Time theft is a common and costly issue for employers. In fact, 24% of US employees admit to committing time theft, averaging 4.5 hours per week. This amounts to over nine billion fraudulent person-hours annually to employer accounts.
The impact cuts across the organization, from staffing requirements to bottom-line profitability. A lack of perceived fairness can hurt employee morale, leading to further damage.
Employers must understand the causes of employee time theft and how to address it.
What is Time Theft?
Time theft is when employees receive pay for hours that they have not worked.
Usually, employee time theft is an issue for employers who manage hourly workers. Hourly workers often complete timesheets, making it relatively easy for them to exaggerate their hours. While there might only be slight adjustments, these false claims add up throughout the year.
One of the most significant problems of employees committing time theft is that it often goes unnoticed. Unless one actively looks for instances of time theft, it is easy to miss. Time theft itself certainly is an issue, but more than that, it is often related to other workplace issues. The longer the problem continues, the worse it gets, and the more costly it becomes.
Six Forms of Time Theft
1. UNAUTHORIZED CLOCKING IN AND OUT
The employee has a co-worker clock them in or out when they’re not in attendance. This is called buddy punching, and an example is asking a co-worker to clock you in if you are running late.
Improperly clocking a worker in or out is a deliberate offence and can result in discipline or termination after corrective measures have been taken and ignored. A solution is a time and attendance system that makes it difficult, if not impossible, for employees to clock in or out for one another—for example, limiting clocking in to specific mobile phones.
2. DISAPPEARING ON THE JOB
In some work environments, such as vast offices or outdoor work sites, it can be easy for an employee to stroll off without being seen by a supervisor. It could take time for this theft of company time even to be noticed; unfortunately, it can seriously impact operational efficiency.
Companies with remote work can also encounter this issue. Remote work can be distracting, with employees facing everything from chores and errands to leisure activities.
To identify this problem, you can monitor which employees’ productivity has decreased. If you suspect an employee of stealing time at work, keep closer tabs on that individual. If your employees are remote, random video conference check-ins could help ensure they are at their workstations.
3. MISUSING BREAKS AND PERSONAL TIME
Employees should be encouraged to take breaks. It’s great for their mental health and productivity. In many cases, you’re also legally required to give your employees paid break time during their shifts according to the U.S. Labor Standards Act (FLSA).
It’s also okay for employees to occasionally handle personal business from the office. A healthy work environment allows people to balance their life priorities with their work. As long as productivity doesn’t suffer, there’s no harm in employees taking a break during company time.
However, problems can arise when employees abuse their lunch breaks and personal time. If they are taking extended breaks or numerous smoke breaks, the time adds up.
Considerations of what is reasonable come into effect. For example, a team member who makes phone calls from work to schedule an appointment is probably not stealing time. You don’t need them to clock out to make a quick call. On the other hand, an employee who regularly browses social media, does their online shopping, chats with friends, and drives to the local coffee shop a couple of times a day is a different story.
There are two things to consider about this type of time theft:
- How much are employees working while they’re on-site? You could pay for hours’ worth of work each day that never gets done.
- What is the cost of workers using work-related equipment for personal purposes? Employers pay for resources like ink and paper, internet access, and utilities. Non-business use of workplace property can result in extra expenses.
4. DISTRACTIONS FROM WORK COMPUTERS
Millions of jobs involve employees working on desktop computers or laptops. If you provide this equipment to your employees, they could abuse their usage to steal time at work.
One way to restrict this abuse is to place a company-wide block on any external websites that enable the misuse of computers. Again, considerations of reasonableness come into play.
This is extra IT work that may or may not be worth it to you. There can be an increase in productivity, but employees might feel overly restricted if they can only perform work tasks on their computers.
5. EMPLOYEES’ ROUNDING TIME UP
Different time and attendance software could round time differently. Some systems may round to the nearest 15 minutes (0.25 hours), while others round to three-minute increments (0.05 hours). These rounding systems provide employees with another opportunity to steal time.
