The Most Common Types of Employee Theft in 2023

When we talk about misconduct and doing investigations, we are most often referring to discrimination and harassment. But the reality is that employee theft is super common. In fact, it’s way more likely that ER professionals will conduct a lot more substantiated theft investigations than classic textbook harassment during their careers.

While employee theft is not something to take lightly, it’s not something to freak out about either- it’s just another example of why great HR/ER people are needed: step in, assess the situation, mitigate the damage, and take appropriate action against the employee who stole. While companies can put processes in place to prevent it as much as possible (think Amazon or Nordstrom requiring bag checks when employees leave their warehouses or stores), at some point, it’s bound to happen.

So what can you do? In addition to prevention, help your organization establish common sense processes, for example expense report approvals that require managers to actually look at employee expenses. With a proactive stance, you can raise the flag on a potential problem ASAP and stop the loss before too much has been taken.

In this article, we walk through the basics of employee theft, share best practices for investigating it, and offer some tips for keeping your process and procedures relevant to this evolving issue.

The Basics of Employee Theft

Employee theft today is just sneakier.

The workplace has evolved tremendously during the past century and so has crime. When paper currency was the only accepted form of payment, employee theft was relatively straightforward. Workers waited until the office or store was empty and then robbed the register or safe.

The migration to credit cards, direct deposits and digital banking forced workplace thieves to adjust their strategy. These days, if employees want to steal money, they have to go hacker style and access online accounts. If they want to steal goods, they have to evade modern surveillance systems.

Theft prevention methods have evolved – we’re savvier.

Employers have updated their financial theft prevention methods to fight modern thievery. Money is usually safeguarded through a series of encrypted digital locks, from point of sale (POS) to company banking account passwords. What’s more, many business owners layer in some form of background surveillance technology. For example, most accounting software and online banking monitors cash flow and alerts relevant people to suspicious activity like unauthorized or unrecognized logins, sudden transfers of enormous sums of money and any changes to the platform’s details or setup.

The elements of theft

It’s one thing to recognize how employee theft has changed, but it’s another to understand what actually constitutes theft. In American law, employee theft falls under “larceny.” To qualify as larceny, it must meet four primary criteria – unlawful taking, another’s possession, non-consent and intent of permanent deprivation.

Employee theft statistics

According to reports published between 2018 and 2020 theft is more common than you’d think, and it happens when people are struggling:

95% of companies have fallen victim to employee theft at some point.
Three-quarters of workers admit to having stolen from their employer.
Employee theft costs businesses more than $40 million annually.
Over 25% of staff members cite financial difficulties as a motivating factor.
More than a quarter of employee theft happens online.

Audit your vulnerability to employee theft.

While we can’t control everyone’s actions or understand their motivations at all times, several factors increase the chances of employees stealing from your organization. The good news is that these are factors good HR/ER teams can impact, like ensuring employees are paid fairly, the workplace is not toxic and you have sufficient anti-theft controls in place.

The Most Common Types of Employee Theft

Each form of theft requires unique prevention methods, but some techniques will overlap depending on the crime’s nature. Typical categories of theft include:

Merchandise theft

Some employees steal stock for personal use or resell it for profit. Your organization can avoid inventory theft by installing surveillance technology such as CCTV cameras and biometric access points at store rooms. It’s also wise to conduct regular inventory checks.

Have different workers physically counting the stock and keeping records as a form of checks and balances. Furthermore, ER teams can request that managers separate staff member assignments to receiving, storing and shipping products.

Supplies theft

Stealing office supplies such as paper, writing implements and kitchenware is considered petty theft, but the costs can add up. Similar to preventing merchandise theft, your organization can combat this by performing regular stock take and using surveillance technology.

Money theft

This one is all over the place. There are multiple kinds of financial theft including but not limited to:

Larceny: Siphoning money out of a business bank account.
Skimming: Reporting lower amounts on invoices and other transaction documents to steal money “off the top” before official entries are recorded (also known as defalcation).
Fraudulent disbursement: Paying incorrect amounts to vendors or sending money to the wrong supplier and keeping the funds once they’re returned.
Fraudulent expense reporting: Paying incorrect funds to employees based on an exaggerated expense report.
Embezzlement: Withholding assets or funds from official records.
Payroll theft: Stealing employee salaries or wages.

Prevent money theft and fraud by using:

Purchase orders that are uniquely numbered and have different employees assigned to preparing orders, receiving payments and filing.
Cash receipts (with individual numbers) that are balanced by someone other than the sales clerk.
Business checks marked by distinct codes that can be used to trace checks if they’re stolen.
Ad hoc audits of all purchase orders, cash receipts, business checks and other official financial records.
Software that requires authorized employees to use specific entry codes or passwords that change dynamically. This is especially important when workers submit resignation notices or are notified of dismissal as their codes can be immediately disabled.

Data theft

Some employees steal confidential client or customer information, business plans and intellectual property (also called trade secrets) to use for personal gain. Your organization can prevent this by using similar protection software as described above.

