What to do when your own workforce is skimming off the top when you have your back turned?
Unfortunately, employee theft statistics reveal that companies are losing millions due to internal theft committed. This is specifically devastating for entrepreneurs and small businesses.
Types of fraud can start with something as little as swiping a few extra coins from the cash register. But they can also go to such lengths as funneling thousands of dollars to a personal cash account.
Employees do it for all kinds of reasons. Job satisfaction statistics say that not all employees are happy in their line of work. Many are also facing bad financial situations to being with.
In order to understand the root of the problem, employers need to realize how these things occur. For that reason, Leftronic has prepared a plethora of stats and facts that can be quite useful in understanding this problem.
Fascinating Facts About Theft in the Workplace
- A 2013 survey revealed that 95% of employees steal from their employers.
- Perpetrators with higher positions tend to cause bigger damage.
- 59.1% of male employees commit fraud as opposed to 40.9% of female employees.
- 75% of thieves will never be caught.
- Employees steel approximately $400 billion each year.
- 42.7% of inventory shrinkage is caused by employee theft.
- Businesses experience a loss of $400 billion a year in lost productivity.
- 34.5% of embezzlement schemes are funds theft.
- Employee theft is responsible for 33% of US businesses going bankrupt.
In order to be able to understand the reason for an employee to steel at work, we need to know what makes them do it. Criminologists have created a theory, dubbed the Fraud Triangle Theory.
It includes three elements:
- Pressure: A certain financial need that the employee is facing.
- Opportunity: A perceived opportunity for the employee to commit theft by having access to a lot of funds.
- Rationalization: An employee justifies the fact of committing theft due to the way they are being treated at work.
Simply saying, an employee who is facing a serious financial situation when presented with an opportunity will most likely commit fraud. This is further amplified by bad work conditions or when employees feel underpaid.
Types of Employee Frauds
But what are the actual ways employees commit thefts at work? They can be numerous and may stem from simple work time steeling to full-blown robbery by transferring large amounts of funds to their personal accounts.
Some of the usual examples of employee theft include:
- Larceny: Encompasses taking cash and all proprietary from the business and claiming it as your own. It can include everything from taking cash out of the till to stealing inventory from the storage.
- Skimming: Stealing “off the books.” Taking money or items before they are officially recorded in the account or registry.
- Billing Schemes: Setting a false vendor’s account and paying for nonexistent services.
- Embezzlement: Theft of property or cash by someone in a trusted position (e.g. a senior executive or an accountant).
- Expenses Reimbursement Schemes: Adding non-business related items to expenses reports.
- Time Theft: Using company time for conducting personal business.
- Information Theft: Stealing and supplying intangible assets (usually stolen data and sensitive information) to a competitor.
- Fraudulent Disbursements: Usually committed by an employee who has a deeper understanding of the system. It includes more elaborate types of theft in the workplace and usually larger sums of money and assets.
And now to take a look at what we’ve all come here to see – the stats!
Employee Theft Stats
1. A 2013 survey revealed that 95% of employees steal from their employers.
(Source: Credit Donkey)
An anonymous survey conducted way back in 2013, which included a total of 500 people, revealed that 95% of their employees steal at work.
The figures jumped significantly higher compared to 1999 when 79% of employees were committing theft at work.
However, the usage of phones and computers for personal use was included in the survey, which greatly bloated the numbers. A total of 80% of employee theft cases admitted to time theft during working hours.
2. Over 279,000 dishonest employees were apprehended in 2018 by just 20 large retailers.
(Source: Hayes International)
Based on the report created by Jack L. Hayes International, a leading loss prevention consulting firm, 279,000 employees were arrested in 2018. The employees were apprehended due to shoplifting at work or dishonest behaviors.
The interesting part is that this only includes 20 large retailers who had problems with their staff members.
The sum recovered due to the misappropriation of assets amounted to $114 million.
3. US businesses affected by employee theft lost $1.13 million on average in 2016.
A study conducted by Hiscox, revealed just how much US-based businesses were being affected by employee theft or misappropriation of funds.
