Time fraud can be a problem for any company, but it's also an opportunity to create clear guidelines and build trust throughout a workforce.
Time theft is when an employee gets paid for time they weren't actually working. Time theft is a common incident for any office, mostly because it's so innocuous that people don't always realize they're doing it. But what about those employees who realize what they're doing? There's a fine line between an ordinary business delay and straight-up fraud, so you should understand where timecard fraud is the ripest for exploits to ensure it doesn't happen to your company.
How employees steal time
The first step in properly managing employees' time theft is understanding how they are doing it. These are some of the most common ways:
- Buddy punching
- Exaggerated work hours
- Conducting personal activities on the clock
- User error
Buddy punching is one of the more pervasive types of time fraud. This is when an employee punches a timecard for a colleague to cover up for them arriving late or leaving early – an intentional practice that takes up valuable dollars in a company's budget.
A recent study shows that employees are getting paid for an average 4.5 hours of unworked time every week, and those wages can ultimately have a huge impact on a budget. Think how much money you'd be losing if you had a staff of 20 getting paid for a collective 90 hours a week. That's the salary of more than two extra employees that could be going to new research, development or innovations.
Exaggerated work hours
Along the same lines as buddy punching, inflating work hours is another flagrant offense, as an employee has intentional involvement in the inaccuracies. For example, an employee may say they arrived at 9 a.m. to create the illusion of punctuality, when they really arrived closer to 9:20. Another employee may have left work at 4 p.m. to get to an appointment, but they report that they didn't leave until 5 p.m. on the dot.
While reporting inaccurate hours at the office is bad enough, some employees commit time fraud by taking extended or unauthorized breaks. That could be taking a nap, going to a 90-minute power lunch with colleagues, or even running a quick errand during regular business hours, which eventually disrupts productivity, costing the company even more money.
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Conducting personal activities on company time
A lot of people conduct some personal business on company time, but when it becomes a habit, it's a drain on your time and resources. Of course, some professionals today need to be on social media or watch a lot of YouTube videos as part of their jobs, and understanding the balance is a critical component of vigilant management. Twitter and YouTube are powerful search engines in and of themselves, after all. However, even though an employee may be in the office, it's so easy to get distracted, whether with browsing social media, doing a bit of online shopping, or just surfing the web.
Burnout is real, and it happens all too often when a manager has a preferred or favorite employee to assign work to. Sometimes it's unintentional, and sometimes it's deemed what's best for business, but by creating an imbalance in workloads, a manager may be doing more harm than good.
If you're just looking at the numbers, it doesn't often make sense to practice favoritism in the workplace, even if there are some perceived positive results. If a given employee is getting 52 hours of work a week, while a peer is only working 28 hours a week, it creates a literal inequity between colleagues. It also costs a company more to pay that extra overtime simply because a manager was favoring one worker's contributions over another's.
To err is human, and mistakes will happen. All you can do is hope for the best and prepare for the worst. Preparation includes proper training when you're onboarding new employees, but it also requires clear communication of attendance expectations on a regular basis. Maintaining a clear record of hours employees spend on the job daily is also a useful practice, as it prevents confusion at the end of the week when an employee is trying to remember how long their breaks were on Monday, for example.
How to prevent time theft
The first line of defense in preventing time theft is good old-fashioned training. As part of any employee-onboarding process, you should always explain the corporate expectations on attendance and punctuality. Emphasize that falsifying any timecard is a form of theft, and that nobody should be clocking in or out for other employees or manipulating reports of hours worked.
When you discover an instance of time fraud, you should discipline the employees involved, with the severity of the punishment based on the violation. If it's a first-time violation for an otherwise-ideal employee, a verbal or written warning, along with individual training or coaching to correct any recurring behaviors, may be appropriate.
Time and attendance software
Time and attendance software can also be used to track employee hours automatically, requiring some sort of physical interaction with the employee. Many HR departments elect to use timecard software, forcing employees to punch in manually when they arrive at the office. More sophisticated solutions for larger companies include keycards that can gather time and location data for any given employee, GPS trackers for employees who need to travel frequently, and biometrics to prevent buddy punching. [Check out our review of OnTheClock, our top-rated time and attendance software.]
Laws used to prosecute timecard fraud
While there are no specific federal laws on employee time theft, there are laws on embezzlement and wire fraud that can be used to prosecute some cases of time theft.
The two most common laws for this purpose are U.S. Code: Title 18, Section 641 and Section 1343. Section 641 focuses on individuals who may have intentionally embezzled or stole something of value. Section 1343 focuses more on larger schemes, including the intention to defraud an organization using interstate communications.
Can you fire an employee for time theft?
You absolutely can terminate an employee for time fraud, but you must prove that the employee worked less time than they reported. If you don't have sufficient employee monitoring tools like timecards or keycards, it's a bit trickier to prove your case outside of hearsay, leaving you open to potentially costly and time-consuming wrongful termination lawsuits.
If an employee exhibits a record of consistent tardiness, disappearances, or other forms of time theft, you're within your rights to terminate them. But it's equally important to appreciate all the conditions surrounding the negative behavior and approach the situation with a cool head. Not only could a premature or inappropriate response create a costly scenario for the company, but letting go of a talented employee without clear understanding of the issue also has the potential to reduce team morale.