Payroll Data Services Blog

Is Time Theft Costing Your Business Money?


When you hear the word “theft,” images of shoplifting, pickpockets and carjackings likely come to mind. However, there is a more subtle form of theft impacting nearly 75% of U.S. businesses. Time theft — or when employees accept pay for time they have not actually worked — is a billion dollar problem that, according to the American Payroll Association, can cost companies up to 7% of their gross annual payroll.  

Reducing time theft is a multifaceted challenge, which begins with knowing exactly how it happens and what steps you can take to detect and prevent it.

Types of time theft

Time theft is not tied to any one kind of industry, workplace, employee or position — it does not discriminate. And, while some types of time theft are more malicious or intentional than others, any form of stolen time impacts your bottom line. Here are a few of the most common ways that businesses experience time theft:  

Accidental overreporting: It’s true, the majority of your workforce is made up of good people that have your best interest at heart. However, it’s not uncommon for employees to make mistakes and overreport their hours, especially with manual time tracking methods like paper timesheets and digital spreadsheets. 

Intentional overreporting: Although it may not seem like much, when employees punch in early or punch out late — even by a few minutes —  it adds up. Let’s say you have 100 employees that each misrepresents 10 extra minutes a day. That’s over 83 hours of stolen time a week. Multiply this by the current average hourly rate of nearly $28, and you’re looking at over $116,000 per year!  

Buddy punching: Buddy punching, or swiping, is when an employee has a colleague clock in or out for them when they aren’t actually at work. Buddy punching is an easy way for employees to hide a late arrival or early departure. However, in some cases, employees use it to cover up missing a shift completely!

Ghost employees: Time theft in the form of a “ghost employee” takes many forms. For starters, an employee could come to work and clock in and then disappear for the day, returning only to clock out. Employees that are in the field, on the road or even working from their home or a remote location, could say they are working when they are not. Or, even more severe, an employee (usually a manager) could create a fictitious person in the payroll system and collect their wages.

Personal time: If employees are using company time for non-business activities like surfing the web, checking their social media accounts, running errands or taking personal calls, it’s a form of time theft. With that said, you need to determine what an acceptable balance is for your organization. This kind of behavior should not happen in excessive, regular amounts. However, most employers understand that an occasional phone call, doctor’s visit or personal task online, is necessary. 

Extra break time: Taking regular breaks throughout the day improves productivity. However, if employees take excessive or extended breaks outside of what’s reasonable or permitted by an employer, they are stealing time. This can take many forms, such extra long lunch or rest breaks, or even distracting and ongoing chit-chat between colleagues. 

Unapproved time: If an employee works through a lunch hour that’s supposed to be unpaid, comes in early without permission, or decides on their own to take work home to “work off the clock,” you are more often than not still required to pay them. Although this form of time theft is usually a consequence of ambition (not malice), it can result in unanticipated payroll costs that you didn’t budget for.

How to combat time theft

Detecting and stopping time theft can be challenging, especially when you have a lot on your plate. However, with the right processes, diligence, oversight and tools, you can reduce the risks associated with this widespread — and often hidden — problem. Here are a few ways to set your business up for success and curb incidents of time theft:

Implement a timekeeping policy: Document, distribute and communicate a clear timekeeping policy, so employees understand what you expect from them. Often employees may not realize they are doing anything wrong, so it’s important to educate them and set clear instructions, expectations and consequences upfront.

Avoid manual tracking: Manual timekeeping systems, such as sign-in sheets, punch cards and spreadsheets, are prone to human error and are especially vulnerable to time theft like overreporting schemes and buddy punching. Instead, consider digital and automated solutions that allow employees to punch via telephone, web, mobile app or time clock. These solutions aren’t only convenient, but they are more accurate and often have features to help you track that the right employee is punching in from the right location.

Geofence punches: With a cellphone in nearly every pocket or purse, many employers are supporting their workforce with convenient solutions to clock in or out using a mobile app on their phone or tablet. If your workforce would benefit from this, consider timekeeping solutions that allow you to geofence, or restrict employee punches based on location. This will help you safeguard against buddy punching and prevent employees from clocking in or out when they aren’t actually at work.

Track and analyze data: Part of the reason that time theft is such a prevalent issue is that organizations are flying blind. By using timekeeping software that allows you to track and analyze employee activities in real time, you can quickly spot trends, identify potential fraud, and put a stop to it. With access to employee activity data, you can keep an eye on concerning trends like a high rate of late arrivals, long breaks or missed punches. Some timekeeping solutions even allow you to set alerts, so you’re notified and can take action when a particular activity, such as hour overages, happen. 

Don’t only rely on technology: While you can do a lot with timekeeping technology these days, you still need trusted employees to oversee the day-to-day and ensure your workforce is doing what they are supposed to be doing. Technology and humans should ultimately work hand in hand. If you notice a concerning trend in your data, talk to the on-site manager — perhaps there’s a good reason for it. 

Orbit Time & Labor can help! 

How are you tracking and managing employee time and attendance? As part of Orbit Solutions, our full-suite human capital management (HCM) solution, we offer Orbit Time & Labor — the industry’s leading timekeeping management solution. 

Here are a few ways Orbit Time & Labor can help you ward off time theft:

  • Capture accurate timekeeping data from various sources, including the web, time clocks, telephony and our HCMtoGo mobile app
  • Set custom work and pay rules, so you can stay on budget and flag violations of your organization’s unique policies using system notifications.
  • Automate policies for attendance and accruals to drive more accurate, consistent enforcement.
  • Access reports to gain real-time visibility into employee activities like missed punches, early or late arrivals, extended breaks, off-the-clock work and other unapproved activities.
  • Free up time for more human oversight by automating and simplifying ongoing tasks like approving timesheets, managing exceptions, responding to time-off requests, and coordinating schedules.

To learn more about Orbit Time & Labor, check out our handy overview sheet and contact us today to request a demo!

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