Burglars on the Loose: The True Cost of Time Theft for Your Business

By Sam Thomas | 15th June 2018 | 11 min read

Time theft in business remains a deceptive problem across the world. No workplace is immune, regardless of structure. No matter what industry, businesses are vulnerable to time theft.

With most businesses spending 10% to 30% of their gross revenue on labour costs, every penny spent on salaries counts. Time theft is an age-old problem that continues to plague HR managers, payroll managers, and even the business owners themselves (especially in startups and small businesses when the owner performs all of these functions).

Defining Time Theft and Different Ways Employees Do It

Simply defined, time theft is when your employees bill you for time outside of actual work. Over the years, employees have become more creative in the different ways they steal time from the companies they work for.

Here are the most common forms of time theft:

  • Proxy attendance. Jane needs to take care of an important errand and is unable to report to work. However, she can’t afford to lose a day’s worth of salary. Jane contacts her closest co-worker to sign the employee attendance sheet for her.
  • Buddy punching. John is running late and miles away from the office. Fortunately, he is also extremely close to his co-worker buddy Bill. John asks Bill to clock in on his behalf. Problem solved.
  • Late starts and early finishes. Aubrey arrives at the office at 8:05 AM. On her way to her desk, she bumps into Allison and engages her in a chat about the latest TV series episode they are both following. Aubrey settles into her desk and the first thing she does is enter 8:00 AM as her start time on her timesheet.
  • Long breaks. Susan went out for lunch and chanced upon a big sale in a store she loves. She extends her lunch time, thinking her boss (and the payroll) won’t mind.
  • Unauthorized overtime. Charles needs extra cash to afford a season pass to the theatre. He works extra hours even though the time is not justified.
  • Personal activities at work. Ricky was paid for 160 hours for the previous month. What the payroll manager doesn’t know is out of the 160 hours, 40 hours were spent on social media.

You might recognise some, if not all, of these anecdotes. Yet, time theft could still be losing money for your business.

Time Theft Could Be Eating Away at Your Profits

How much money, you ask? A lot!

According to a study, a company can lose as much as 7% of its profits due to time theft. This means that if your company is earning £100,000 per year, you could be losing £7,000 annually because of stolen time. While this isn’t enough to bankrupt a company, it’s a serious amount of money bleeding from a business that payroll managers cannot ignore.

Another study by Software Advice revealed that an average employee steals up to 4.5 hours from their employers per week. Annually, this adds up to 6 weeks of stolen time per employee per year. This number increases as your company expands.

For instance, at UK’s average hourly salary of £14, an average employee would steal £63 per week. For a 52-week fiscal year, this amounts to approximately £3,300. For an organization of 50 employees, that’s £165,000 lost due to time theft per year.

Imagine what you could have accomplished with £165,000. Hire more staff? Invest in product research and development? Scale your marketing to acquire more customers?

Now you can see what seems to be a petty employee misgiving could turn out to be a serious financial leak for your business.

It Goes Beyond the Money

Aside from the profits, your company might be losing due to time theft, it has other negative effects on your business.

The most alarming one is the ripple of stress and unproductiveness that it may create among your other employees. How would you feel if you’re putting in the work and the hours, then getting the same paycheck as someone who’s always late, absent, taking long breaks, and doing non-work related things?

Your honest employees will be demoralized and even tempted to do the same thing. If their colleagues get away with stealing a few minutes here and there, why couldn’t they?

Stop Time Theft, Stop Losing Money

The solution to time theft should be two-pronged. It should be tackled from an HR aspect as well as from a technological aspect.

Time theft is often a result of organizational shortcomings that lead to employee dissatisfaction and distrust. For example, most employees would not commit fraudulent behaviours if they feel that their employers are treating them fairly (i.e. paying at least minimum wage, crediting valid overtime, etc.). Unresolved trust issues will result in employees taking matters into their own hands.

Another important HR aspect that you should look at is schedule and shift organization. Is the work schedule currently being implemented something that was consulted with your employees? Maybe the majority of your workforce is unable to adapt to the work schedule.

In addition to reviewing the above points, business owners and payroll managers should revisit the time tracking technologies that are currently being implemented. For instance, manual punch cards, although very rarely used today, could be an issue especially with buddy punching. Some biometric devices could still be cheated. Plus, given the nature of today’s mobile workforce, these methods of logging in attendance and tracking time don’t work for businesses with remote employees.

The key is to find a time tracking technology that is easy to use and integrates with multiple workforce setups. It should also fit well within the company’s budget. Sufficient controls, or fences, are necessary to make time theft almost virtually impossible to commit (i.e. geo fencing limits the area where employees can clock in). The time tracking technology should also seamlessly integrate with your payroll platform for easy consolidation.

Left unchecked, time theft can cost your business thousands if not millions in the long run. Stop being cheated and act now.

Author Bio

Dean Mathews is the founder and CEO of OnTheClock, an online time clock app that helps over 8000 businesses all around the world track their employee time.

Dean has over 20 years of experience designing and developing web-based business apps. He views software development as a form of art. If the artist creates a masterpiece, many people’s lives are touched and changed for the better.

When he is not perfecting time tracking, Dean enjoys expanding his faith, spending time with family, friends and finding ways to make the world just a little better. You can find Dean on LinkedIn.