5 Types of Employee Theft and How to Prevent Them

5 Types of Employee Theft and How to Prevent Them

Protecting your company’s assets starts with awareness. Learn how to identify, detect and prevent employee theft with this quick guide.

Every year, businesses lose $50 billion to employee theft. On top of that, some face reputation damage and legal trouble when customer data or an employee's paycheck is stolen.

Even more alarming, 75 per cent of employees steal from their employer at least once. Whether that's a few pens or an entire client list, employee theft puts financial, legal and emotional strain on employers.

Below we describe five common types of employee theft and how to reduce your risk of each one happening in your workplace.

Do you have reasonable grounds to suspect employee theft? Download our cheat sheet for steps on how to confront the situation.

1. Inventory Theft

Inventory theft occurs when an employee steals a product from their employer. They may want the item for personal use or steal with the intent to sell (which is common with technological and medical products).

Employees are responsible for nearly half of inventory shrinkage, so implement preventive measures ASAP. Security cameras and inventory controls such as locking up expensive items help deter potential thieves and make it easier to catch employees who steal.

In addition, establish a workplace culture where employees don't want or need to steal. Make employees feel valued, pay them a fair wage and ensure managers set an example of ethical behavior.

RELATED: 41 Types of Employee Fraud and How to Detect and Prevent Them

2. Data Theft

Data theft is one of the most troubling types of employee theft. Not only can it put your company's assets in danger, but may also compromise your clients' and customers' sensitive data.

Examples of data theft include:

  • Stealing an employer's trade secrets or proprietary information
  • Theft of clients' or other employees' personally identifiable information (e.g. credit card information, social security numbers, addresses, etc.)
  • Stealing customer or contact lists when leaving the company

Preventing employee data theft should start with strict policies surrounding data and electronics use, as well as a "clean desk" policy to keep sensitive information away from prying eyes.

In addition, build data security into your day-to-day procedures and processes. For example, protect devices and files with strong passwords. Restrict access to your company's proprietary information. Follow good disposal practices, too, by shredding papers and wiping data from devices.

A strong data security policy can help to prevent data theft. Use our free template to write yours.

3. Theft of Services

This type of employee theft can occur in any type of business, from an accounting firm to a bakery to an auto garage. For instance, an administrative assistant at a hair salon may ask a stylist to cut her hair free of charge.

While you may offer discounts to employees on your services, some employees will still misuse company services and defraud your business. To prevent this, encourage tips on your internal reporting hotline.

Timothy Dimoff, a certified legal expert in corporate security procedures, suggests employers "advise employees that if they know of another employee's dishonesty and fail to report it, they can be subject to discipline as well."

4. Payroll Theft

This type of employee theft is just as it sounds. An employee whose work involves financial tasks, steals and cashes other employees' paychecks or writes fictitious checks and cashes them.

Prevent payroll theft by establishing checks and balances in your organization, especially in the finance department. One employee should never be tasked with both writing the paychecks and reconciling the payroll account.

RELATED: 6 Action Steps to Take When Dealing with Employee Theft

5. Theft of Cash

Theft of cash occurs most frequently in cash-heavy businesses such as retail. Examples of this type of employee theft include:

  • Stealing cash funds from registers, safes or petty cash drawers
  • Overcharging a customer and pocketing the difference
  • Skimming (not registering a sale or recording a transaction in accounting books and taking the cash)

To prevent cash theft, make sure your organization has clear policies in place. "Let employees know that any dishonest acts come with serious consequences," says Dimoff. Clearly define what behaviors are not acceptable in your code of conduct and outline the consequences of each one.

Not only will this deter potential thieves, it will also protect your company if an employee files a defamation or wrongful termination suit.

RELATED: Theft in the Workplace: Prevention, Detection and Investigation