Understanding and preventing employee time theft

We’ve all heard the classic phrase ‘time is money,’ but it applies to your employees in the most literal sense. Every hour worked equals an hour paid, but are your employees truly being productive during their billed hours? Or, more nefariously, are they intentionally billing for extra work hours where nothing actually gets done?

This is known as time theft, and it’s an issue that affects more businesses than you might think. In fact, employers lose an average of 4.5 hours of productivity per week due to time theft.

Additionally, 75% of companies lose money from ‘buddy punching,’ which is where co-workers clock in and clock out fellow employees who aren’t actually present. Buddy punching is only one type of time theft, as there are numerous other ways employees can steal time without their managers ever catching on. Taking extended breaks (and frequent smoke breaks), disappearing on the job, and completing personal tasks during the workday are all common ways that employees get away with time theft.

While it may seem like a missed punch or an extra 15 minutes of paid work time isn’t a big deal, these numbers quickly add up.

If you don’t have time theft policies in place at your organization, stolen time could negatively affect your bottom line by a significant margin. Stay tuned to learn more about time theft, why it happens, and how you can prevent it.

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Distinguishing reasonable downtime from time theft

Before we proceed, it’s important to clarify that what qualifies as time theft varies from organization to organization. Also, some positions have more downtime than others.

For example, security guards, librarians, receptionists, and hotel night auditors tend to have a lot of downtime due to the nature of their jobs. As a result, if these employees quickly check their smartphones or order something online during their downtime, it doesn’t necessarily qualify as time theft.

If, instead, they’re taking extended breaks (while clocked in) and are having co-workers punch them in when they’re not actually there—they’re committing time theft—and disciplinary action is necessary.

Some managers have the false assumption that salaried employees can’t commit time theft. Their thinking is since they don’t get paid by the hour, stealing time isn’t possible.

However, this is not true.

Despite the time clock being out of the picture, salaried employees can still commit time theft by making personal calls, taking longer breaks, failing to report PTO, and giving in to distractions like surfing the web or watching streaming services.

That means you shouldn’t forget about your salaried employees when developing time theft policies. Your management team will have to pay an equal amount of attention to salaried staff in addition to your hourlies to ensure that no form of time theft is taking place.

How much will time theft cost your organization?

A little bit of lost productivity here and there doesn’t sound like much of a big deal, which is why some professionals tend to ignore time theft. Yet, when you do the math, the actual negative impact of time theft starts to shine through.

For instance, let’s say that you have an employee named Jeff who’s scheduled to work from 7:00 AM to 3:00 PM on Monday through Friday. He’s an hourly employee that gets paid $18 per hour. In reality, Jeff shows up at 7:05 AM, but his buddy Nate, who gets there at 5:00 AM, punches his time card so he doesn’t appear late.

Nearing the end of his shift, Jeff noticed that he could sneak out the back at 2:50 PM to get a headstart on the traffic. To hide the fact that he left early, Jeff found a way to access the time-tracking software remotely — enabling him to clock out on the go. Adding all this together, Jeff steals 15 minutes of company time every single day, which adds up to an extra $22.50 you’re paying him for nothing.

At first glance, this doesn’t seem like much, but that number keeps growing over time. You’re paying Jeff 5 extra hours per month, totaling $90. Over the course of one year, Jeff earns an extra $1,080 due to stolen time. That’s great for Jeff, but it’s bad news for your bottom line.

To make matters worse, Jeff is only one employee, and 1 in 4 employees admit to reporting more hours than they actually work. So, if you have 10 Jeffs at your organization, your company is losing $10,800 every year – and it’s happening right under your nose.

All that loss and each employee was only stealing a measly 15 minutes every day. That’s why time theft is a serious issue that you shouldn’t ignore, as it can easily get out of hand and cost your company thousands of dollars.

Why do employees steal time?

What would motivate an employee to commit time theft? This is almost an impossible question to answer, as there are countless reasons why time theft occurs in organizations.

