Time Theft Explained: Strategies to Combat Unauthorized Time Usage at Work
Time larceny in the workplace is a widespread and costly issue. The lengths an employee goes to steal time can range from small discrepancies to large-scale scams, often flying under the radar for years. Research by Statistic Brain shows that employee time theft costs businesses around $50 billion annually.
Businesses often overlook the damaging impact of misreported time, and small inconsistencies can add up to a significant financial loss over time. Just like a tiny leak in a boat, it may not sink you all at once, but if left unaddressed, it can cause great harm.
This type of theft can result in severe profitability problems and even contribute to business bankruptcies, with up to 33% of bankruptcies attributable to it. The average employee steals 4.5 hours of wages each week, equating to almost 6 weeks of wages over a year of misreported timesheets. For a $20/hour employee, this equates to a loss of $4,680 in stolen wages every year.
Time theft isn't solely about adding extra hours to time cards. There are various ways employees steal time or inflate their wages. This guide will delve into the reasons behind time theft and provide strategies for business owners to prevent it.
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What is Time Theft?
Time theft is the act of manipulating the system to receive pay for time not worked. Employees employ various strategies to steal time, all boiling down to receiving wages without performing the necessary work.
In addition to the obvious financial loss, time theft can have a ripple effect within a company. A team member stealing time can negatively impact productivity, motivation, and overall morale. As a hard-working employee watches someone else make the same amount for less work and poorer results, it can erode trust and lower the overall quality of work.
The Consequences of Stealing Time
Even employees who accurately bill their time can experience a decline in productivity in a time theft-prone environment. Businesses may not even realize that their overall attendance and productivity levels are far lower than they should be due to time theft. Over time, low performance can become the new norm.
As morale dips, employees are more likely to adopt similar behaviors. They may take extended breaks, arrive late, leave early, and use work hours for personal tasks more frequently. In some cases, an employee who consistently gets away with time theft may even encourage coworkers to do the same.
Types of Time Theft
The longer you ignore time theft, the more it multiplies. A reluctant employee may become more daring as time passes without consequence. To help management spot this costly issue, businesses should understand the various ways time theft occurs:
Buddy Punching
Although old-fashioned time clock systems are less prevalent, buddy punching remains a common occurrence. Buddy punching happens when employees help one another deceive the time clock. Instead of clocking in or out themselves, an employee has their coworker begin or end the time clock on their behalf.
In some cases, the entire team participates in a buddy punching scheme, with the first person to arrive at work clocking everyone in, and the last person to leave clocking everyone out. This results in the longest shift possible for the entire team, regardless of actual work hours. In other situations, it's less organized, with an employee asking a friend to clock them in early, or someone leaving early and getting a coworker to clock them out at the end of the day.
Regardless of the method, buddy punching means paying for time that wasn't actually worked.
Timesheet Fraud
Inflating or falsifying timesheets to receive extra pay is called timesheet fraud. Sometimes, time card inaccuracies result from accidental mistakes, particularly with manual timesheets. While not the same as timesheet fraud, these errors can still be costly for employers.
An employee might round their time cards to the nearest hour, even if it means receiving pay for 15 or 30 minutes they didn't work. Although they may not intend to inflate their timesheets unfairly, these minute additions can quickly accumulate.
Consider an employee who is expected to work from 8 AM to 5 PM, with a one-hour lunch break. If they actually arrive 15 minutes late every morning, take an additional 10 minutes for lunch every day, and always leave the office by 4:30 PM, they file their timesheets to reflect their assigned schedule. Each week, this employee is paid for 4 hours and 35 minutes that weren't worked.
This type of employee time theft can also occur when employees add hours to their timesheets to earn overtime or to cover up time they weren't present as scheduled. The discrepancies can be substantial.
Employees may alter their time clock information or claim they forgot to turn on the app to add hours to their paycheck. Keep an eye out for significant alterations or employees who frequently "forget" to turn on their work timer to detect potential timesheet fraud attempts.
Using Breaks and Personal Time Inappropriately
It's essential to encourage employees to take breaks and handle personal matters during work hours, but only within reason. Misusing breaks and personal time can lead to significant financial losses and increased expenses.
For example, an employee who makes numerous personal phone calls from work, frequently takes extended breaks, and makes frequent coffee runs can result in substantial losses, both in terms of lower productivity and higher costs for resources like ink, paper, internet access, and utilities.
There are two primary areas to consider when addressing this type of time theft:
- How much actual work is being accomplished during work hours? You could be paying for hours of work that go uncompleted.
