What Is Time Theft and How to Prevent It

Time theft in the workplace is a common and expensive problem.

It can take years for employers to find out that an employee is stealing time. The longer it goes on, the more it costs. Statistic Brain estimates that employee time theft costs businesses $50 billion every year.

Companies often overlook the potentially serious impacts of misreported time. Small discrepancies add up to big numbers over months and years of fraudulent time reporting.

It’s like a small leak in a big boat — it may not flood you all at once, but let it go long enough, and it will still cause you to sink.

Time theft costs businesses about $50 billion every year.

This type of theft can cause major profitability problems. Statistic Brain reports that it causes up to 33% of business bankruptcies!

When there is extra time on time cards, the average employee steals 4.5 hours of wages each week.

Those hours add up quickly. That’s almost 6 weeks of wages over a year of misreported timesheets. For example, your $20 per hour employee may engage in the average amount of time theft; you lose $4,680 in stolen wages to that employee every year! Learn more about time tracking stats here.

Time theft isn’t just adding extra hours to time cards. There are lots of ways that employees and contractors steal extra money from businesses. In this guide, we’ll talk about why time theft occurs and how business owners can prevent it.

Employees who add hours to their timesheets add an average of 4.5 hours of wages every week. That adds up to 6 weeks of stolen pay per year!

What is time theft?

Time theft occurs when an employee or contractor manipulates the system to get paid for hours they haven’t worked. There are a lot of different ways employees steal time, but they all boil down to a person claiming wages without having worked to earn them.

Time theft can hurt productivity so much that low performance becomes your new normal.

Aside from the obvious cost of paying for work with no results, a team member who is stealing time creates an expensive ripple effect within your company.

Productivity suffers across your entire team. It’s demotivating for a hard-working employee to watch someone else make the same amount of money for less work and worse results.

The consequences of stealing time

Even employees who bill their time accurately suffer performance issues in teams where time theft is a problem. You may not even realize that the overall attendance and productivity of your team is far lower than it could and should be. Low performance can become your new normal.

As morale is negatively affected, other employees are more likely to adopt similar behaviors. They’ll take extended breaks, show up late and leave early, and use work hours for personal tasks more often.

In some cases, an employee who regularly gets away with timesheet fraud might encourage their coworkers to do the same.

The longer you go without addressing time theft, the worse it gets.

This is a complex problem.

Types of time theft

The longer you go without addressing time theft, the worse it gets. A team member who is hesitant at first may become a bit bolder as they continue without repercussions.

In order for management to spot this expensive problem, business owners need to understand the different ways that employees steal time.

Buddy punching

Even though old-school time clock systems are less popular, the practice of manually clocking in and out is still common.

Buddy punching happens when employees help each other fool the time clock. Instead of clocking in at arrival and punching out when they leave, an employee has their coworker start or stop the time clock on their behalf.

There are a few different ways this happens.

In some cases, the entire team participates in a buddy punching scheme. The first person who arrives at work punches everyone in, and then the last person to leave punches everyone out. This gives the entire team the longest shift possible, no matter what hours they actually worked.

Other times, it’s less organized. An employee who is running late might ask a friend to punch them in early, or someone might leave early and get a co-worker to punch them out at the end of the day.

No matter how it happens, the bottom line is that buddy punching means you’re paying wages for people who aren’t even physically at a job site.

Timesheet fraud

Forging or altering timesheets to get paid for extra hours is called timesheet fraud.

Sometimes, time card inaccuracies are accidental. This happens a lot with manual timesheets. While it’s not the same as timesheet fraud, it can still be expensive for employers.

Though time tracking software is far more accurate than paper timesheets, companies who use software can still experience timesheet fraud. Watch for employees who frequently alter their records.

A lot of employees round their time cards to the nearest hour — even if that means they’re getting paid for 15 or 30 minutes that they haven’t worked. They may not intend to inflate their timesheets unfairly, but that extra time adds up.

Here’s a common example:

Let’s assume you have an employee who is supposed to work from 8 AM until 5 PM with an hour lunch break. That employee actually arrives 15 minutes late every morning, takes an extra 10 minutes for lunch every day, and always leaves the office by 4:30. Still, they file their timesheets to reflect that they followed their assigned schedule.

Each week, that employee is paid for 4 hours and 35 minutes that weren’t worked.

This type of employee time theft can also happen when employees add hours to their timesheet to get overtime or to cover up times when they weren’t at work as scheduled. The discrepancies can be huge.

Employees may alter their time clock information or claim that they forgot to turn on the app in order to add hours to their paycheck. Watch for major alterations or employees who frequently “forget” to start their work timer to spot possible timesheet fraud attempts.

Abusing breaks and personal time

Your employees should be encouraged to take a break. It’s great for their mental health and productivity. In a lot of cases, you’re also legally required to give your employees paid breaks during their shifts.

