Is Time Theft Costing Your Business Money?

Is it really a bank robbery if the theft occurs slowly over time? A roll of quarters here. A dollar bill there. What about a museum heist? But, instead of priceless art, millions of dollars are lost in the gift shop in a steady stream of pilfered tote bags and postcards. 

There are no superheroes swooping in to apprehend the transgressors of time theft. What would that look like anyway — a caped hero battling a leaky bucket? That’s because when employees accept pay for time they have not actually worked, it’s usually not a grand, singular event. Time theft is a series of micro infractions which, as stand-alone incidents, may not seem like much. Add them up, and they cost employers billions of dollars per year.

As with many challenges in the HR and payroll world, preventing time theft starts with the right protocols and systems. During a recent roundtable event, we spoke with organizations about how time theft occurs and what can be done to address it. This blog shares key insights from that conversation, along with learnings we’ve gained from over 30 years in the HR and payroll space.

The biggest takeaway? Not all heroes wear capes.

Types of time theft

Time theft is not tied to any one industry, workplace, employee or position — it does not discriminate. And, while some types of time theft are intentional (or even malicious), others are purely accidental. Regardless of intent, all forms of time theft impact your bottom line. Here are the most common types to watch for:

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 and labor tracking methods like paper timesheets and digital spreadsheets. 

That said, overreporting isn’t always an accident. Employees may intentionally punch in early or punch out late (even by just a few minutes). While this may not seem like a huge deal, this time adds up. Let’s say an employee consistently starts work at 8:05 a.m. every single workday, but reports an 8:00 a.m. start. Removing three weeks for holidays and vacations, those five minutes a day over the course of a full year add up to 1,225 minutes, or 20 hours and 41 minutes. Multiply that by the employee’s hourly earnings, extrapolate the results of overreporting across other employees — and the numbers become ... well, mind-boggling. 

Buddy punching

This is related to intentional overreporting, but involves an accomplice. Buddy punching is when an employee has a colleague clock in or out for them. Buddy punching is an easy way for employees to hide a late arrival or early departure. However, in some cases, employees use this technique to cover up missing a shift completely. Both manual and electronic timekeeping procedures are susceptible to buddy punching. Without a biometric time clock (more on that later), stealing time is often as easy as stamping somebody else’s timecard or entering a coworker’s PIN.

Ghost employees

A ghost employee is someone who appears on the payroll but isn’t actually working the hours — or in some cases, doesn’t exist at all. This type of payroll fraud can take several forms. An employee might clock in and then leave for the day, returning only to clock out. One manufacturer who attended our roundtable shared how they even caught an employee hiding out in a maintenance room during their shift! In other examples, remote or offsite workers may simply claim hours they didn’t work. And, in more elaborate cases, a manager may create a fictitious employee in the payroll system and collect unearned wages. Talk about spooky! 

Personal time

This was a big point of discussion during our roundtable. If employees are using company time for non-business activities like surfing the web, online shopping, social media, running errands, taking personal calls and more, 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 (and some activities shouldn’t happen at all). 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, and in certain cases, is required by law. However, if employees take excessive or extended breaks outside of what’s reasonable or permitted by an employer, they are stealing time. This form of time theft can take many forms, including extended lunches, unauthorized rest times, excessive socializing or goofing around, faux bathroom breaks (yes, catching up on Netflix in the stall counts) and more. 

Unapproved time

If an employee works through a lunch hour that’s supposed to be unpaid, comes in early, works overtime without permission or decides on their own to take a project home to “work off the clock,” you may still be 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. 

Unproductive habits

No human can operate at 100% efficiency day in and day out. That said, unproductive daily habits are technically a form of time theft. Let’s say Bob is an employee of yours and has never been late in his 20 years as an employee. That said, his morning routine is far from efficient. He shows up, clocks in, makes the trek across the warehouse to grab his coffee mug from his station, walks back to where he came in, fills up his coffee, catches up with his pal Bonnie, uses the restroom, chats with a few other coworkers — and finally, settles in to work a full hour after clock-in. Yes, Bob is a reliable and well-liked veteran employee, but these less-than-ideal habits are time theft.

Other inefficiencies

Like we saw with Bob, some time theft hides in the day-to-day inefficiencies that drain productivity and inflate labor costs. But inefficiency takes other forms too. Employees may deliberately work at a slower pace to extend a project and earn overtime. In other cases, time is lost due to a lack of clear processes or streamlined decision-making, forcing employees to wait on approvals or instructions before moving forward. Even something as simple as an inconveniently located time clock can add up to minutes lost per shift, especially across a large workforce. While these examples may seem minor in isolation, together they contribute to significant and often overlooked losses in time, efficiency and money.

How to combat time theft

During our roundtable, organizations shared the strategies they’re using to prevent time theft. Combined with insights of our own, we’ve compiled the below well-rounded list of practical solutions for you to explore. 

Establish clear policies

Create and document straightforward, detailed policies surrounding time and labor, including those related to clocking in and out, breaks, device usage, overtime and extra shift approvals, personal time and beyond. Don’t be afraid to get very specific with your policies. For example, one roundtable participant shared how they created a policy prohibiting employees from bringing their phone into the bathroom, an example of how detailed policies can help address even subtle forms of productivity loss. 

Tip: Physically documenting policies is critical in eliminating ambiguity. It also gives managers something objective to point to, making it easier for them to avoid the label of “bad guy” and frame conversations in terms of company expectations, rather than personal ones.

Create a strong frontline

You can create policies until you’re blue in the face, but they’re only effective if they lead to the behavior you want. That’s where managers come in. To drive policy adoption and prevent time theft, you need a strong frontline of managers who know the policies, understand why they matter, enforce them consistently, lead by example and hold their teams accountable.

