Time Theft: What it is, Impact on Business, & Prevention

As the saying goes, time is money. That means that time theft is something no business owner ever wants to think about. But it happens—sometimes by mistake, and sometimes on purpose. Unfortunately, the reason doesn’t matter. Intentional or not, handle it efficiently and effectively, or run the risk of it costing your business a lot of money.

In this article, we’ll review the ins-and-outs of time theft, the different types, and how much it can cost businesses like yours.

And since hey, we’re here to help, we’ll also share how your business can prevent it.

What is Time Theft?

Time theft can be a result of many things. It comes down to an employee not working for all the time they’re supposed to, but being paid for it.

Time theft is considered an abuse of time in the workplace and can happen unintentionally or on purpose.

But sometimes, the reasons for time theft can be blurry. For example, you might have an employee who invites their friend to the coffee shop for a visit during their shifts. When it’s slow—and even when it’s not— they spend a chunk of their time behind the counter chatting. They get a gossip update, but counters don’t get wiped, and floors don’t get mopped.

Is this act of socialization considered time theft? Yes. But is it intentional time theft? That depends.

How was your employee was trained? What are the expectations set out by their manager? And does the team member recognize that they should be working instead of socializing, even in slow times?

This is why it’s so important for every team member to understand your work policies around what to do during slow shifts, why clocking in accurately is important, and how it impacts the success of the business. They need to know what can happen when time theft occurs—whether they mean for it to, or not.  

Time Theft Statistics

Time theft adds up. Your team might think that 5 minutes here and there, or a late lunch every now-and-then doesn’t really matter. However, it can make a big dent on your budget and the morale of your employees.

According to website TotalRetail.com, 75% of companies in the United States lose money from a form of time theft called “buddy punching”. This is when a team member has a coworker clock in or out for them. It’s quite common, and not always done maliciously. Some employees do it to avoid reprimand, while others may believe they’re looking out for a friend.

Time theft can also be committed by the employer, but in a different form. This is called wage theft, and it’s when a business doesn’t pay an employee for things like overtime, working through their breaks, or when an employer asks a team member to come in early or stay a bit late.

Just like employee time theft, wage theft can be both unrealized and undocumented. Employees might not track the extra time they’re working, and without a proper way to do so, businesses might not either. In fact, the Economic Policy Institute, a nonprofit think tank, estimates that unreported wage theft could amount to as much as $50 billion per year owed to workers.

Any type of time theft can leave employees feeling a drop in morale. If a team member witnesses a coworker frequently showing up late, but still getting paid without reprimand because they’re “buddy punching”, they might feel resentment toward their teammates or the business itself, setting the foundation for a toxic workplace.

This is just one reason why time theft should be prevented at all costs.

4 Types of Time Theft You Can Prevent

Time theft doesn’t always look like a villain running away with a bag full of money. In reality, it can look like an employee scrolling on their phone a little too often, or a team member clocking in for their friend who’s “just running 5 minutes late!”.

Here are 4 common types of time theft that you can start preventing today.

1. Buddy Punching

Buddy punching occurs when an employee uses a time clock to register attendance for a coworker who is not present. This action is usually a collaborative effort between two or more employees. It occurs commonly in workplaces where time clocks are used, and identification methods are not stringent. Biometric systems and stringent monitoring can mitigate this form of time theft.

2. Inflated time

When employees report having worked more hours than they actually have, it is termed as inflating time. This form of time theft is common in roles where work is not closely monitored, such as remote positions. Research data indicates that approximately 43% of hourly employees admit to having inflated their work hours at some point. Companies are addressing this issue by implementing rigorous time-tracking software and regular audits.

3. Using the Internet

In many professions, internet access is essential for performing job tasks. However, excessive personal use of the internet during work hours constitutes time theft. Common unproductive activities include scrolling through social media, online shopping, and consuming unrelated content. To manage this, companies are increasingly deploying internet monitoring tools and setting guidelines for acceptable internet usage during work hours.

4. Taking longer or extra breaks

Taking longer or additional breaks than permitted can disrupt workflow and lower overall productivity, in addition to being a form of time theft. Employees might extend lunch breaks or take additional short breaks, affecting not just their output but also that of their team. Employers are combatting this issue by establishing clear break policies and employing time management systems to monitor adherence.

No matter your break policy, stick to it. If you talk about having hard and fast rules for breaks, your employees will notice if others are sliding by. Not only can that be bad for team interactions, but it has an effect on you as well. Your team won’t know when you’re serious about guidelines and policies and when you’re lax. Or worse—they’ll think you’re playing favorites.

Is Time Theft a Crime?

We know about the different types of time theft, but is time theft actually illegal? Is it a crime?

The short answer is yes—time theft is considered a crime.

Time theft can be categorized as payroll fraud, which occurs when an employee steals funds from a business by falsifying timesheets. Examples could be:

• An employee clocking in too early or clocking out later than they’ve actually worked
• An employee not working during their scheduled shift
• An employee who takes too long of breaks or extra breaks
• An employee who has a has a friend punch in for them if they’re running or late or not showing up
  

According to Samfiru Tumarkin Law Firm, in Canada, non-unionized workers can be punished by their employer for committing time theft. Results include a team member being put on paid or unpaid leave and potentially terminated.