The figure that they came up with is a staggering $1.13 million on average per business!
Small and midsize businesses were the ones that were affected the most. Employee theft facts show that this was the case in 69% of the time.
The median loss to the year prior amounted to $289,684.
4. Businesses lose at least 5% of their annual revenue to employee fraud and abuse.
Based on the Association of Certified Fraud Examiners, 5% of annual losses suffered by a company due to employee theft are recorded.
Smaller businesses, or firms that employ fewer than 150 workers, are more vulnerable to stealing in the workplace. Additionally, they are more likely to experience a catastrophic loss due to the same reasons.
The main reason behind it is not enabling enough internal control. Also, some owners are simply not aware enough of the risk companies may face from inside threats.
5. 75% of employees have stolen from their employers only once.
If you are asking yourself about the likelihood of a business suffering from employee schemes, you should understand that 75% of employees have stolen from their employer at least once.
These stats come from the US Chamber of Commerce, which also reveals that 30% of cases of a failed business are directly caused by employee abuse. The embezzlement cases have proven to be the most dangerous one.
6. Bookkeeper steals a total of $600,000 during a six-year period.
(Source: Chicago Tribune)
Renee Johnson (61) was accused and sentenced for stealing over $600,000 from the restaurant Blackbird and Avec, where she used to work as an accountant.
Johnson was sentenced to two years and four months if jail time in federal prison, even though she was originally facing a four-year sentence demanded by the Assistant US Attorney.
Johnson admitted to stealing money from work between 2011 and 2017.
She tried to explain the situation to the FBI by saying: “You take that first cookie and it tastes good. So you just keep going.” She also believed that she would have never been caught.
7. The likeliest targets subject to bank theft are the elderly and the rich.
In contemporary times, you rarely see big money heist situations when a group of thugs comes to rob a bank keeping everyone at gunpoint. Today, the biggest threat comes from within.
Employee theft at banks is the likeliest way someone would steal from a bank today. According to bank employee theft statistics, their likeliest targets are the elderly and the rich!
Bank employees have direct access to clients’ funds. Sometimes they abuse their position by doing fraudulent activities. They usually target accounts with Social Security payments or those with large amounts of money.
This activity has become more apparent due to the rise of ATM machines and electronic banking. It directly results in tellers being paid less as many processes have become automated.
8. Perpetrators with higher positions tend to cause bigger damage.
Employee theft consequences seem to be more damaging the higher the position of the perpetrator is.
Research shows that a median loss suffered due to owners or executives comes to $573,000.
Managers have been able to cause a median loss of $180,000. Regular employees damage the firm by causing $60,000 of damages.
Also, the longer the perpetrator worked for the company the higher the losses may be. People with 10+ years of experience caused a median loss of $229,000. Those in their first year of work cause $25,000 of damages on average.
9. 59.1% of male employees commit fraud as opposed to 40.9% of female employees.
(Source: Sheer ID)
According to employee theft statistics based on demographics, male employees are the ones who commit more of them. A total of 59.1% of fraudulent employees are men. Only 40.9% are women.
As far as degrees go, 34% possess a high school degree, 21% have a college degree, 34% come with a Bachelor’s Degree, and 11% have a Postgraduate Degree.
10. US employees steal more than shoplifters.
(Source: Axe Resolutions)
Organized retail crime is something that greatly plagues US stores. Employee theft statistics show that 42.7% of crime in the stores is committed by employees. This goes beyond 35.6% of shoplifting done by the customers.
15.4% of loss is credited to administrative errors, while 3.7% is to vendor fraud.
11. Employee theft is responsible for 33% of US businesses going bankrupt.
(Source: Axe Resolutions)
About 33% of US businesses bankrupt due to their employees stealing from them. It is a loss of about $50 billion a year.
Small businesses are the most vulnerable. 68% of all prosecuted cases were due to employee theft in the workplace form companies that had 500 or fewer workers.
