What is Employee Theft and Why It Occurs and 7 Steps To Prevent It

Employee theft is the theft of goods, money, or time by people working for you, such as employees or contractors. To prevent employee theft, you need to identify how your business becomes vulnerable. You can then create policies, processes, and monitoring systems to reduce or prevent employee theft.

To prevent inventory theft or point of sale (POS) cash, we recommend using a POS system like Lightspeed. With Lightspeed, you can manage and reconcile inventory, sales, and inconsistencies to prevent employee theft.

Here are 7 steps to stop employee theft in your business.

Step 1: hiring an honest person


The best way to stop theft is to hire an employee who doesn’t steal. That said, in addition to monitoring existing employees, which will be covered below, you should do background checks on new hires and make sure they are the type of people you trust. It’s a great reference to ask your former employer before hiring someone new.

Step 2: Establish a Zero-tolerance Policy


Statistics from the Statistic Brain Research Institute show that US companies spend 7% of their annual sales each year on employee theft. To prevent this in your business, it’s a good idea to start with a disallowed policy.

Educate in front of your employees that their employment will be terminated if they steal you in any way; Include the following five sections in your employee theft policy:

  1. Statements Where Employee Theft Is Prohibited : This section should remind employees that theft is illegal, and should provide cases of employee theft of the kind, such as stealing cash, goods, or falsifying timetables.
  2. Expectations that the manager will be notified if an employee is stolen : This topic should also cover how employees report employee theft to management.
  3. Examples of prohibited behavior by pictures : This section is unique to each business and describes common types of theft in your industry, such as service workers bringing your tools home or food service workers providing food and beverages to friends.
  4. Statement on Echo : This section should point to the disciplinary policy, dismissal is automatic and suggests that the incident will be reported to the police.
  5. Notice of Your Commitment to Theft Investigation : This section explains that we will handle all reports of theft but will not tolerate false accusations.

Also Read: What is Business Consultancy and Its benefits

Step 3: Communicate your policy clearly.


The best way to communicate a new policy is to include it in the employee handbook and review it annually. That way, you can provide a case and your employees can ask definitive questions about what the theft policy is and what the consequences of a policy violation.

When communicating your policy, you must provide examples of work-related practices that may arise in your industry. This is especially important for people who are new to employment, such as summer high school students. Some employees may need a case to understand that taking food and beverages off the shelf during or after work is not allowed.

Others may think that making a few photocopiers or renting a sticky note or tape dispenser from the supply room is not so important, unless they say you are banned.

Step 4: reduce temptation


Once the policy is set and communicated, the best way to reduce employee theft is to make the theft difficult. For example, installing a video security camera to reduce temptation will make it easier for employees to find it. Don’t leave cash on counters and desktops. Whenever your money or valuables are in danger, always make sure you have more than one person.

Here are two other ideas that can help reduce workers’ temptation to steal.

Assign two tasks

When cash or expensive items are involved, nominate two people together for work. For example, schedule two workers to refill the shelves at night. Knowing that someone else can catch theft can be a deterrent. The same is true for employees who are engaged in calculating cash, processing customer revenue, or calculating inventory in the back room.

Separate duty

Separate job roles to prevent embezzlement. For example, in the bookkeeping function, make sure that the person handling money or checks has a receipt signed by a colleague. Likewise, the keys to the lockbox must be managed by the person who moves the money in and out of the microcash fund. Similar controls can be installed for equipment and supply room tools.

It’s also best to ban the person who writes corporate checks from managing business banking settlements. The same goes for wages. The person who approves the employee timetable should not be the same person who is paid the wages. Each individual balances against others for financial transactions.

Step 5: Monitoring employee activity by type of theft


Employee theft can happen at any time. For example, a product may be stolen by an employee before bringing it to the shelf. It can also be stolen after the purchase cycle is not completed correctly or after a purchase that has not been cashed out. Your best bet is to provide a system like Lightspeed POS that allows you to monitor the shop floor from inventory to customer receipts at each point in the product cycle, as shown below.

POS systems like Lightspeed can prevent employee theft throughout the product lifecycle.

The type of monitoring you use should be based on the type of employee theft you want to prevent. For example, you can prevent employees from stealing items with a camera on the back door. On the other hand, with purchase orders, each purchase can be “approved” in advance.

Here are some examples of different types of employee theft that can happen in your business. Knowing all the ways your employees can steal can help you plan preventive measures for each type of theft.

Employee theft of products

An employee’s product theft occurs when an employee takes an item that your business does not pay for, or when others take it. For example, if you run a retail store or distribution center and get away with a product the employee hasn’t paid for, it’s an employee’s theft.

Product theft is not always clear. For example, let’s say you run a restaurant or bar. Let’s say the server “discards” a food or drink to a friend who hasn’t bought a freebie. It’s also employee theft.

