Combating Time Card Fraud

Time card fraud is very real –and more common than you might think.

In fact, according to the Association of Certified Fraud Examiners, it’s coellnsidered the number one source of accounting fraud and employee theft. While payroll fraud happens in 27 percent of all businesses, it happens nearly twice as often in companies with fewer than 100 employees than it does in bigger organizations.

No business is above time card fraud, and many have employees who are actively participating in it. Whether it’s in the form of time card falsification –the most common method of time theft, or paying ghost employees –workers that don’t exist, time card fraud is a form of theft –and workers that engage in it are stealing from their employers. It’s estimated that time theft costs billions of dollars in lost productivity annually.

While time theft can have devastating consequences, the good news is that there are ways that you can take action to reduce the chance of it happening in your company. Let’s take a look at a few ways that you can help to keep your workers honest.

Require a Manager’s Approval

Many companies require a manager to sign off on employee time cards before the payroll is processed. The manager is responsible for checking and comparing the hours that the employees say they worked, with the hours they were actually approved to work. Any discrepancies can them be cleared up with the manager and employee before the time card is processed. Having a level of accountability introduces an extra ‘checkpoint’ in which fraud could be detected, and can help to discourage workers from fabricating their time card data.

Consider Surveillance Cameras

Strategically placed surveillance cameras can allow you to monitor your staff to ensure that they’re at their stations working when their timecards state that they are. Sometimes, something as simple as a surveillance system can be enough to keep your employees honest.

Update Your Time Card System

A good up-to-date time card system will include systems to help with time card fraud prevention. Most time card options today are internet-based, and some even require GPS verification, as well as other security measures such as fingerprint or smartphone verification, making it far more difficult for workers to falsify data –or clock coworkers in. These types of systems are especially important if your company has grown to a point where you can’t personally supervise your employees, and aren’t there to verify when they clock in, and out. It’s also invaluable for companies with employees that are out in the field, or working remotely.

Develop Clear Policies and Procedures

Having clear policies that state exactly what is expected of your employees, as well as procedures that outline the consequences of falsifying timecard data can help to discourage your workers from committing time card fraud. Make sure your workers have read –and signed the policies, and ensure that you follow procedure when someone is found to be falsifying timecard data. Of course, it’s a good idea to run your policies by an attorney first, to ensure they are in compliance with the law.

Prove That You Care

Workers who recognize that you take time fraud seriously, and know that you actively track their timecard data will be less likely to cheat. Consider implementing systems for reconciling your payroll at least quarterly –with someone other than your worker who regularly does the payroll.

Contact Your Attorney

Finally, while issues with falsification can usually be easily corrected if they’re discovered within the same time period during which the discrepancy occurred, if an investigation reveals ongoing time card fraud, or uncovers an issue with time card data after the wages have been paid, it’s a good idea to seek legal counsel. This will help you to understand the actions that you can take to recover lost funds, and may also give you information that you need to prevent such losses in the future.

Time card fraud involves everything from covering for coworkers and blatantly falsifying data to smaller issues such as rounding hours up. All time theft is serious, though, and can add up over time. According to the American Payroll Association (APA), the average employee takes anywhere from 50 minutes to 4.5 hours per week by showing up late, leaving early, and taking extended breaks and lunches.

Your best defense against time theft is to make sure you have systems in place to help reduce the chance of it occurring at your company. You’ll also want to ensure that you handle any occurrences with time theft in a way that’s effective –and in accordance with the law.