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How to Prevent Employee Theft with a Security System

How to Prevent Employee Theft with a Security System

Any time an employee steals, uses or misuses an employer’s assets without the express permission or consent of that employer, it’s considered an instance of employee theft or fraud.

It doesn’t matter whether you’re talking about a cashier swiping an extra dollar or two from the register or an accountant funnelling thousands of dollars into their personal account: if they’re taking money – or anything else – from the business, it’s considered theft or fraud.

Why Do Employees Commit Theft or Fraud?

While there could be a wide range of reasons why employees would commit fraud and/or steal from the businesses that employ them, some of the most common include:

1. Financial Pressures and Incentives

Employees who experience financial pressures in their home or personal lives are more likely to commit a crime by stealing from their employers. These pressures could include high amounts of personal debt, irresponsible spending habits, unsustainable cost-of-living expenses or many other factors.

2. Opportunity

The more access to merchandise an employee has, the more likely they are to feel like they could potentially commit an act of theft or fraud without getting caught. Employees who handle thousands of units in a single day and know that some inevitably go missing may think that no one will notice if those if they take one or two units for themselves.

3. Rationalization

Sometimes an employee can convince themselves that their crimes are allowable or justified for any number of reasons, including the size of the company, the presence of insurance that would cover the cost of what they’re taking, a perception that their job performance entitles them to extra benefits or a belief that they deserve extra compensation for being treated negatively or paid insufficiently.

How to Prevent Employee Theft with a Security System

How Common is Employee Theft?

Employee theft or fraud occurs more often than many people might suspect.

Estimates suggest that employees steal upwards of $50 billion annually from the businesses that employ them, and roughly 7% of a company’s annual revenue is lost to fraud each year.

The vast majority of employees – a whopping 75% – steal something from their employers at least once over the course of their careers, and nearly 40% are repeat offenders who steal something two or more times.

These instances of theft and fraud may seem minor or relatively inconsequential to the individual employee who commits them. Still, they can add up to have huge – and potentially devastating – effects on business: 33 percent of all business bankruptcies are caused by employee theft.

In terms of who commits these crimes, statistics show that 29% of all instances of employee theft are committed by those who felt that their ideas were stolen at work, suggesting that one of the best ways to reduce employee theft is to make sure all employees feel listened to and properly rewarded for their work and ideas as much as possible. Interestingly, the majority of fraud or theft is perpetrated by the people who the business trusts the most, as managers commit more than half of all instances of fraud (55%).

In many cases, fraud or theft can go on for a long time before a business can detect it. On average, fraud occurs for two years before it is detected. While not all employees commit fraud or theft, unfortunately, businesses cannot expect their more honest employees to help them root out crime: 20% of employees admit to being aware of fraud at their companies.

How Employee Theft Eats Into Inventory

Many businesses owners might be surprised to learn that the number one source of inventory shrinkage is not shoplifting or theft of their property committed by outside persons, but employee theft.

In fact, 43% of all instances of inventory reduction are due to employee theft, while only 36% are due to shoplifting. These two categories are by far the biggest factors that lead to a reduction in overall inventory. Administrative errors are responsible for less than half as many instances of inventory shrinkage as shoplifting, at only 15%, while vendor fraud accounts for just 4%, and another 4% of inventory that goes missing is considered miscellaneous or unknown because the source of the loss is never properly identified.

Who Commits Employee Fraud?

As the statistics above suggest, unfortunately, the short answer to this question is, “almost everyone.”

In terms of demographics, men are more likely to commit acts of theft or fraud than women: men commit about 60% of all instances of fraud, and 40% by women.

Although it may seem counterintuitive, statistics show that higher educational achievement does not make an employee less likely to commit theft or fraud. Both employees who have only achieved a high school diploma and employees who have attained a bachelor’s degree have a 34% chance of committing employee theft, while 21% of thefts are committed by those who have some college, and 11% are committed by those who have a postgraduate degree.

Types of Employee Theft

Depending on the specific business, employee theft could potentially take many forms, but usually falls within one of the below categories:

1. Embezzlement or Larceny

This occurs when an employee already has legal access to a business’s property or assets but uses that access to illegally redirect money or assets away from the business and to themselves or a third party.

2. Skimming

Skimming is the term used when an employee removes cash from a business or organization in the hopes that it will go unnoticed. It is referred to as an “off the books” crime because the employee hopes that their stolen money will go unaccounted for.

3. Fraudulent Disbursements

When an employee uses the company’s systems to illegally benefit themselves rather than the business or organization, it’s considered an act of fraudulent disbursement.

4. Idea, Opportunity or Information Theft

Not all instances of theft involve removing cash or physical products from a business. Sometimes the item being stolen is a piece of valuable information, like a customer list trade secret or piece of internal software.

How You Can Prevent Employee Theft

There are a number of steps you can take to reduce instances of employee theft, including vigilance in screening and hiring employees and instituting policies to ensure they are treated fairly and have little or no incentives to defraud or harm the business in anyway.

But for businesses who are concerned about employee theft, one of the best methods of prevention is to install security protocols that can both prevent theft and make it more likely that any perpetrators will be caught.

On-site security guards protect premises and act as a visual deterrent; computer security measures allow you to understand who is accessing what information digitally, and high-tech surveillance cameras allow you to keep an eye on valuable merchandise and the employees who handle it.

Employee theft is an all too real threat facing all businesses. But by taking precautions and installing the security measures that make sense for your organization, you can dramatically reduce your risk and instances of loss.


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