It would be very noticeable if an employee were stealing a large number of office supplies or inventory. Unfortunately, employee time theft is not as obvious to spot and control. While a few minutes here and there may not seem like much, added up over several years and several employees, the time and cost can be significant. It can take a considerable toll on an employer’s payroll and ROI.
A survey conducted by the American Society of Employers determined that 20% of every company dollar earned is lost to employee time theft. This equates to a loss of more than $400 billion per year. A minute or two can add up to a significant loss for a company. Every penny counts in business, so business owners and managers must do all they can to minimize time theft. At the same time, there is also a fine line between tracking time and making your employees feel like they are in a prison camp.
How Time Theft Occurs
The most common types of time theft include:
- Buddy Punching
- Early departure or check-in
- Longer than approved breaks
- Unauthorized overtime
- Personal tasks during work hours
By far, the largest cause of time theft is due to what is known as “buddy punching.” For one reason or another, some employees buddy punch by having a fellow employee clock in for them. According to the American Payroll Associate, 75% of employers are affected by buddy punching.
To put this in context, on average, an employee receives 4.5 hours of wages for hours they did not physically work when buddy punching is the reason. At the current minimum wage of $7.25 per hour, this equals to more than $30 lost in payroll per week. While $30 a week may not seem like much, over a year that comes up to over $1,500 per employee. Since most small businesses employ less than twenty people, multiple workers buddy punching for each other could cost your payroll department an unnecessary $30,000 a year. Now, consider if your employee earns well above minimum wage and you have more than twenty employees. You can see how these numbers can quickly accumulate and cause significant loss.
Another very common way time theft occurs today is due to misuse of time spent online. With most electronic devices have some form of internet connectivity. A quick minute spent checking social media or shopping can quickly add up to hours of unproductive time.
There are many perks to allowing employees to work from home (e.g., less office space and supplies needed, lower costs associated with technology, etc.). However, there are many employees who take advantage of this convenience and spend very little actual time working.
Then there are the always-present problems when a large workforce is present: time wasted on idle conversation, unauthorized breaks, and those employees who “watch the clock” to fill their required shift. Some employees go to great lengths to avoid having to do more work than necessary.
Time theft is also commonly seen in companies that have remote workers or remote job locations. Unnecessary travel time and unauthorized personal stops can quickly add to unprofitable time.
Most employees do not usually fully understand the true extent of the problem. Gretchen Van Vlymen, vice president of an HR service company named StratEx, said: “Employees don’t always understand why it’s such a big deal — a few minutes here or there, we’re human, but on a larger scale, it adds up and costs employers money. It seems dramatic to call it ‘theft,’ but it is because we’re paying you for every single minute.”
Can Technology Help Minimize Time Theft?
In 2017, QuickBooks conducted a survey to find out what method employees used to track their time at work. With as readily available and affordable as technology is today, 38% of employees surveyed were still using manual methods like paper time cards and the traditional punch clock.
Some companies have turned to technologically advanced time-tracking tools to help minimize time theft. Some software and tools allow you to see precisely what your employees are doing at every minute of the day. Are they sending emails, using a document processing program, or just randomly browsing the internet?
It is challenging for employers to detect time theft without some form of technology. Biometrics is a very secure option to make a significant cut in buddy punching and other common types of time theft. Fingerprints, eye scans, and faces are hard to fake. However, there are still some downsides to technology – biometrics can be expensive to implement and slow down the clock-in/clock-out process which can be detrimental in a quick-moving environment.
While automated employee time clock software is undoubtedly extremely helpful in minimizing time theft, some employers feel that technology alone can reduce time theft. This is not necessarily true, unfortunately. Accurate timekeeping must have a strong foundation built on clear policies, proper training, and consistent enforcement. No amount of technology can take the place of that.
A Greater Problem Than Time Theft
What issue can be more pressing about time tracking than employee time theft? Recent years have seen a spike in class-action lawsuits brought against employers for off-the-clock work or uncompensated time on-the-clock. This should be the greater concern.
Everyone feels the pressure to keep overtime expenses and unnecessary hours to a minimum, but managers and business owners should be cautious of underreporting hours as well. Attorney Michael Puma, a partner at Morgan, Lewis & Bockius, LLP, cautioned: “You need a good policy that reported work hours must be accurate; you don’t want over- or under-reporting.”
To accomplish this, you must first clearly define what qualifies as “work.” Legally, employees must be compensated for work even it is performed outside of regularly scheduled hours, not requested, or unapproved. While the work was not approved and the employee should be corrected, they still must be paid for the work performed.
Employers need to careful that they do not encourage or suggest that employees not report all time worked. Even though an employee may take a few minutes to take care of a personal matter on-the-clock, be careful about deducting paid time. Legally, they are still usually considered “working.” It is always best to err on the side of caution when it comes to this. Attorney Puma warned, “Even for exempt employees; you can lose their exemption if you start taking partial-day deductions.”
An excellent way to guard against large employee class action suits is to maintain a strict policy and to review them consistently. In doing so, it will be relatively easy to identify any issues, correctly train employees, and address any other related problems. It is also wise to have employees sign an acknowledgment of these policies annually. The more protection you can have in place for your company, the better.
The legal limits and liabilities associated with payroll and employee time tracking are other concerns regarding tracking your employees’ hours accurately. While technology enables employers to monitor nearly everything employees do while on the clock, it is not always wise to do so. Just because you can, does not mean you should. There are two aspects of this to consider.
Employees can easily feel that their privacy is being invaded or feel as if management does not trust them. Excessive monitoring can lower morale and cause workers to harbor feelings of resentment and mistrust towards management. Use common sense in this area.
Another aspect of applying or installing monitoring systems is the legal aspect. For example, while it is perfectly legal for employers to monitor employees while they work, it is illegal to use monitoring devices in a cafeteria where employees discuss personal matters, in bathrooms, or locker rooms. Be sure to know federal and state laws and limits regarding employee monitoring.
Properly Educate Employees
Even though it was previously mentioned, it is imperative to stress that the first step in minimizing time theft is to educate your employees properly. Yes, there are plenty of workers who intentionally steal time, but there are also those who do not even know they are misreporting their time. The more specific you can be about your time off/time on policies, the better. Try to cover every common scenario your employees will encounter on a day-to-day basis.
Dealing with time theft is an unfortunate task that all businesses must take on. To help make time tracking as easy and uncomplicated as possible, consider investing in employee time clock software that is easy for your employees to use. It will give you and your employees peace of mind that their time is being tracked accurately.