Has remote work affected employee theft?

Every employer-employee relationship requires a degree of trust, especially if a worker is tasked with handling an organization’s finances. Given how common remote work has become, trust is more important than ever.

Research by Edelman shows that intra-organizational trust happens from the top-down: Executives trust employees more than their managers do. By contrast, staff trust their co-workers more than middle management and senior leadership.

The distrust gets compounded by geographical distance associated with remote work. Managers worry that the lack of physical oversight makes it easier for employees to commit theft; a valid concern that makes monitoring software that much more important.

Future Proofing Your Employee Investigation Procedures

As much as we would like to believe we can wholeheartedly trust our employees, the reality is that organizations of all kinds must take steps to safeguard merchandise, supplies, money and data from internal theft. It’s just good business to have anti-theft policies in place.

Nine steps to take if you suspect employee theft.

First things first, you’ve got to know what signals to look for. Bounced debit orders or checks, missing products, unauthorized login alerts and improperly balanced books — are a strong signal for employee theft. Once you suspect theft, it’s time to investigate using an established workplace anti-theft policy which includes the following steps:

Contact legal counsel to guarantee that due process is followed to avoid the case being dismissed in court (in the event that the business chooses to pursue criminal prosecution). Legal advice is important for professional liability purposes.
Gather all relevant evidence and discuss the suspected theft with the employee. This can and often should be done in the presence of an objective third party to oversee the proceedings, which can ensure there’s no duress or forced confession. Witnesses should also be involved if they choose to be.
Avoid using the word “theft” during conversations with the suspected employee, as unfounded or untrue allegations that utilize this kind of terminology can be the basis of a defamation lawsuit. Rather, use phrases like “violating company policy.”
Keep the case confidential. Any discussion about the case should take place only among the staff members and/or relevant stakeholders.
HR or ER may choose to notify the police to file criminal charges. When this happens, make certain that your evidence is water-tight and trial ready.
If criminal charges are being filed, contact the organization’s insurers. Note, if you’ve not already consulted legal counsel, it’s time.
Don’t deduct anything from the employee’s final paycheck if it’s decided to fire or suspend them.
Assign an independent investigator to the case to help ensure impartiality and confidentiality. Have the third party conduct interviews and examine any evidence on your organization’s behalf.
Document everything.

Can an employee be fired for suspicion of theft?

Yes. You can dismiss an employee if they’re suspected of theft. However, the dismissal will need to be done in accordance with your workplace policy and must adhere to any applicable contract clauses and union agreements.

When immediate termination is not the clear choice, you may want to temporarily suspend the employee while carrying out an internal investigation, as well as a trial if necessary. Once the evidence has been evaluated and the investigation is concluded, the business may take action in accordance with its policy and the law. Note if the employee is found innocent, you must ensure the company apologizes and compensates them accordingly lest you want to head back to court for a defamation suit.

How do you keep your employee anti-theft policies relevant?

Because a company’s anti-theft policy is its first port of call in the event of suspected theft, it’s essential that it’s thorough, legally sound and up to date. Ensure all contract clauses about theft and all anti-theft policy stipulations are legal. This means adhering to federal, state and local legislation and staying abreast of any changes in the law. Here’s a quick list of anti-theft policy must haves:

Policy definitions.
Clear instructions for when HR or ER can conduct an investigation.
Clearly defined steps of the investigation process.
Possible repercussions and disciplinary action.
Restitution processes to recover losses.

As a rule of thumb, anti-theft policies should be part and parcel of the onboarding process. Employees must read the policy and sign a document stating that they understand the policy’s contents. This ensures a paper trail for ER teams involved in theft investigations.

Handling Theft with Employee Relations Software

Whether it’s a small business, mega corporation or an NPO, your organization needs an anti-theft policy — there are no two ways about it. It’s also smart to invest in business insurance coverage to cover any potential loss owing to employee theft. But, more than that, your organization must have programs that allow you to prevent and handle employee theft cases easily and accurately.

As a preventative measure, consider using risk management technology to increase security and use information from previous cases to improve your prevention methods. Often, other employees who aren’t stealing may be more in tune with suspicious activity than the ER team or senior leadership. So, it’s important to have a platform that staff can use to submit anonymous tips.

Should theft occur, you’ll also need programs that allow you to carry out your investigation and record details every step of the way. This tech must also have the ability to ensure investigations are legally compliant and keep all information secure and confidential. Lastly, you should be looking for a tool that helps you enhance data and network protection.

HR Acuity is proud to offer software that meets all the above requirements and more. Below are a few of our offerings that help businesses prevent and mitigate employee theft:

If your organization needs to up the ante on getting ahead of potential workplace thieves, contact HR Acuity today to discuss the best options for you going forward. Book a demo to get a taste of what we have to offer. Let’s protect your business together.

The Most Common Types of Employee Theft in 2023 – And How to Prevent Them