Other common examples of items, products, or inventory stolen by employees may include:

  • Soft drinks or food consumed in the refrigerator
  • Retail product stolen from shelf.
  • Employees using “discounts” on their friends’ purchases
  • Daily necessities such as steak and prime ribs from a walk-in freezer
  • Remove office supplies for home use from storage.
  • Bringing a corporate computer or other equipment from an empty office
  • Tools or consumables stolen from work vehicles
  • Work vehicle used for meaningless purposes without permission

Install a security camera or use a system like ADT to pay attention to what’s happening in most areas of your business. Don’t forget to have a camera that shows your movement in and out of the building. It has been reported that new and part-time employees tend to steal more than five times more than what thieves took from a retail store.

Also, make sure to use an inventory system like Lightspeed so you can be alerted immediately before stock runs out.

Theft of employee services

Service theft is another type of employee theft, often claiming to work for business, while employees often receive payments for friends or family, or from outsiders. For example, if you run a service business like a car wash and your employees allow friends and family to wash your car for free, you’re stealing the service.

Examples of employee stealing services:

  • Your business is a computer repair shop and an employee repairs a friend’s computer during work, but doesn’t charge you.
  • If your business is a service company and your workers do plumbing work for neighbors who use the company’s work vehicles, “on the go”
  • Employees using personal fax machines or photocopiers or stamps without permission

Employee theft of cash or payment

Stealing cash or money is just what many employers think of when they imagine employee theft. This is especially true for businesses that don’t have a powerful POS system like Lightspeed. For example, if a customer makes a cash payment to the receptionist, it is easy to miss cash if the payment is not documented.

Since many payments are made by credit card, it is important to keep your customer credit card number secure. An unscrupulous employee can steal a customer’s credit card number and buy it online. This kind of theft of customer payment information can damage your business’ reputation.

Other forms of cash and payment theft may include:

  • Cash missing from a cash register or trivial cash fund
  • A tip stolen from a tip container or colleague’s table
  • Cash sales did not grow in the POS system.
  • Accountants move funds from your business account to your own bank account.
  • Customer payment has been received in the accounting system, but has not been entered.

In fact, embezzlement and check fraud are expensive among all employee theft. About 70% of check fraud occurs in businesses with fewer than 100 employees.

Employee time theft

Time theft is another kind of employee theft that new businesses haven’t thought of but are expensive. For example, let’s say an employee punched before their scheduled office hours, or punched for an employee when he wasn’t on the site yet. That’s the theft of time. Other common examples of time theft are shown in the chart below.

An employee whose clock is not input or output correctly can steal time, such as 15 minutes or more every day. This is especially true if you work overtime for an hour and a half for non-part-time workers.

It’s not uncommon for honest employees to eat late lunch or leave early, just like regular working hours, recording the hours worked and the resulting income. It is estimated that the average employee steals 4 hours a week.

We recommend using an employee scheduling and timekeeping system such as Homebase to prevent time theft. Homebase offers a free plan to track complex tasks like shift work. Homebase can also export time stamp data directly to the payroll system, reducing the chances of manipulating time card data.

Employee theft of ideas

Employee idea theft occurs when an employee uses or sells proprietary information. It could be a list of current business contacts, a hard drive full of new product ideas, or a copy of a business plan.

Idea theft is most common in the professional or high-tech sector and can be addressed by having employees and contractors sign non-competitive or non-disclosure agreements upon hiring.

You might also consider installing a system that allows you to monitor what’s happening on your business computer, network, or website.

The risk of monitoring

There are 12 states that have laws on books that prohibit video or audio monitoring without prior authorization. So, if you plan to use a video camera or record employee phone conversations, make sure the information is stated in the employee handbook or the theft policy signed by each employee.

Step 6: supervisor training


It educates supervisors about each type of theft and helps them understand how they can help monitor employee behavior in extraordinary ways. You can print a copy of this document and provide it as a handout. Watch out for theft at work and encourage them to see with your eyes and ears.

For example, if an employee sneaks into a back door and finds something stolen, you should ask a non-threatening question like this:

  • “I think you’re leaving. Do you still have the time?” : If an employee says no, you can give your manager time to follow up on why you’re going out on an unpaid product.
  • “What’s your carrying? I haven’t seen you come in with it.” : This may be felt directly, but the employer has the right to inspect everything that the manager enters and exits your store.
  • “Did you pay for it? Can I see the receipt?” : It’s a good idea to ask the employee to check the receipt if it appears to be selling the item. If you paid the price, the person will not be offended.
  • “Why are you using the back door?” : You don’t blame yourself for stealing, but managers have the right to understand why someone is “sneaking out”. He or she may be getting something out of the vehicle.
  • “Have you seen me just put it in my backpack? Trunk?” : Say this only if you sincerely suspect that something has been stolen. If that person has done nothing wrong, that person will not be defended.