For instance, sometimes time theft occurs completely by mistake. It could be that an employee forgot to clock out on your attendance software, causing them to get billed for hours they didn’t work.

Other times, distractions are the culprit. Many employees have access to their smartphones and company computers during the workday, both of which present numerous distractions. If an employee is bored or doesn’t have much to do, they may do things like check their personal emails, browse online shopping platforms like Amazon, or make personal phone calls.

Unless downtime is allowed (like for the positions mentioned earlier), this still counts as a form of time theft for most companies.

Why is that?

It’s because they’re engaged in personal activities during paid work hours, which doesn’t provide any value to the organization. For the most part, employees should save personal tasks for break time.

Intentional time theft

Putting aside all unintentional causes of time theft, there are plenty of instances where employee theft is conscious, premeditated, and very intentional. These are the cases where employees bill extra hours, use ‘buddy punching,’ take extended breaks on purpose, and neglect their responsibilities.

9 times out of 10, these instances take place because the employees feel undervalued. It could be that your employees are overworked, disengaged, or under-compensated. Whatever the cause may be, some underappreciated employees choose to steal time as a way of recovering the benefits they feel they rightly deserve.

Consider a scenario where a company has to cut labor costs due to underperforming financially. Despite cutting employee hours (and pay), the employer expects everyone to pick up the slack by doing more with less.

Overworked and underpaid, some employees begin gaming the attendance system to recoup some of their lost income. Ironically, this winds up hurting the organization even more due to the money lost from time theft. The best way to cut down on these types of time theft incidents is to improve your employee morale and engagement levels.

Research shows that when employees are highly engaged with their work, they’re far less likely to commit time theft.

Is time theft considered a crime?

We’ve already gone over how detrimental time theft can be to an organization’s bottom line, but is it actually illegal? In other words, are there any federal laws that make stealing time against the law?

Unfortunately, the answer is no. Therefore, in most instances, time theft is a form of employee misconduct and is not considered an illegal crime. Having said that, this doesn’t mean that time theft should go unpunished.

It should be your policy to meet time theft with harsh disciplinary actions like:

  • Written warnings

  • Verbal warnings

  • Loss of privileges (especially if the employee was using their privileges to steal time, like viewing social media content on a company iPad instead of working)

  • Retraining on core job duties

  • Demotion to a lower role with fewer responsibilities

  • Implementing a performance improvement plan to get the employee back on track

  • Suspension for a specific period of time

  • Termination

These are all acceptable disciplinary actions you can take if you catch an employee stealing time intentionally. However, you should NOT withhold employee wages, tempting as it may be, as this is against the law.

Some employers want to withhold wages equivalent to the amount lost due to time theft, but this is in direct violation of the Fair Labor Standards Act (FLSA). According to the FLSA, withholding wages is a form of wage theft, so trying to recoup the money you lost isn’t a possibility — and could land you in hot water with the federal government.

There is an exception to the misconduct rule, though. If an employee commits fraud or breaks the law to steal time (such as forging signatures or falsifying records), you can press criminal charges.

Yet, if they were simply taking longer lunch breaks or spending time taking care of personal errands, it reverts to an act of misconduct.

The most common types of time theft (and how to prevent them)

Now that you’re more familiar with what time theft is let’s look at some of the most common ways that employees steal time. Some types are more severe than others, such as falsifying time sheets and manipulating time clock software, as they count as acts of fraud. Other types are less nefarious, such as online shopping during an employee’s downtime.

Unauthorized clock-ins (buddy punching)

The most common type of time theft is buddy punching, where an employee clocks in a co-worker despite them not being physically present. In most cases, employees resort to buddy punching whenever they have trouble making it to work on time.

Rather than face a reprimanding due to tardiness, they opt to send a quick text to a co-worker asking to clock them in at the normal time. More often than not, buddy punching is not a one-time thing.

