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 that feels entitled. 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. As a result, they’re 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. Therefore, you can expect it to happen often.

Ways employees steal from you

So, how do your employees steal from you? In retail, checkout is their biggest opportunity. Up to 40% of small business theft is in cash. Sales reps manipulate a sale through refunds, discounts or voided transactions.  Consignment shops have an extra temptation. A retail shop receives boxes of pre-ordered inventory. Each box is thoroughly numbered and entered into the system. All merchandise is accounted for before it even hits the floor. However, a resale or consignment shop receives individual pieces that may or may not be entered correctly. Items that never make it to the sales floor are reported as returned to the consignor. Or, just never existed. 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.

employee theft can happen to you tooHow 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.
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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 will you handle the situation? By only firing the employee, you’re not changing a lifestyle. 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 build a quality sales team. Put checks and balances into all of your systems. Stress to everyone that employee theft is taken seriously. Post signs that remind everyone “Shoplifters will be prosecuted.” Let your staff know you will take action.


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