How to prevent employee theft from happening to you

April 7, 2016

Employee theft is real and growing

The statistics on employee theft are staggering.

  • In  2015, U.S. retail workers were listed as #1 in employee theft globally.
  • Over 64% of small businesses admit they have employee theft.
  • Employee theft accounts for more than 42% of  inventory shrinkage. Shoplifting accounts for 35%.
  • Over a third of small businesses that filed bankruptcy directly attributed their failure to employee theft.
  • The US Chamber of Commerce states 75% of all employees steal at least once.
  • Businesses lose 20¢ on every $1 to employee theft.
  • Only 16% of businesses chose to report employee theft.

Why Do Employees Steal?

A Pinkerton report states, “Over the years, we have seen the workplace mentality of some employees shift from one of responsibility to one of entitlement.” In many ways, we are a society with an entitlement mentality. Unhappy employees feel they are not being paid enough. They feel under appreciated or over worked. Therefore, they’re entitled to receive more. Not surprisingly, seasonal or part-time employees also feel a greater sense of entitlement due to their lower pay. Sometimes employee theft occurs merely for the excitement of “getting away with it.” Other times, an employee will justify their actions by saying, “Everybody else does it” or “Taking this little amount won’t hurt anyone.”

Employees most likely to steal

Managers account for over 50% of employee theft. Because they’ve been a trusted worker, they’ve gained a managerial position and are often unsupervised. When a business is small, it requires individuals to take over a greater amount of authority. Plus, everyone has access to all areas of the business. Younger employees and people with less education are usually more willing to steal. Men have a greater tendency to take a risk and steal over women. In addition, the majority of theft is not a one-time incident. It’s often an on-going scheme.

Ways employees steal from you

So, how do your employees steal from you? Checkout is their biggest opportunity. Up to 40% of small business theft is in cash. A sales rep can manipulate a sale through refunds, discounts or voided transactions after the customer has left the store. Consignment shops have an extra temptation. A retail shop receives boxes of inventory that are thoroughly numbered and entered into the system. However, a resale or consignment shop receives individual pieces that may not be entered correctly. Items that never make it to the sales floor can be reported as returned to the consignor or just never existing. Employees also steal information. One consignment shop owner reported that an employee had stolen her consignor list, opened a shop down the street and was notifying everyone she was open for business and offering a bigger percentage.

No employee theftHow can you prevent employee theft

  • Everyone, no matter who, should go through a background check.
  • Always contact references.
  • If your state allows, run a credit check. Your state’s Department of Labor or Small Business Association can give you the rules for interviewing employees.
  • Create the right environment. Often, it can be something as simple as listening. Most of the time, employees just want to be heard and know someone cares.
  • Security cameras are a plus.
  • Review your store layout. Unobstructed exits, better lighting and even an area where employees check in and out can all deter theft.
  • Monitor your register closely.
  • Keep company checks behind locked doors and tracked.
  • Your intake area should be in the open near the front counter where items are reviewed, counted and entered immediately into the system.

Should You Report The Theft?

Why do 82% of small businesses choose not to report the theft?

  1. The crime isn’t viewed as important enough
  2. Emotional ties to the employee
  3. Mistrust of the justice system
  4. Fear of losing the confidence of other employees
  5. The cost involved in prosecuting may be greater than the amount stolen

Ultimately, you have to decide on a case by case basis how to handle the situation. By only firing the employee, you’re not changing a lifestyle pattern. But, the time and financial investment involved in prosecuting could be greater in the long run. The best method of preventing employee theft is to take your time building a quality team. Put checks and balances in to all of your systems and stress to everyone that employee theft is taken seriously and you will take action.

Deb McGonagle

I have been a writer for various forms of marketing for over 40 years. I've written my share of radio and TV scripts, magazine and newspaper ads as well as direct mail brochures and newsletters. Currently, as the Marketing Coordinator for Traxia, home of SimpleConsign software, I've moved into blog posts, eBooks and website text. It's been an ever changing and ever challenging journey but I've loved it all along the way.