Employee Time Fraud Costs

From the earliest days of industrialization, business owners have faced
enormous challenges in keeping their employees honest and making sure
their working hours were reported accurately. Whether those employees
worked on the assembly line at the local factory or the telephone bank at a
nearby office park, their bosses looked for ways to improve the accuracy of
their time reporting.

In the early days of the factory, those timekeeping mechanisms consisted
largely of mechanical time clocks, and workers were expected to clock in and
out at the beginning and end of their shifts. Even then, however, factory
owners faced the threat of fraud, as workers routinely clocked in and out for
one another. While employers looked for better ways to police their time
clocks, employee time fraud continued unabated, costing bosses millions of
dollars in lost productivity and excess wages.

Once the internet age arrived, it ushered in a new wave of electronic
timekeeping, one that used websites, log-ons and passwords to report time
accurately. Unfortunately, that new wave of electronic timekeeping faced the
same old challenges and the same time of employee time fraud. Just as
workers could punch one another in and out on a time clock, employees
could share log-on IDs and passwords, creating the same costly situation for
their bosses in the process.

Employee time fraud has not gone away, and in many ways, the problem
has gotten even worse. As growing numbers of workers abandon the office
in favor of telecommuting and work and home opportunities, the danger of
time fraud has grown even bigger. This kind of electronic time fraud is bad
enough at the office, where supervisors can look over the shoulders of their
workers. When those same employees are working from home, the danger
of time fraud is magnified that much more.

Employee time fraud can take many forms, and it is a problem in both the
public and private sector. The government has been fighting this kind of
fraud for years, as have their counterparts in private business. And while
punching in and out for one another may be the most obvious way
employees commit time card fraud, it is far from the only one. Here are
some other ways employee time fraud impacts those in the business
community.
• Surfing the web or using personal email while on the employer’s clock
• Engaging in freelance work during office hours
• Having a personal conflict of interest
• Arriving late while reporting in on time
• Asking someone to alter reported time
• Taking an extended lunch hour or a longer than normal break
• Claiming work that was never performed

No matter what form employee time theft takes, it is a serious threat to
business owners and corporations. Without vigilance and follow-up, this kind
of wage theft and false time reporting can easily get out of control.

Once employees realize that this kind of time fraud goes undetected and
unpunished, they may be more likely to cut corners, claiming credit for work
that was never done, clocking in and out for one another and stretching that
one-hour lunch break to 90 minutes or more. That is why it is important for
employers of all sizes to recognize this unique threat and take steps to
combat it.

Employers can begin the policing process by auditing and monitoring their
online timekeeping websites. A consistent pattern of clocking in late,
claiming it was a mistake and asking a supervisor to override the time
reported should raise a red flag, as should time reporting that is too
consistent. The employee who consistently clocks in at 8:30 instead of 8:29
or 8:28 may not be as conscientious as they look – they may be committing
time fraud.

Employers may need to take additional steps to police their remote
workforces, as these workers can have additional incentives, and greater
opportunity, to cheat. Many employers have chosen to install special
monitoring software, programs that can detect which websites are in use,
what employees are doing on company time and when they log in and out of
the company intranet.

All of these steps can help reduce the incidence of employee time fraud
among remote workers, but there is no substitute for eternal vigilance. Even
if you trust your telecommuting staff completely, it never hurts to verify the
accuracy of the time they report. The more you know, the easier it will be to
manage your workforce, no matter where they are located.