During training, remind the manager that the employee has never committed theft or theft directly. Instead, “Come back inside and describe what you’re doing.” or “Watch Let’s video footage to see what’s being shown.”

Step 7: policy enforcement


If you know that your employees aren’t enforcing your policy, you’ll be courageous to steal or steal. Perhaps someone makes 12 dollars an hour. If you are making money from selling products or cash to take, or if you are making money from selling cash, you may decide that stealing is a better deal, even if you are at risk of losing your job.

So, if there is a policy on the employee to prosecute theft, do so. You only need one or two cases of implementing a zero tolerance policy before other employees realize you are serious and less likely to try yourself.

It’s a good idea to set up a system so that whenever an employee observes a theft occurring at work, it can report it to a manager or human resources representative. Then apply the policy to thoroughly investigate your concerns.

Catching a thief

If you are stealing an employee, you need to be careful about the next steps. Then you will not be sued for unfair termination. Like all U.S. citizens, employees are presumed innocent until proven guilty. Use the three steps below to solve the “theft” problem that claims to be counterproductive and can cause money or legal headaches in a professional way.

1. Data collection

Before an employee confronts a suspected theft, collect data such as video files or employee witness statements. Then talk with the business owner or manager about the next steps. If you find someone with a stolen item, take a picture. Whatever you do, do not fire an employee from the field for “theft”.

All you have to do is leave the company immediately if you say you are investigating for possible violations of company policy. If there is a gradual disciplinary policy, it must be followed.

2. Meet or close the employee.

Meet with an employee and describe the data you find, such as “The video shows an unauthorized product violation brought out of the store as per company policy.” Know that you will file a claim with the employee if there are enough enough to file an insurance claim.

If an employee resists a request to leave, you may consider calling 911 and filing a police report at the location (threatening to call the police may urge the employee to cooperate with her final salary).

You can fire an employee for non-compliance with the company standards set out in the employee handbook. There is no need to state that you caught him or her stealing. If you have already sent an employee home, you can submit a termination letter or email.

In fact, using the words “stealing,” “stealing,” or any other loaded accusation can lead to unfair dismissal lawsuits if the person later turns out to be innocent in court. It is better to state that the person was fired for “violation of company policy”. There is a lawyer’s insight.

“If I find anything like that, I will provide a reason for dismissal in writing. That way, retrograde that the employee was fired for another reason can provide clear evidence as to why the employee was fired.”

If you are in a country that accepts the doctrine of the job you are attending, you may not have to provide any reason for dismissal. Simply put, “You’re being fired under our employee employment policy.” Read our guide for office workers looking for more insights.

3. Contact the police and submit a report

For example, if the amount of an item or money is more than 50 dollars, you can file a police report. Because insurance companies require a police report number to file an insurance claim, you may need to file a report each time you file an insurance claim for a missing product. Contact your local police department, sheriff or law enforcement department to file a report.

Risk of accusation

Don’t let anyone other than your immediate supervisor and employee know that your employee has been stolen. In fact, accusing an employee of theft is dangerous given the guilt. Therefore, maintain vague grounds for termination, such as “violate company policy” or “fail to meet ethical standards,” and consistently adhere to the discipline and dismissal practices you have established. Here’s what an employment legal expert adds:

“Theft is a matter that needs to be dealt with privately. Publicly blaming an employee can make the employer look unprofessional with the rest of the team and create indirect embarrassment and awkwardness. Instead, the user is directly related to the closed situation. You have to deal with the situation only with those who are there. This preserves the integrity of the workplace and does not expose others to further problems. As far as legal matters are concerned, disseminating false information can lead to defamation lawsuits.”

–  Jesse Harrison, California in the Employee Rights legal-Group CEO

Why Employee Thieves Occur


Many advocates believe that employee theft is due to a bad culture in the business, a lack of supervision, or an angry employee. However, it may be easy for a few to steal and lack moral self-management. CNN reported that those who steal do not need it because of desire, but act for greed or vengeance. In fact, according to a CNN report, if you see other people run away, 66% of your employees will steal.

Additionally, CNN data showed that the lack of results could potentially steal people. As mentioned above, implementing policies is just as important as strengthening the hiring process first.



There are many forms of employee theft prevention, from hiring honest employees to stealing temptation. You also need monitoring tools for different types of employee theft, such as video surveillance, solid inventory and accounting practices. In order for the theft policy to work properly, it must be enforced. We hope that this step will reduce the impact of employee theft on your business.

Lightspeed is a great point-of-sale system that provides inventory management capabilities, so it’s a good idea to proactively prevent or identify employee theft so you can stop it before it affects your bottom line.

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