From the employer’s side, committing wage theft carries a different penalty. If a business owner refuses to pay an employee for unauthorized overtime, they could be violating local and federal laws, like the United States Fair Labor Standards Act (FLSA).

How to Prevent Time Theft

There are many ways to prevent this, and not all require someone monitoring the break room 24/7. With the proper tools and rules you can make sure your employees are showing up when they should, and spending the shift actually working.

Implement Time Theft Policies

Implementing strong policies can start with communication. Talk to employees about the value of their time. Explain what happens when they’re on shift but not actually working, and what’s lost when team members have their coworkers clock in-and-out for them.

Ensure that employees know that these policies do more than prevent the loss of money, but that they’re there to build trust and transparency. Team members should feel open to communicating with their boss about any issues, including running late or missing a shift so they can get support, not reprimanded.

Establish Time Theft Repercussions

Once you’ve communicated time theft policies, explain to employees what happens if they don’t follow them. Document a formal write-up in their file, or consider assigning them less shifts for a set period of time. If it’s their first offense, try a direct conversation (but ensure it’s still documented).

Clearly communicate any repercussions, document them, and have your employees verify that they understand them. Including this feature in your onboarding package for new team members is a great way to ensure everyone has read the policy and digitally signed off.

Use Tools to Identify and Prevent Time Theft

The best way to take control and prevent time theft is to use modern software solutions. This includes implementing tools like a GPS digital time clock, digital timesheets to prevent fraud, and messaging apps for teams so you can check in with employees if you notice they are clocking out late or showing up too early.

Homebase: your partner in preventing time theft

We know that it’s easier to push the idea of time theft out of your head. But as a business owner, it’s something that you need to be aware of and on top of. And because we know that you’ve got other things on your mind and on your plate, Homebase is here to help.

Sure, you could post signs reminding employees of how to correctly log time or provide a copy of the company’s policies as a reference. However, if you’re ready to go one step further, consider online business tools that are designed to prevent time theft. Even better: look for a tool that also supports team communication and workplace transparency.

At Homebase, we’ve got exactly that.

Smart Automated Tools

Small business owners can partner with us for time tracking, automating timesheets and employee scheduling.

Our free time clock app can be downloaded to smartphones, iPads, computers, POS devices, and more. That way you can effectively track hours, breaks, overtime, and paid time off.

Employees can use a unique PIN to log in. And if you need to, our time clock software can take a photo of the person clocking in so you know that the correct employee is signing in. That’s right: no buddy punching on our clock.

On top of the prevention perks for you, employees get to save time since they won’t have to manually input their shift start or end times. It also helps prevent unintentional time theft for employees that clock in early by accident, or forget to clock out.

If you need help setting up prevention policies, Homebase has just the thing.

Skip the worry and set up your break and overtime rules to comply with federal, state, or city laws.  We’ll store all your time cards—including all edits—to help you comply with FLSA record-keeping rules. We’ll even send alerts when labor laws change at the state or federal level.

Need a bit more support? We’re here for you. That’s why we have certified HR Pros to review your policies.

Time Theft FAQs

What Are the Consequences of Time Theft for Employees?

If employees engage in time theft, they can face a variety of disciplinary actions, depending on the severity and frequency of the offense. These actions may start with verbal or written warnings and escalate to more severe actions such as suspension or job termination. In extreme instances, employers might go as far as seeking financial restitution to cover the losses incurred due to the time theft.

How Can Time Theft Be Prevented?

Prevention of time theft often involves a multi-pronged approach. Employers can deploy time-tracking software that accurately logs work hours. In addition, developing transparent and explicit policies regarding what constitutes time theft can serve as a preventive measure. Employers should also commit to consistently enforcing these policies to deter employees from stealing time.

Can an Employer Sue an Employee for Time Theft?

Though time theft is not a criminal offense, it can still lead to legal ramifications. An employer can initiate a lawsuit against an employee if there is irrefutable evidence that the employee has been falsifying timesheets, thereby being overpaid. Legal action, however, is often considered a last resort due to the associated costs and time required.

Is Time Theft Considered a Form of Payroll Fraud?

Yes, time theft is considered a subset of payroll fraud. Payroll fraud refers to scenarios where an employee receives undue compensation. In the case of time theft, the employee is essentially stealing time and thereby money from the employer by getting paid for hours not actually worked.

What Is the Impact of Time Theft on Businesses?

Time theft has a substantial financial toll on businesses. Statistics from the American Payroll Association indicate that as many as 75% of companies in the United States report financial setbacks due to this issue. This underscores the importance for businesses to take adequate measures to curb time theft.

Is Time Theft Always Intentional?

Not necessarily. Time theft can occur both intentionally and unintentionally. An employee may unknowingly commit time theft by, for example, rounding their time entries, thinking it makes things simpler for administrative processes. It’s essential for employees to be aware of what constitutes time theft to avoid accidental infractions.

What Should an Employee Do to Avoid Accidentally Stealing Time at Work?

Employees can take several steps to avoid unintentionally engaging in time theft. Firstly, they should become well-acquainted with their company’s policies regarding time tracking and time theft. Secondly, they should use accurate methods for recording their work hours, such as using approved time-tracking software. Understanding the potential consequences can also act as a deterrent to committing accidental time theft.

Is your business struggling with time theft? Get Homebase for easy scheduling, time clocks, payroll, messaging, HR, compliance, and more — all in one app. Get started for free.