Employee dishonesty often slips under the radar, but it is no small crime. It is estimated that employee theft costs U.S. businesses $50 billion each year, and in the retail industry in particular, nearly 50 percent of all shrinkage is the result of employees, not outsiders. Overall, an estimated 80 percent of all workplace crime is carried out by an employee, and one in four workers have admitted to committing or personally witnessing fraud or other similar crimes.
No employer wants to believe that their employees would steal from them, but no matter the industry or the success of the company, there is a chance that it may occur. Every business should have a Commercial Crime policy as a final line of defense, but these measures can also aid in reducing the likelihood and the devastation of a dishonest employee.
Preventing Employee Dishonesty
The best defense is preventing the crime from occurring in the first place. Businesses should familiarize themselves with the most common forms of employee dishonesty:
- Cash theft: This is most common in retail environments, when employees stealthily take money out of cash registers or cash boxes, or they charge customers a higher price than necessary and pocket the difference.
- Supply and merchandise theft: This is a small act, but repeatedly taking company equipment can quickly add up to a hefty cost.
- Information theft: This method does not involve the employee directly taking money or tangible items, but it is not uncommon for employees to take information from their employers such as customer lists or other data to benefit themselves or a competitor.
- Fraud: Fraud comes in many forms, with the most common being payroll fraud, time-clock fraud, workers’ compensation fraud, and reimbursement fraud.
Keep in mind that the most likely forms of employee theft can vary depending on the industry and the business model of a company. However, across all areas, one of the most effective ways that a business can reduce the risk of crime is limiting access. No one employee should have sole access to sensitive materials (such as expensive products or cash), and any process that involves the transfer of sensitive materials (such as money or confidential data) should require authentication from at least two employees. In addition, employees should never be left working alone with valuable objects.
The likelihood of theft should also be considered heavily during the hiring process. If any red flags come up during the background check (such as previous record of theft or other dishonest acts), the employee should not be given a position. Some companies also require applicants to take a screening test that will check for potential bad behavior on the job.
In addition to the above security measures, improving the company climate can help employees to feel less likely to steal. If executives make an effort to get to know their employees on a personal level, it could make it more difficult for employees to be dishonest towards them. Taking time to listen to the employees and address their needs and concerns will also make them feel more valued at the company, which will reduce their desire to steal.
Recovering from an Act of Dishonesty
Once a dishonest act has been uncovered, the first step is assessing the losses. Multiple trusted employees (remember, do not leave one employee alone with sensitive information or valuable items) should assess the losses. If you want, you could have a third party assist with this.
Once the scope of the dishonesty has been realized, it’s time to make an important decision: should the offending employee be terminated? It is ultimately up to your discretion, but keep in mind the losses incurred, their overall attitude, and whether you think they are likely to offend again. Whatever you choose to do, make sure it is documented and in line with your existing disciplinary policies, as you do not want to face an employment practices lawsuit on top of everything else. If you choose to retain the employee, you may want to restrict their access to valuables or sensitive data until you feel that they have proved their trustworthiness again.
Going forward, it’s important that you learn from the incident and prevent similar ones from happening in the future.
About Axis Insurance Services
At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (201) 847-9175 to speak with one of our professionals.