26 Mar 7 Types of Time Fraud (+ How to Prevent Them)
Time fraud comes in many forms and can be tough to detect. It is often committed by supervisors because of the position of trust they hold in the company and the access they have but it doesn’t end there. Employees at all levels can commit time fraud.
For example, employees may take a longer paid break than originally allotted, spend more time at lunch than they should, do personal things like make phone calls, shop, or surf the web, while on company time, clock in remotely even though they aren’t working or having a friend or supervisor clock in for them. While some of these seem innocent enough, when compiled and multiplied against your employee population, the hard costs really add up.
In an average company, 75% of U.S. businesses have employees who are committing time fraud, according to the American Payroll Association (APA) resulting in $200 stolen from under your nose each month.
Types of Time Fraud
- Buddy punching – A coworker clocking in for another who isn’t’ present.
- Ghost punching – Clocking in without actually performing the work.
- Overextended breaks – Taking longer breaks than allowed and getting paid for it
- Internet time theft – Spending time on non-work-related websites on company time.
- Personal time theft – Dealing with personal matters on company time.
- Time waters – Wasting company time being unproductive.
- Time rounding – Rounding up to the minute or hour causing the company to pay for unworked time
Time fraud is productivity loss and it results in thousands of dollars in losses for organizations annually. The process of discovering and investigating time fraud can pull key individuals away from their primary role, resulting in more productivity losses.
Industries Impacted by Time Fraud
While time fraud can be a problem in any industry, certain industries are more susceptible to being a victim of greater losses than others. The top five industries with the most annual loss in time fraud are:
- Mining
- Real Estate
- Construction
- Oil and Gas
- Banking
Other susceptible industries include temp staffing, janitorial, and home health care.
How to Prevent Time Fraud
When there is little trust, productivity, responsibility, and initiative decrease and turnover rates increase. There are several solutions to the complex problem of time fraud. Use these tactics to set clear expectations and policies can help cultivate an environment of trust.
- Create a clear and concise policy on time fraud that is easily viewed by employees in the office.
- Offer the option for employees to approve their time card online.
- Use a time tracking system that offers mobile time tracking
- Train supervisors and managers on time fraud, as well as wage and hour laws in your state.
- Train supervisors and managers to catch inaccuracies and notice inconsistencies.
- Regularly check in and ask questions about time cards to show employees that this is an important issue and that time cards are being checked and reviewed carefully.
- Require supervisors and managers to simply approve time cards each pay period confirming time cards they oversee and accurate including meal and break times.
- Use time and attendance software to efficiently track and monitor employee time.
- Implement facial recognition time clocks to prevent buddy punching and eliminate time fraud.
- Contact legal counsel immediately upon finding problems with time fraud to be directed in the best way.
- Remember that your employees need to feel valued and trusted. Communicate that your time tracking policies benefit the business so that everyone can be successful.
Time Tracking Technologies
Time fraud may be costing you money each and every workday. Plus, it chips away at your culture when your employees see what their coworkers “get away with.” But technology exists to stop time theft. Reclaim your profits with time tracking solutions like these:
- Mobile Apps: Time tracking applications designed for smartphones and tablets. They allow users to track their time on the go, offering features such as timers, task categorization, and synchronization with other devices or platforms.
- Web-Based Platforms: Time tracking platforms accessible via web browsers. These platforms often provide comprehensive features for time management, project tracking, invoicing, and team collaboration. Users can access them from any device with internet connectivity.
- Biometric Time Clocks: These systems use biometric technology such as fingerprint scans or facial recognition to track employee attendance and working hours. They offer high accuracy and security in time tracking, particularly in workplace environments.
- GPS-Based Time Tracking: Utilizes GPS technology to track the location of employees or workers while they are on the clock. This type of tracking is often used in industries where employees work remotely or in the field, such as construction or delivery services.
- RFID Time Tracking: Radio-frequency identification (RFID) technology is used to track employees’ presence in a particular location or their movements within a workspace. RFID tags or cards are assigned to individuals, and readers detect their presence, enabling accurate time tracking and access control.
You work hard. You’ve taken risks to build on a business. You account for all your expenses — except one. Time fraud is when employees cheat a business out of wages – plain and simple. The good news is with today’s technology, its’ easy to prevent. You just have to get started.
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.