Time Theft Guide: How to Spot it and How to Stop It

Employee theft is an unfortunate reality. Food, alcohol, and cash are common victims of theft—but business owners have to look beyond physical goods. Employee theft can be more hidden or even unintentional—with time theft. This occurs when employees are paid for the time they weren't scheduled or didn't actually work, and can come in a variety of forms.

In many cases, it's not cold, hard theft either. Employees may clock in early to help out or leave a few minutes early on a slow day. It seems harmless on both sides. But a few minutes here or there multiplied by days or numbers of employees can have a less than a small impact on your bottom line by the end of the year. It's also more common than you may think. The American Payroll Association (APA) reports that roughly 75 percent of U.S. businesses are affected by time theft. For a healthier business, it's important to flush out any time theft that's happening now and create preventive measures to keep it from creeping up. Thankfully, there a number of tools that can help you identify and prevent employees from stealing time—intentional or not.

What is time theft?

Simply put, time theft is when an employee is paid for the time that they did not actually work. It is also known as time fraud or stealing time.

How much can it cost my business?

Let's say you have an employee on the schedule for 8:00 AM until 5:00 PM. They make $15 an hour. But they came in at 7:50 AM, clocked in, and poured themself a coffee before starting work at 8 AM. It was a slow day, too, so they left ten minutes early and texted their friend to clocked them out at 5 PM.

From an employee's perspective, it may seem harmless. And it's easy to let slide as an employer— what's 20 minutes? Let's do the math:

If the employee does this each day over the course of a five-day workweek, that can add up close to 85 hours a year—costing your business $1200 in extra payroll for time not actually worked.

That's $12,000 dollars for a small business with 10 employees.

Or $120,000 for a multi-location business with 100 employees.

You wouldn't hesitate to stop someone from taking $1200 worth of meat or alcohol from you—so why let time theft add up?

How to spot it: Types of time theft

Employees can steal time in different ways. By understanding the ways it can occur, business owners or managers have a much higher chance of identifying it before it racks up a hefty bill. Here are a few ways time theft can happen:

Buddy punching

When an employee clocks in or out for another employee, this is known as “buddy punching.” For example, one of your two openers is running a bit late and has the other punch them in before they arrive. This can occur if you use a PIN-based system or time cards. It's all too common, and a 2017 study showed that buddy punching alone costs U.S. employers up to $373 million annually.

Inaccurate time cards

People are generally bad at filling out timesheets. When you have employees manually enter their hours into a spreadsheet, mistakes are almost guaranteed. Honest mistakes happen, and you'll end up paying for it. It also makes it easy for employees to manipulate numbers: negate a late arrival, trim down a break, or give themself a few extra hours.

Longer Lunches and Extended Breaks

Employees may add a few minutes to their mandated lunch or coffee breaks, coming back after 17 or 34 minutes rather than 15 or 30. These can add up over time and end up costing you a significant amount. An employee may also take a break but not record it, which can lead to compliance issues down the line.

Personal activities on company time

Employees who misuse company time by taking multiple smoke breaks, step away to take calls, or run quick errands during slow times are technically committing time theft. Things come up sometimes, and some phone calls have to be taken. But when goodwill is abused, it can end up costing you extra payroll. Make sure you clearly define when it's ok for employees to take a call or run down the street, and call out when it happens too much.

How to prevent employee time theft

The best way to stop time theft is to prevent it from happening in the first place. There are a number of simple preventative measures to ensure that intentional time theft is nearly impossible.

Have clear policies in place

In the restaurant business, communication is at the core of success (7shifts Team Communication App can help with that). Make sure that your employees are well aware of what your policies towards late/early clock-ins are. And make sure they know the consequences of time theft are. Be sure to give employees detailed explanations for how you expect them to track their time. Instructions for making corrections to their time card can go a long way in preventing mistakes, too. A proper employee handbook that includes those details can help be a great solution.

You allow employees to clock in a few minutes early if they arrive. You may also allow employees to correct their time if they're late due to public transit delays. Just make sure you budget for these kinds of overages when forecasting your labor costs so you don't end up with higher labor costs than expected. It's always better to come in under than to go over.

Recommended Download: Free Restaurant Labor Cost Calculator Template

If you're still using paper time cards or a manually updated spreadsheet to track hours, get rid of it. Upgrade to a digital, automated time clocking system. Time clocking tech makes it easy for you to monitor employee time and attendance to make sure they're taking the right breaks and clocking in and out as it's aligned with their scheduled hours. These tools can help identify bad habits before they can morph into costly problems. Some even allow for personal passcodes, photo identification, or geofencing, to prevent buddy punching from ever taking place.

