for an employee who works eight hours per day, you’re only getting 5.5 hours of productivity out of them, on average.
Employees may also have personal matters to deal with, constantly taking their attention away from work. They may need to step outside and take personal calls or spend time on their phone sending emails and texts.
Many employees spend 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. When it becomes a serious time drain like that, it’s time for you to take action.
Here’s what those statistics mean for your company. If you pay Steve $10 per hour and he regularly works 40 hours per week but is taking an extra 12-minute break per day, you’re paying Steve $10 extra each week. Over the course of the year, that’s an extra $520 you’re paying to Steve without him working—and that’s before you factor in all the taxes you’ll pay for his higher wage.
How to Uncover and Prevent Time Theft
To uncover time theft, you need to have clear policies in place. 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. The better way to combat time theft is to set up structures that prevent it.
Check out our top recommended time and attendance software for help preventing time theft.
Create and Communicate Attendance Policies
Attendance policies are important pieces of communication to let your employees know when they’re expected at work. An attendance policy may also include a time theft clause discussing how it is against company policy to modify your own time sheet or to 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. If they suddenly change their behavior after a quick chat with you, that could be an indication that they have simply resorted to time theft, especially if you still notice them coming in late.
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 they will respect your policies in return, like rules against time theft.
Train Managers to Monitor Time Sheets
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 before 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.
You run a business with 100 employees and dozens of managers who approve time sheets.
- Over two years, one of your inattentive managers, Jack, approved the time sheets of Allen without verifying whether Allen really worked.
- Allen manually entered the time sheets into a spreadsheet that he gave to Jack every two weeks. Allen only worked five days per week, but Jack didn’t notice that Allen routinely added hours for days he didn’t work.
- During the course of a routine HR audit, Allen’s time sheet discrepancy was uncovered.
- Because of the length of time this was going on and the number of hours Allen falsified, your company overpaid Allen $65,000 plus thousands more in employment and business taxes.
- Time to terminate Allen, potentially sue for fraud, and discipline Jack. Because of the amount of money stolen by Allen, it may also result in criminal charges as well.
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 Performance Management 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 if you can show through regular performance reviews that an employee is not meeting their goals, this does two things for you:
- 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.
Use an Electronic Time Clock
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 time sheet. 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
Time Theft Laws
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 that 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 lawsuit to attempt to recover substantial funds paid to the employee.
Fraud laws vary among jurisdictions, but it’s generally the idea that one person intentionally deceives another person or company for their own financial gain. Fraud lawsuits can be both criminal and civil, although only prosecutors can file criminal charges.
For a civil claim against an employee, you will need to prove that the employee falsified their time sheets. If you can prove that, the court may order your employee to pay your company restitution, court and attorneys’ fees, and maybe even additional damages.
But your attorney fees can quickly get high, something you’ll need to cover to start. Even if you get a favorable outcome, the employee may not be able to pay the judgment and that’s why most employers choose a disciplinary route instead of a legal route, except in extreme cases.
We know in exceptional circumstances you may have legal options to pursue compensation from your employee. Many employers understandably do not want to go down that route and would rather handle the issue in-house. Disciplining the employee per your company policies is the right move in this situation, but make sure you pay attention to wage and hour laws.
The FLSA requires employers to pay employees for any hours the employee works. If you suspect an employee is not working for part of their shift, you might conclude that you can deduct pay.
While you’re right that, you only need to pay employees for hours worked, you may have difficulty proving the employee didn’t work all the hours they reported on their time sheet. If you have no evidence, it’s not worth your time to deduct pay. You may quickly find yourself in a costly wage and hour lawsuit.
Even if you do have evidence the employee falsified their time sheet, if it doesn’t amount to substantial funds being stolen, it’s simply not worth the risk on your part to deduct pay from the employee. The best way to recover from time theft by employees is to prevent the practice.
When you suspect employees of stealing time from you, there are few legal options for you. But by taking steps to ensure employees understand the expectations you have for them 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.