Employees sometimes stall the clock before officially clocking out to round up their time, especially if they feel they may fall short of their daily hour requirements. According to the U.S. Department of Labour, you can legally make time-rounding adjustments for your employees. If you can demonstrate that an employee is intentionally stalling to round their time up, you may be able to fix the distorted timesheet.
6. MOBILE PHONE USAGE
Mobile phones are the ultimate distraction, no matter who you are. Employees may be too preoccupied with their phones on the job, causing a decline in their work performance.
According to Consumer Affairs, Americans, on average, look at their phones 144 times a day and spend 4.5 hours on them. Employees might get distracted browsing social media, making long phone calls, texting friends, playing games, or shopping online.
A cell phone policy helps ensure employees understand your phone usage expectations.
Business Impacts of Time Theft
FINANCIAL COSTS
When it comes to hourly workers, every minute counts, literally. While an individual employee may see it as a bit here and a bit there, when you have 50+ employees, it adds up very quickly.
For hourly employees who earn $20 per hour and exaggerate their timecards by 4.5 hours per week, the cost of time theft is $ 4,680 per year. If 24% of a 100-person company does this, it adds up to $112,320 per year.
EMPLOYEE CONFLICTS
Often, employees engaging in time theft can make other, hardworking employees resentful. As you can imagine, this resentment can lead to frustration, which can lead to conflict in the workplace. These conflicts impact the entire workforce and can lead to deeper issues with morale, absenteeism, teamwork, and possibly even turnover.
LOST PRODUCTIVITY
Time theft ultimately leads to lost productivity. Tasks go unperformed, or staff might need to be reassigned or new employees hired. There’s an opportunity cost to the lost time, as the employee can work on new projects or be helpful in other aspects of the business.
This impacts production, operations, customer service, and other crucial business functions. This could further increase the financial costs of time theft for your organization.
How to Prevent Time Theft
Time theft doesn’t happen in a vacuum. A lack of policies, culture, and systems all contribute to an environment that enables time theft. Careful review of the situation and proper implementation of new standards can help rebuild accountability, improve productivity, and reduce time theft.
CREATE A CLEAR TIME & ATTENDANCE POLICY
Time theft generally results from poor time and attendance procedures. If this is the case for your company, it’s time to create a clear time-and-attendance policy. This policy should cover clocking in and out procedures, break periods, and the use of company time for personal tasks.
It should also detail the disciplinary actions that will be used to discourage time theft.
Once the policy has been created, be sure to educate employees on it and incorporate it into your employee handbook. It can also help to ask your employees to sign a declaration saying that they have read and understood the policy.
It is also essential to follow through on these new procedures from the beginning so that employees know how serious time theft is.
IMPROVE EMPLOYEE ENGAGEMENT
Often, employees who carry out time theft are not well-engaged. Employees who struggle with motivation are much more likely to pad timesheets or use company time to complete personal tasks. Well-engaged employees, on the other hand, are generally punctual, honest, and committed to their work.
There are many steps you can take to improve employee engagement across the board. Regular check-ins with employees, regular feedback, and other ways to improve communication can help. Incentives, flexibility, and different ways to increase employees’ job benefits can also improve morale.
USE TIME TRACKING SOFTWARE
Accurately tracking time and attendance is a powerful tool to reduce time theft. Time and attendance software can improve every element of your process, from how employees clock in and out to how attendance is matched to hours worked.
Some features to look for:
- Mobile App – Employees can check in and out of shifts directly from their mobile phones, preventing buddy punching of any kind.
- Automated attendance matching – Use data from employee check-ins and outs for payroll. Exporting data directly to payroll reduces the risk of payroll errors. It also tracks clock-in/out data down to the minute, rather than rounding up/down to the nearest 15 minutes. This ensures you pay only for the time your employees actually work.
- GPS-verified geofenced check-ins. Employees on the road or out in the field can only check into their shifts once they are on site. This prevents time sheet padding by mobile workforces.
Track Time and Attendance Accurately
By understanding their workers, setting clear and reasonable expectations, and using precise time-and-attendance tools, businesses can maximize productivity, foster a good work environment, and reduce employee time theft.
Discover how to improve your time tracking and sync smoothly with Payroll.