Once employees realize they can get away with it, buddy punching becomes part of their routine. That’s a big reason why 75% of companies lose thousands of dollars every single year due to unauthorized time punches. It’s a serious issue that affects organizations from every industry, but there are ways to stop it from happening.

In particular, timekeeping software that uses biometrics renders buddy punching virtually impossible.

They work by recognizing each employee’s fingerprints. Instead of pressing a button to clock in, employees press their finger into a sensor. Since everyone’s fingerprints are 100% unique, there’s no way an employee can clock in a late co-worker. If you lack the budget for biometric time clocks, you should closely monitor employee attendance both in-person and through the back end of your attendance software.

Vanishing on the job

Some employees are skilled at pulling off disappearing acts, where they vanish during work hours so they can duck their responsibilities. This is easier when the work environment has lots of open spaces and areas to hide, like large offices and outdoor job sites. It’s also particularly easy for remote employees to disappear for hours on end, likely falling down a YouTube rabbit hole instead of working.

What should you do if you suspect your employees are disappearing and neglecting their duties?

First, you should keep a close eye on your employee productivity levels to spot instances of time stealing as soon as they occur. If you notice the productivity level of a specific employee starts to dip, you should monitor them during the day to see what’s causing the lull.

Should they be disappearing during work hours, swift disciplinary action is recommended. You should enact clear policies that discourage disappearing on the job to deter your staff from giving in to the urge to disappear.

Geofencing is another way to prevent employees from vanishing on the job. It uses GPS or RFID technology to designate a ‘work zone.’ Should one of your employees leave this zone, you’ll receive an immediate notification, which will make disappearing during work hours virtually impossible.

Taking excessive or extended breaks

Do you have an employee who’s constantly stepping outside for a cigarette? If so, you’re essentially paying them to smoke, which isn’t going to help your bottom line.

Besides smoke breaks, some employees will extend their regular lunch breaks to steal a little extra time on the clock. They do this by clocking back in early while they’re still on break or not clocking out at all. It’s understandable if an employee goes 5 minutes over their break time on isolated, rare occasions. However, if they take an extra 5 minutes every single day, it becomes a problem that you should address.

The break issue is a tricky one, as breaks are necessary to maintain employee’s well-being and productivity. If you eliminate breaks entirely (besides the lunch break), your engagement levels may suffer, which could lead to more time theft as a result.

Your best bet is to clearly outline your break policy in your employee handbook. As an example, you could offer 30 minutes for lunch in addition to three 10-minute breaks employees can take at their discretion. Make it clear that if they go over the allotted time or number of breaks, disciplinary action will occur.

This is a reasonable compromise, as your team will have plenty of breaks to keep their minds fresh, and you’ll have a policy to ensure they don’t abuse their break privileges.

Computer distractions and smartphone abuse

In today’s age, distractions from work lurk around every nook and cranny. As such, the urge to engage in activities more suited for personal time is stronger than ever.

The typical employee workstation consists of a computer, smartphone, and tablet — all of which can be used for nonwork activities. As a real-world example, a remote accountant in Canada was caught streaming television shows on her computer during work hours, an offense which cost the company $1,500 (due to 50 stolen hours).

Netflix, YouTube, and social media are all distractions employees must avoid during the work day, something that’s easier said than done — especially for remote workers. Even in physical offices, employees can take personal calls, check their social media accounts, and read nonwork-related articles (like the news, sports, and other current events).

To cut back on this problem, it’s a good idea to block all external websites on your company computers. Or at least ones like social media that are known distractions. For your remote teams, there are numerous employee monitoring software options available to ensure your staff remains productive.

Final takeaways: Employee time theft

By now, you should know how to prevent the most common forms of time theft, which will help save your organization thousands in lost productivity. Time theft is something that can take place at any organization, so you should never assume that it’s not happening to you. With the right policies and technology in place (like biometric time clocks and employee monitoring software), you can significantly reduce the amount of time theft occurring at your business.