The Recession and Increasing Employee Theft: Understanding and Preventing Employee Theft

Employee theft is rising as the economy is sinking, according to a report by i4cp, Inc.,

The report says:

[We found] that 27% of respondents in large companies — those with 10,000 or more employees — said crime in the workplace has risen during the current economic crisis, while 15% of all respondents, regardless of company size, reported it stayed the same the same.

Why Do Employees Steal?

There are three factors that generally lead to employee theft, according to a Dec. 11 piece in the Virginia Gazette:

  • Motive
  • Rationalization
  • Opportunity

A floundering economy can contribute to or even be the primary motive influencing employee theft. With housing prices falling, food prices rising, and credit being crunched, employees are feeling pinched at a time when employers may not be able to help out with a much-needed raise.

Rationalization becomes easier for employees who are feeling the squeeze. According to i4cp, “31% of companies with 10,000 or more workers said they’ve noticed an increase in the theft of company-owned items such as office supplies, products they produce, electronic equipment and food items since the economic downturn,” as opposed to a much smaller 24% of companies overall (including many smaller businesses). In other words, it’s easier for many employees to rationalize stealing from anonymous shareholders than from an company whose owner is potentially also your friend or neighbor.

Add reports of CEOs continuing to receive large salaries and bonuses while average salaries are being squeezed, and the rationalization factor increases exponentially.

As for opportunity, the Dec. 11 Wall Street Journal online says, “Employers are hot targets for theft because workers ‘know their systems, controls and weaknesses, and they can bide their time waiting for the right opportunity,’ says Mark R. Doyle, president of Jack L. Haynes International Inc., a provider of workplace crime-prevention services based in Fruitland Park, Fla.”

Types of Employee Theft

In addition to embezzlement (taking money), employees may steal products (food, electronics). Many businesses also consider it theft (“time theft”) if employees conduct any personal business while on the job.

A struggling economy provides a growing incentive to steal. Employees may need more money than they’re making to pay off debt or even put food on the table. And “Time theft,” can increase when employees fearful of layoffs play it safe by looking for their next job while at their current position. Employees who have survived layoffs and are required to work longer hours still have to take care of the personal business they used to take care of on their off time. And the more pressure people feel, the more enticing an Internet break can become.

“Trustworthy” Employees Frequently Commit Theft

Of course, some employees will steal regardless of the economy. And you’d be surprised to know that “To many employers’ chagrin, the workers guilty of the most grandiose theft frequently turn out to be those they’d deemed highly trustworthy,” according to the Wall Street Journal article.

Nor are non-profit organizations entirely safe. The Virginia Gazette piece uses the example of a Catholic priest who was caught after embezzling more than $1 million from two churches.

Preventing Employee Theft

According to the three articles, there are several ways to help prevent employee theft:

  • Communicate with your employees about the issue
  • Increase the frequency of internal audits
  • Increase oversight by the owners
  • Promptly reconcile bank statements
  • Use a payroll service
  • Obtain embezzlement insurance
  • Add surveillance cameras. Be careful about this option, says the Wall Street Journal, because it could have a detrimental effect on employee morale, and lead to liability issues as more states and localities are restricting such invasive surveillance.
  • Remember, the perception of detection is a very good deterrent

In our opinion, it’s also a good idea for you as the boss or CEO to make concessions in your salary and/or bonuses if you know your employees are suffering. Letting your employees know that you’re in a boat that’s at least close to theirs will make it much harder for them to rationalize a theft or two.

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