Say the word "theft" and images of carjackings, broken cash registers and swiped purses come to mind. But a more subtle form of stealing touches nearly every business. Time theft — which spans everything from employers avoiding overtime pay to employees rounding up their hours — is so insidious that it seems impossible to curtail.
The answer, it turns out, is to make the workplace fairer for everyone. To do so, we must first understand what wage theft is, and why it happens in the first place.
A Ghostly Presence
One recent study shows that the average employee steals approximately 4.5 hours per week from their employer, totaling nearly six full work weeks per year and costing businesses hundreds of billions of dollars a year worldwide. Another study by the American Payroll Association reported that more than 75 percent of companies lose money from buddy punching, a practice where one employee clocks in for another.
These are just a few examples of the corners typically cut by time thieves.
It is important to understand, however, that time theft is not a one way street. Both employees and employers are victims and perpetrators of the practice.
Employers steal wages when they fail to pay for overtime, pay less than minimum wage, fail to deliver deserved benefits, misclassify employees as independent contractors or even just fail to pay earned wages. Employees, meanwhile, steal wages by committing time sheet fraud and rounding up their hours, having coworkers punch them into work when they’re not there, taking unauthorized paid breaks, conducting personal business while on the clock or not working while they’re being paid.
Why Does Time Theft Happen?
Time theft is the realm of opportunists. It happens because it can. To understand motive, however, we must look at the situations involved: When does someone steal something?
Most people steal when their backs are against the wall.
From an employer perspective, a business may be trying to make ends meet and stay afloat. Most businesses spend 10-30 percent of gross revenue on labor costs.
Managers are often put under pressure to keep costs low and meet sky-high KPIs, such as clearing out all inventory by year’s end (what if it’s a bad year for holiday shopping?) or selling a certain number of meal deals (what if the franchise is located in a neighborhood where people prefer a la carte?).
An easy, nefarious solution is to cut costs on the employee end of the equation. When corners are cut to maintain or increase profit, however, the employee naturally feels like they are the losing out. Time theft can serve as a way for employees to recoup what they see as undelivered benefits or an undervaluing of their labor. In essence, the employee feels that they are being treated unfairly and that they are taking what they feel they have rightfully earned.
Create Trust, Avoid Theft
Business culture and policies are the first gateway to time theft—and the first line of defense. Businesses concerned about time theft should follow the process below:
- Evaluate company culture and policies. When employees feel that they are being treated fairly, they are much less likely to commit time theft. It is important to drive ownership and empower your employees to treat the business as their own. Part of being treated fairly is to set clear goals and expectations, in addition to those expectations being met.
- Set a transparent organizational structure. Crime thrives in confusion. Revisiting roles and responsibilities helps employees and managers understand what’s expected, and in the process helps avoid cutting corners or inflating hours.
- Codify policies and procedures that dictate fair employment practices. These are available at the state — and federal level — and should be reasonably attainable for any business.
- Enhance accountability with technological solutions. Your best employee might be best with customers but not in management, but the proper technological encouragement and data-driven insights can help make up for any deficiencies. With a modern workforce management platform, the manager could instead gain insight about labor costs that would allow them to properly plan to have the right employees in the right shifts at the right time instead of trying to cut corners.
- Set realistic expectations. If you put an employee into a management role and saddle them with an unrealistic KPI for spending on labor, they may then decide to pay employees under the table, or cut other corners to meet the company’s budget.
Prevention Is The Best Solution
Time theft might be pervasive, but it is not insurmountable. Making the effort to audit existing culture, policies and technology may be a handful in the short term, but will pay off handsomely — and financially — in the long run. Best yet, you don’t need to be a cop about it. Simple trust will do.