To build a strong frontline, it’s critical to get all your managers on the same page — and to help them see one another as part of a unified leadership team (even though they each have their own independent team of reports). One way to do this is to hold regular group meetings to train, review policies and reinforce expectations. One roundtable participant emphasized the value of meeting with all managers at once to ensure consistent messaging, foster camaraderie, develop a rapport and create a space for shared problem-solving. Ego also came into the conversation. By asking managers to publicly state their goals for reducing time theft and report on their progress at each meeting, you can tap into a person's ego to drive accountability and results.

Policy champions are everywhere: Think beyond management. Veteran employees others look up to, reliable team members who consistently model the right behaviors or even a third party can make excellent policy champions. Empower these individuals to reinforce expectations and set the tone for their peers.

Get the word out

Building a strong frontline of policy champions who are equipped to spot and address time theft is a vital first step, but it’s only part of the equation. HR teams also have a responsibility to communicate policies, expectations and consequences clearly, consistently and regularly across the organization. Roundtable participants discussed many ideas to help get the word out, including using breakroom TVs, digital displays and a dashboard within the company’s human capital management (HCM) system to highlight a policy related to time-theft prevention each month. 

Promoting expectations is important, but your actions speak just as loudly. Enforcing time and labor policies consistently — regardless of an employee’s role or rank — sends a clear message that accountability applies to everyone. It’s also worth considering how your communication aligns with your culture. If your organization has a strong mission and core values, frame policies within that context. Veteran employees, in particular, may respond more positively when they see efforts as part of a broader ideology and the commitment to integrity and shared success.

Reset perceptions and behaviors

As discussed, time theft isn’t always deliberate — often, employees simply don’t realize their actions are problematic. A common refrain like “That’s how we’ve always done it” signals the need to reset expectations. Whether it’s unproductive time, personal distractions or inefficient routines, changing behaviors starts with shifting mindsets. One roundtable participant shared how a new manager identified unproductive habits on the team. At first, employees didn’t see the issue; in their eyes, it was business as usual. But once the manager clearly explained the expectations and why those behaviors were unfair on company time, employees understood, adapted and improved. Sometimes, all it takes is clarity and a conversation to turn things around.

Celebrate wins

Celebrate the behaviors you want to see by recognizing employees and managers who are doing things right — like submitting accurate timecards, following policies, identifying time theft issues or improving efficiency. Simple but effective ways to celebrate wins include bringing in lunch for a department, hosting regular giveaways, offering gift cards or creating monthly awards. Even a quick shoutout during a team meeting or a thank you email can go a long way in reinforcing positive habits and motivating continued success.

Use technology strategically

The right technology is absolutely critical in helping organizations combat time theft and manage employee time efficiently, accurately and securely. If applicable, begin by taking a critical look at any analog tracking practices within your organization. Think: spreadsheets, punch cards and paper sign-in/out sheets. These outmoded timekeeping practices are prone to inaccuracies and time theft, and should be the first systems to go, if they haven't already.

Another action of the first order is to leverage a solution consisting of a data-collection device (such as an onsite time clock and/or a mobile app) that interfaces with a cloud-based technology like our Time & Labor solution. 

Here are key capabilities to look for with time and labor technology:

• Biometrics: Use a time clock with fingerprint, facial recognition and/or iris scans to eliminate buddy punching by confirming employee identity through physical characteristics.
• Smart punches: Automatically prevent employees from clocking in when they aren’t scheduled to work, reducing time theft through errors and unauthorized hours.
  
• Geofencing: Prevent clock-ins and clock-outs when an employee is outside an approved geofence, or location. Mobile apps are handy for time collection, but they're risky to leverage without an automated way to prevent people from clocking in when they aren't actually at work (ahem, parking lot punches included). Check out our dedicated geofencing blog to learn more.
• Geosensing: Record the location of each punch to support audits and confirm employees were where they said they were.
• Approval workflows: Combined with a policy that requires manager approval for additional hours and overtime, leverage a technology that facilitates easy in-system employee requests and manager approvals.
• Notifications and alerts: Automatically inform managers of timecard issues related to long breaks, early arrivals, missed punches and other time and labor violations via system notifications and alerts.
• Attestation: Ask employees via an on-screen prompt at a point of data collection (time clock, mobile app or web clock) to confirm the accuracy of their time at the end of each shift or pay period, reinforcing accountability.
• Data tracking and analysis: Spot time and labor trends like frequent tardiness, compliance issues or excessive breaks through in-depth reporting capabilities. 
• Integrated HCM: Ensure you time and labor solution is an integral and connected part of an HCM solution. Look for a unified platform with payroll, time and labor, HR and talent management solutions all within one tool.

With the right HCM technology in place, your team can prevent time theft proactively — and with far less manual oversight.

How to get started

We’ve shared a number of ideas to help you identify and prevent time theft — from policy development to people engagement, technology and more. While the concepts may be clear, the real impact comes from putting them into action. Here’s how to begin:

• Form a committee (even a small group of 1–2 people can make a difference).

• Review your current policies to identify gaps or vulnerabilities.

• Establish clear priorities — and don’t be afraid to experiment and learn from mistakes.

• Assign responsibilities and actively seek employee feedback.

• Set deadlines and revisit progress regularly.

How B2E Solutions can help

As our B2E Solutions name implies, solutions are at the heart of what we do. Our human capital management (HCM) solution, UKG Ready, offers a Time & Labor product that helps businesses manage employee timekeeping, time-off requests, approvals, overtime, pay rules, scheduling, reporting — and of course time theft. 

To learn more about how UKG Ready Time & Labor can improve your timekeeping practices and help you mitigate time theft, request a demo today.

Editor's Note: This blog was originally posted on July 1, 2019 and is regularly updated to reflect the most up-to-date information.