20 Jun 7 Easy Ways to Prevent Employee Time Fraud
“Trust but verify.” This Russian proverb, made famous in America by President Ronald Reagan, also applies to tracking your employees’ time and attendance. As a business owner, you’ve taken on risks, and you’ve likely made personal sacrifices to build your business.
It’s not fair that a rogue employee would steal from you by committing time fraud – especially when today’s technology can prevent it. The American Payroll Association found that 75% of businesses in the United States suffer from time theft every year.
What Is Employee Time Fraud?
Time fraud occurs when an employee intentionally misrepresents the hours they have worked in order to receive more pay than to which they are entitled. This can include:
- “Buddy punching” – clocking in a co-worker who is not present
- Clocking in for a colleague who is running late
- Falsifying time sheets
- Taking extended breaks
- Deliberately padding labor hours or clocking in earlier or later
- Extended personal phone calls or messaging
- Managing personal business during the workday
- Spending work time checking social media sites or surfing the web
7 Easy Ways to Prevent Employee Time Fraud
1 – Implement a “Time and Attendance” Software System
- The most effective way to prevent time fraud is to use a modern timekeeping system or app.
- Payroll Partners offers geofencing. Once geofencing has been setup, you will be able to easily identify employees that have used the mobile app to clock in and out beyond the boundaries of their defined location.
- Payroll Partners also offers biometric verification to prevent buddy punching (an employee punching in for someone else.)
2 – Set Clear Expectations
- Employees need to understand what is expected of them when it comes to timekeeping. Set clear policies and guidelines for clocking in and out, taking breaks, and requesting time off. Make sure your policies are in writing and easily accessible to all employees.
- These policies should be in your company’s Employee Handbook. These time and attendance policies should also be communicated in the new-hire onboarding process.
- We surveyed over 2,000 U.S businesses and found that 8 in 10 companies that identified as having a fast growth year also have an Employee Handbook updated in the past 12 months.
3 – Train Your Managers
- Your managers should be trained to identify and prevent time fraud. Supervisors should know how to spot signs of time fraud, such as employees clocking in early or staying late without authorization or taking excessively long breaks. They should also understand the consequences of time fraud and know how to handle any instances that do occur.
4 – Monitor Employee Schedules
- It’s important to keep an eye on employee schedules to ensure that they are arriving and leaving when they are supposed to. This can be done through electronic timekeeping systems or through physical monitoring.
5 – Conduct Regular Audits
- Regular audits of your timekeeping system can help identify any issues or inconsistencies. Compare timecards or time sheets with schedules, look for patterns of late arrivals or early departures, and investigate reports of time fraud.
- Regular audits can help deter time fraud by sending a message that you take timekeeping seriously.
6 – Address Time Fraud Immediately
- If you do identify instances of time fraud, it’s important to address them immediately. This sends a clear message that time fraud will not be tolerated and can help prevent further instances from occurring.
- Depending on the severity of the time fraud, you may need to take disciplinary action, up to and including termination of employment.
7 – Provide Incentives for Good Attendance and Encourage a Positive Culture
- When employees feel valued and respected, they are more likely to value and respect your company. As part of this effort, consider providing incentives for good attendance and punctuality. Examples include a monetary bonus, additional vacation time, or perks the employee would enjoy.
Conclusion
Time fraud is a serious financial issue for small and midsize businesses. Take steps to prevent it.
- Implement a “Time and Attendance” software system
- Set clear expectations
- Train your managers
- Monitor employee schedules
- Conduct regular audits
- Address time fraud immediately
- Provide incentives for good attendance and encourage a positive culture
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.