It’s also okay for employees to occasionally handle personal business from the office. A healthy work environment leaves room for people to balance their life priorities with their work. As long as productivity doesn’t suffer, there’s no harm in employees taking a break during company time.

Problems only arise when employees abuse their breaks and personal time, taking longer breaks and causing major issues that cost you thousands.

For example, a team member who makes phone calls from work to make an appointment is probably not committing time theft. You don’t need them to clock out to make a quick call.

However, an employee who regularly browses social media, does their online shopping, chats with their friends, and drives to the local coffee shop a couple of times every day is.

There are two things you should consider about this type of time theft:

• First, how much are employees actually working while they’re on-site? You could be paying for hours’ worth of work each day that never gets done.
• Second, what is the cost of workers using work-related equipment for personal purposes? Employers pay for resources like ink and paper, internet access, and utilities. Non-business use of workplace property can result in extra expenses.

Unauthorized overtime

Paying extra for overtime makes sense when you need to get things done on a tight schedule, but most companies require overtime to be approved first. After all, overtime pay and associated labor costs might not be in the budget — or the extra hours worked might not justify the extra expense.

Once the hours are worked, you’re legally obligated to pay those wages. That includes overtime pay.

Some employees try to pad their paychecks with unnecessary overtime hours.

According to the Fair Labor Standards Act, you must pay for that overtime. For hourly workers, that means time and a half for anything over 40 hours in a workweek — whether you authorized it ahead of time or not.

Time theft through unauthorized overtime is usually obvious. You’ll see that one employee works more than 40 hours per week — even after you’ve asked them to stop at 40 hours.

If you have an employee who continues to clock unauthorized overtime, you may need to have their manager keep track of their work hours throughout the week. Once they reach 40 hours, the manager must send them home to avoid the extra pay.

Whether it’s legitimate or not, you can’t refuse to pay overtime for hours after they have already been worked. This can lead to legal issues. For a repeat offender who doesn’t comply with overtime policies, termination of employment might be your only option.

How to stop and prevent employee time theft in your business

That’s a lot of information to digest, but the main question is this:

How can you prevent time theft?

You might be tempted to carefully monitor your employees to make sure they’re working all the hours they bill — but be aware. Micromanagement hurts performance and can actually make time and attendance worse.

One of the most common reasons employees commit time theft is because they feel like the business is trying to take advantage of them. They feel that they’re underpaid and undervalued for the work that they do. Employees that feel this way may start to clock extra time as a way to even the score.

Micromanagement seems like a solution, but it actually makes time theft worse.

There’s a feeling of “us versus them” in these situations. Taking extended breaks or turning to buddy punching serves as a small retaliation for those that feel they’re in an unfair arrangement.

Of course, disliking your work doesn’t mean it’s okay to commit time theft.

You can stop time theft and create a better working environment with these strategies.

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1. Create a clear time theft policy

The first step to prevent employees time theft at work is to define your organizations’s time theft policy. Include:

• Behaviors you consider time theft
• Behaviors which are not time theft, but have the potential for abuse
• The consequences if someone breaks the rules

Once your policy is created, make sure to clearly communicate it to your team. Having management send an email and ask for agreement isn’t enough. Discuss why you created this new policy and make sure everyone understands what it means.

Start by explaining all the situations that you consider time theft.

Some practices like clocking in 15 minutes early might seem minor, but explain how that time adds up and how much it costs on a monthly and annual basis.

This is particularly effective if you’ve had to reduce perks or cut other costs because of budgeting issues. When employees understand how those little behaviors affect their comfort and job security, they’re more likely to be conscious of accidental time theft.

It’s smart to clarify things that aren’t considered time theft, too. Be clear that your team members can take breaks, handle a little personal business, and adjust their timesheets if they forget to track their work.

A good time theft policy is fair. It protects your workers and ensures they’re paid fairly as much as it protects you from overpaying.

Could you afford more perks if you weren’t dealing with time theft? Show your team what they’re missing out on because of all those wasted dollars.

At first, your team might feel like this new set of rules is a way for you to make more money out of their work. If employee time theft is already a problem, that’s a sign that your people don’t trust the company.

Consider setting a team goal with an attractive reward. If your team makes an effort to clock in on time and improves performance, you might offer to provide team lunches a couple of days a week using the money you’re no longer wasting on inaccurate payroll.

Focus on how this policy helps individuals have a better work experience. That will also help as you tackle this next step:

3. Use the right time and attendance software

One of the best ways to prevent employee time theft is to ditch manual timesheets and use good time and attendance software.

Time tracking technology has come a long way since the days of paper timesheets and manual time clocks at a job site. While it’s not impossible to fool time tracking software, it takes more effort to do so.

Even if you have employees who try to beat the system, the right software gives you accurate data that you can use to track and address time theft.

Hubstaff is a great choice for companies concerned about time theft. Its location-based time tracking and detailed reporting make it easy for teams to track hours and for employers to get labor data.