- What are the costs of employees using work-related equipment for personal purposes? Employers bear these expenses. Inappropriate use of workplace property can cause additional costs.
Unauthorized Overtime
Overtime pay can be justified when needed to meet tight deadlines, but it usually requires prior approval due to associated labor costs and budget considerations. Some employees try to pad their paychecks with unnecessary overtime hours.
According to the Fair Labor Standards Act, you must pay for overtime at time and a half for any hours over 40 in a workweek, whether authorized ahead of time or not. Time theft through unauthorized overtime is obvious – one employee might work more than 40 hours per week, even after being asked to stop at 40 hours.
If you have an employee continuing to clock unauthorized overtime, you may need to have their manager monitor their work hours throughout the week. Once they reach 40 hours, the manager must send them home to avoid the additional pay. Despite being unauthorized, you cannot refuse to pay overtime for hours that have already been worked – doing so can lead to legal issues. For persistent offenders who fail to comply with overtime policies, termination may be the only option.
How to Stop and Prevent Employee Time Theft in your Business
Preventing and stopping time theft requires a multi-step approach:
1. Create a Time Theft Policy
The first step to deter time theft is to establish an organizational time theft policy. Include:
- Behaviors considered time theft
- Behaviors that may be abused
- The consequences for breaking the rules
Once your policy is in place, ensure it is clearly communicated to your team. Be transparent about why you've implemented this policy and explain the impact of time theft on both the business and the individuals involved.
2. Use the Right Time Tracking Software
The right time tracking software can significantly reduce time theft and provide accurate labor data. Time tracking technology has advanced considerably, and while it isn't impossible to fool time tracking software, it does require more effort.
Good time tracking software should be easy to use, provide productivity tracking, cater to role-specific needs, allow for automation, and offer transparent reporting for both the employer and employees. Hubstaff provides location-based time tracking and detailed reporting, making it an excellent choice for businesses concerned about time theft.
3. Check In, but Don't Intrude
Regularly checking on your team's progress and ensuring time tracking is accurate is crucial, but be mindful not to micromanage. Monitor your team's work primarily to identify problems that make it easier for them to complete their tasks, rather than to catch those not performing well.
Use Hubstaff's hub to see where your teams are on a live map, as this allows you to track shifts without needing to physically visit the job site. This saves time spent driving from location to location just to check in.
4. Foster Open Communication
Transparent communication is vital for a successful team. Start by being honest and open about your decisions, and provide access to information for your whole team. Lead by example by being receptive to feedback and acting on it when appropriate.
When you genuinely show that you care about your employees, they will take notice.
5. Address Time Theft Cases
If you've already faced time theft in your business, address it promptly. Depending on the situation, you may have options to recover stolen wages. Consult with a corporate attorney to determine the best course of action, taking into account state and country labor laws.
Job Theft in the Modern Workplace
This post was originally published July 18, 2019. It was updated with additional information and resources on August 11, 2020.
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Overall
Employee time theft is a pervasive problem that can significantly impact a company's bottom line. Implementing a clear time theft policy, employing the right time tracking software, checking in on your team without being overbearing, fostering open communication, and addressing time theft cases are all crucial aspects of preventing and stopping time theft. By addressing these issues, you can maintain a productive and motivated workforce while protecting your organization's financial health.
Common Methods of Employee Time Theft
- Buddy Punching: One employee clocking in or out for another who is absent, late, or leaving early
- Time Clock Theft: Intentional manipulation of time clock records, including buddy punching
- Timesheet Falsification/Padding: Inflating work hours by rounding up clock-out times, adding extra minutes, or claiming unauthorized overtime
- Excessive Breaks/Unauthorized Breaks: Taking longer breaks or breaks during non-work times without recording the non-work time
- Late Starts/Early Finishes: Recording incorrect start or end times, resulting in incorrect pay
- Personal Searches and Distractions: Non-work-related activities like browsing social media or online shopping during work hours
Time theft can have a significant financial impact on businesses, often contributing to loss of productivity and even corporate bankruptcies. The types of time theft include buddy punching, timesheet fraud, inappropriate use of breaks and personal time, and unauthorized overtime. To combat this issue, businesses can create a clear time theft policy, implement a reliable time tracking software like Hubstaff, ensure open communication, and address cases of time theft promptly. Regular checks on the team and fostering a productive work environment can also help reduce time theft. Business owners must recognize that time theft is not solely an issue of adding extra hours to time cards, but also includes various forms that can lead to substantial financial losses.
