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Five Steps Any Company Can Take to Detect and Curb Time Theft

2/15/19 2:45 PM

It’s not always intentional, it’s hard to detect, and it requires diligence and oversight to eliminate, but time theft is among the largest hidden costs to any business. By definition, it happens any time employees misrepresent the actual amount of time they’ve worked and been paid for, intentionally or otherwise.

It's probably happening to you

Whatever the causes and remedies, time theft is probably costing your company money. A recent survey by the American Payroll Association found that 12 percent of payroll professionals in the United States estimate their hourly workforce regularly overstates two hours of work each pay period - that could be saved. Another study found that 43% of U.S. shift workers say they "over exaggerate" their hours. The problem could be even greater.

Time fraud comes in all shapes and sizes

Punching in early or punching out late, even by a couple of minutes, is perhaps the most common kind of time fraud. It may not seem like much, and employees may not even be aware they’re doing it. But it can add up.

Five minutes here, 10 minutes there — it all adds up.

  • If an employee misrepresents only 10 EXTRA MINUTES IN EACH EIGHT-HOUR SHIFT, that’s an extra 50 minutes per workweek — almost one hour of pay!
  • At the current average hourly wage of $26.395 , that comes to $1,099.58 EXTRA / EMPLOYEE / YEAR (50 minutes a week x 50 weeks x $26.39 per hour / 60).
  • For every 100 full-time employees, THAT’S $109,958 PER YEAR for nonproductive activity

Other ways your company may be losing money due to lack of visibility into time and attendance records include:

  • Taking an extended meal period and not recording the full time 
  • Reporting working off the clock without doing any work
  • Intentionally not clocking in when arriving late, to be able to later manually record a full day’s schedule
  • Clocking in or out for another employee — “buddy punching”

Five steps for reducing time fraud and system gaming

Reducing time fraud is a multifaceted challenge. Here are five steps any company can take to help curb time theft:

  1. Have a written timekeeping policy, with specific instructions on honesty and fraud.
  2. Train supervisors on wage-and-hour laws specific to timekeeping.
  3. Prove you care; employees who are frequently questioned about their time records will cheat less.
  4. Implement special procedures for employees who work remotely or in the field to ensure the reliability of time records.
  5. Develop a system where your labor budget is fixed specifically to each position so variances can be quickly identified and investigated.

Click here to download our article on reducing unwanted overtime hours.

Automation is the real time-fraud game changer

Time and attendance tracking has traditionally been a labor intensive, manual process. Because it’s dependent on manually transcribing information from one system to another and often has weak controls, this method leaves companies vulnerable to time fraud. Automation can make a huge difference.

With real-time visibility into employee hours, HR, payroll, and team managers can better spot and manage time and attendance exceptions. They can identify:

  • High rates of early or late arrivals
  • High rates of absences
  • Long or missed breaks
  • Unusual trends in overtime
  • Missed punches
  • Late punches
  • Employees working outside their assigned shifts

When managers receive information about those exceptions in real time, they can quickly and easily make corrections and ensure accurate time reporting going forward.

How to solve for unwanted overtime hours

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