Employees can use their own mobile devices to download the lightweight Hubstaff app.

The app automatically starts an employee’s timer when they enter or exit a Job site. Unlike physical time clocks that can make stealing time easier through buddy punching, Hubstaff travels with your field or mobile team and automates the time tracking process.

Using modern time and attendance software helps reduce accidental time theft, too. Here’s what you should look for in good time card software.

• Ease of use – if it’s too complicated, your team will just ignore it.
• Productivity tracking – look for software that helps your employees optimize their time
• Individual controls – your employees all do different work, so your app should be customizable to suit their roles
• Automation – if you have to do everything manually, your time clock system will create more work and leave room for human error
• Transparent reporting – you and your team should both be able to see everything that gets tracked so that everyone can benefit from that information.

4. Check in, but don’t intrude

As an employer, it’s important to make sure that work is going smoothly and time tracking is accurate.

Checking on your team’s progress could easily start to feel invasive — especially after you’ve just given a presentation about time theft. Teams that feel micromanaged rarely perform at their best.

Your time clock software should help with this. Instead of interrupting work to ask someone how their to-do list is coming along, you can check detailed labor reports to spot potential issues.

Hubstaff allows you to see where your crews are on a live map. If shifts are started late or left early, you can see it on the web dashboard. This saves you time spent driving from site to site just to check in.

Teams that feel micromanaged rarely perform at their best. Don’t try to catch people doing things wrong. Instead, look for ways to improve processes.

Instead of approaching these checks as a way to see who isn’t doing their job well, change your perspective. You should be looking for problems to solve so that it’s easier for your team to get their work done.

When you’re genuinely looking out for your employees, they notice.

5. Speak openly and truthfully

Good communication is at the heart of every successful team.

Start by being more transparent. Explain why you make decisions and consider making information readily available for your whole team. Prove that you value open communication by practicing what you preach.

You’re on the right track when your employees are comfortable telling you what you’re doing wrong.

If your “communication” only goes one way, you’re not actually communicating.

In fact, hearing criticism from your team is far better than not hearing criticism from your team. Your employees will only tell you what’s wrong if they believe there’s a chance you’ll fix it.

If you need some time to process what’s been said, say something like this:

“I appreciate you telling me about your concerns. I’m going to consider this more thoroughly, and I’ll get back to you with an action plan by the end of the week.”

Then do it. Show that you listen and act when people tell you things. Communication at your company will improve drastically when everyone sees that it makes a positive difference.

Hearing criticism from your team is far better than NOT hearing criticism from your team.

What can you do about time theft?

These are all great tips to help stop and prevent time theft moving forward, but what if employees have already stolen from your business? Do you have any recourse?

The short answer is: maybe.

It depends on the situation. Let’s use buddy punching as an example. Let’s assume that Joe punched the time clock for his friend Jen. If you can clearly prove that Jen didn’t arrive until an hour later, you can probably dock Jen’s pay that period for the hour that she wasn’t at work.

Other situations are more complicated.

In the example above, you’re justified in adjusting Jen’s check because she wasn’t physically present at work during the hours she billed. That doesn’t mean you can legally dock pay for every minute of the day that Jen wasn’t at her desk doing work, though.

You shouldn’t try to withhold pay for things like smoke breaks, handling personal business at work, and browsing social media. Address those kinds of issues with disciplinary action through HR.

But what if you look back through the records and find that Jen has been clocking in early for the last 7 months?

Or what if you look at time clock records and find that Joe has spent 2 hours of every day watching movies instead of doing his work?

The first step in extreme cases of time theft is usually to terminate the employee who has been stealing from you. Whether or not you can recover the stolen money is a different question.

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Prevent time theft

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Can you sue an employee for time theft?

After discovering an issue, management will likely want to know if there are time theft laws that have been violated.

As an employer, you can sue for stolen time if you have clear proof that an employee billed for hours they weren’t at work. However, you’re not likely to recover any costs from less obvious types of time theft like unauthorized overtime, playing games, goofing off at work, or extended breaks during the workday.

Wage theft cases against employees are rare. State laws vary, and every case is different. If you want to know your options for recovering stolen wages, you should talk to your corporate attorney to decide on the best course of action. You’ll want to check your state or country’s labor laws as well.

More often, lawsuits related to time and wage theft are filed by an employee against their employer. These suits usually relate to things like payment for hours worked off the clock or unpaid overtime. For example, if a company refuses to pay time and a half for unauthorized overtime hours, the employee may file a suit for the additional wages. There aren’t broad time theft laws in place for employers, though.

Employee time theft can be an expensive problem. In a lot of cases, your options to recover that money are limited. Labor costs can add up quickly, so prevention is your best course of action in most cases.

This post was originally published July 18, 2019. It was updated with additional information and resources on August 11, 2020.

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