How to Prevent Employee Theft
An employee may be motivated to steal from their employer for various reasons including addiction, financial need, greed, opportunity or resentment towards their employer.
Employee theft is generally defined as theft, forgery, fraud, embezzlement or destruction of company property committed by an employee of that business. Here are some examples:
- Stealing cash from a register.
- Stealing merchandise or materials.
- Stealing customer data or company intellectual property.
- Altering or tampering with invoices, expenses, payroll or other accounts.
- Forging invoices or payments.
In Canada, employees can be persecuted for theft or fraud, depending on the value of stolen property or money and the method used.
How to Prevent Employee Theft
Luckily, there are steps businesses can take to prevent employee theft, including:
- Carry out thorough employee screening for new hires.
Ensure you check your potential hire’s references. You may want to require a background or criminal check for certain positions—just ensure you get approval in writing from the prospective employee.
- Set up a reporting process.
According to the Association of Certified Fraud Examiners, 37 per cent of employee theft is initially detected due to a tip by another employee, vendor or client. Whether you establish this in-house or hire an outside vendor, ensure the tipster’s anonymity is protected.
- Ensure there are procedural checks and balances.
Depending on your business, there are many ways you can establish procedural checks and balances. This may include restricting access to certain employees; requiring multiple signatures on transactions over a certain amount; requiring manager approval on refunds or voids; having multiple employees review accounts; performing regular and random audits of cash, inventory and procedures; establishing clear policies banning employee theft and outlining consequences; and hiring an independent third party to review your accounts.
- Invest in security measures.
Security measures act as a deterrent and can help provide evidence in the event of a prosecution. These can include cameras; alarm systems; multi-factor authentication; required logins; biometric identification; IT tracking; and physical barriers such as doors and locks.
- Make employees feel valued.
Providing adequate pay, recognition, quality feedback, development opportunities and other perks can help stave off employee theft.
- Establish consequences for employee theft and follow through.
Clearly communicate a zero-tolerance policy for employee theft and outline consequences in your employee contract. We also recommend prosecuting employee crime.
- Add crime coverage to your commercial insurance.
Employee theft is not a covered peril by commercial insurance policies unless you have crime coverage (also known as employee theft, employee dishonesty, fidelity coverage or commercial crime insurance). This protection helps cover losses or damage to company property as well as money or securities theft committed by an employee. However, it should be noted that this coverage can be limited as it often has a minimal limit.
Work with your broker to review your policy and discuss your options for protecting your business from employee theft.
Does your organization have (enough) crime/fidelity coverage?