If you don't already, it may be wise to set up video surveillance of your POS system. In addition, to help monitor cash transactions, it can also help identify and prove time theft in action.

“Most modern workplaces have multiple means of recording hours like a punch-in clock backed up by video surveillance in public areas of the restaurant. This two-part system is important because many would-be time thieves will ask or threaten co-workers into logging into the time clock for them,” says Vincent P. White, a partner in the employment law firm White, Hilferty, and Albanese.

Give your managers top-level visibility

Tools aren't any good without proper access. Make sure you're giving your managers access to time clocking tools that allow them to view reports, make changes or corrections, or access data from their computers, tablets, or mobile devices. This ensures they are able to monitor the time clock and catch errors before they become problems.

Time theft laws

If you suspect that your business is the victim of time theft, you may choose to seek legal action if it is serious enough. But before you do, there are a few items to keep in mind.

The Fair Labor Standards Act of 1938 (FLSA) requires any business to pay an employee for the hours they work, which are reported on their timesheets. Even if you suspect that some of that time may be stolen—intentionally or not—refusal to pay it may land you with a lawsuit. An employee can sue for an amount equal to double the missing wages in back pay, plus any legal costs and fees.

What can you do once employee time theft occurs?

If you suspect that time theft has occurred in your restaurant, you have a number of options as to address it. The first step involves making sure you have proof before you can decide where to take it.

“With the right safety measures in place, such as a time clock with a video camera facing it, time theft can be extremely easy to prove. In that situation a common tactic employers utilize is to offer the employee the chance to make restitution. If they don't, a civil suit could be an expensive option for the employer and may not be worth it. But they could always just turn things over to the police.” says Vincent P. White.

Here are the three steps to take when time theft has occurred:

1. Investigate

Theft of time should be investigated with the same rigor as theft or property. Findlaw.com says that any investigation should follow specific guidelines. These include involving neutral third parties, committing to confidentiality, and making sure it is well documented. You will also need to work with an attorney and certified public accountant. A thorough and lawful investigation is essential before moving forward.

2. Disciplinary action

If you can prove that time theft occurred and you've determined that the intent behind time theft was intentional, you may seek disciplinary action against the employee. This is entirely up to your discretion. It can range from suspension to termination, if necessary.

3. Seek restitution

You may also choose to seek restitution (back payment) for the wages paid. This is generally by working with your insurance company, attorney, and a CPA. In cases where the amount paid out due to time is rather large, litigation may be required to get that money back. This is a costly option that is often not worth it.

“Time theft can generally become a felony criminal charge when it meets the threshold dollar value of a felony in your local jurisdiction. For example, if you live in an area where stealing $2,500.00 could constitute a felony, then time theft could be viewed as a felony there when the value of the hours stolen reached $2,500," says Vincent P. White.

Frequently asked questions

Is time theft a crime?

Time theft is considered to be a crime, and in some cases where the total wages paid exceeds that of felony theft, a felony crime.

Can you be fired for stealing time?

This is entirely up to your employee, but you may be terminated for stealing time and expected to pay restitution.

What's the difference between time fraud and time theft?

Both time fraud and time theft occur when an employee is paid by their employer for hours that they did not work.

Closing Thoughts: How to Stop and Stop Time Theft

Time theft is a problem all too common for businesses. For some, it can add up to thousands of dollars a year in labor costs for unworked hours. No one wants to have to call attorneys, fire employees, or take these claims to court. By using tech-enabled time clocking and scheduling software, you can prevent time theft from happening at all. This makes for a healthier and happier workplace for all parties involved.

The information contained in this content is general in nature and businesses should consider whether the information is appropriate to their needs. Legal and other matters referred to in this article are based on 7shifts' interpretation of laws existing at the time and should not be relied on in place of professional legal advice. 7shifts is not responsible for the content of any site owned by a third party that may be linked to this article and no warranty is made by 7shifts concerning the suitability, accuracy or timeliness of the content of any site that may be linked to this article. 7shifts disclaims all liability (except for any liability which by law cannot be excluded) for any error, inaccuracy, or omission from the information contained in this article and any loss or damage suffered by any person directly or indirectly through relying on the information contained in this content.