12. 29% of employees admitted they stole because they were too lazy to buy the product.
(Source: Axe Resolutions)
According to a survey conducted by GetVoip, the majority of employees committed theft because they were too lazy to actually buy the products they stole. The surveyed individuals didn’t rise to the level of corporate theft as 14% of them stole goods in the value of up to $100.
The reasons for stealing were:
- Too lazy to buy it – 29%
- Because I can get away with it – 24%
- Needed the money or object stolen – 15%
- Wanted the money or object stolen – 13%
- Felt frustrated/dissatisfied by the job – 12%
- Addicted to stealing – 7%
13. 26.3% of employee theft is discovered by a tip from another employee.
(Source: Brandon Gaille)
If you are wondering about who commits employee theft you should also be aware of how these people are usually busted.
26.3% of the time, it is an anonymous tip that comes from another employee. But accidental discoveries are right there at the very top as well.
- Tip from Employee – 26.3%
- Accidental Discovery – 18.8%
- Internal Audit – 18.8%
- Internal Controls – 15.4%
- External Audit – 11.8%
- Tip From Customer – 8.8%
- Anonymous Tip – 6.2%
- Tip From Vendor – 5.1%
- Notification from Law Enforcement – 1.7%
14. Managers needed to routinely order 20% more than necessary due to employee theft.
(Source: The Atlantic)
Between the period from 2002 to 2018, corporate theft losses jumped by 11%. As employee theft statistics for 2018 reveal, there were 21% established as opposed to 10% from 2002.
The items stolen range from a single pencil to an entire pallet taken from a loading dock.
15. Stealing in the workplace starts from small and escalates to enormous measures.
(Source: The Atlantic)
Еven the simplest theft can escalate into something much more enormous with time.
This happens due to a social-cognitive mechanism, familiar as moral disengagement, which sees a worker stealing something as minuscule as a pen and erupting into something much larger in time.
The best example of stealing from work taken too far comes from a juvenile detention center in Texas committed by Gilberto Escamilla. He was a correctional officer who stole $1.3 million worth of fajita meat during a period of nine years.
Escamilla confessed that he started small and with time felt more secure. Things only got bigger to the point that he could not control himself anymore. He was given a sentence of 50 years in prison.
16. Organized retail crime costs $703,320 per $1 billion in sales.
Retailers are in a very bad position in recent times as the activity of reporting organized retail crime has increased. Employee theft statistics for 2019 say that over two-thirds of retailers have reported theft in the last 12 months.
7 in 10 of them see a need for federal intervention in certain cases.
This results in more than $700,000 of cost per $1 billion in sales for retailers.
17. 40% of people who committed some sort of crime received an HR-related red flag prior to them committing the act.
One of the main reasons that push employees to commit fraud is getting red-flagged by HR for any sort of reason. Employees that have been flagged due to poor performance at work, given reduced pay or benefits, received a demotion or an involuntary cut in hours are much more likely to commit employee fraud.
In fact, 40% or workers that have been red-flagged decide to do so. 14% are the people that have been given a bad performance at work review while 13% are those who fear losing their job.
18. A decrease in employee theft has been established in the UK according to police records in 2019.
According to police records starts, there are 7.7 thousand fewer cases of employee theft recorded in the UK.
The statistics cover the period between 2002 (where 17,530 cases were reported) to 2019 (with 9,835 cases reported).
There is no apparent reason but it definitely has to do with the UK’s employee theft laws that seem to be tightening up.
19. Employees steel approximately $400 billion each year.
According to the US Chamber of Commerce, businesses lose about $400 billion annually due to their employees. Further investigation conducted by Ernst and Young reveals that 90% of businesses have been affected by employee theft of some type.
Employees stealing is a common occurrence, happening in all sectors. This includes retailers, the healthcare industry, schools, and colleges, as well as the hotel industry.
You should think about these stats next time when you ask yourself “Why does employee theft matter?”
20. 42.7% of inventory shrinkage is caused by employee theft.
When it comes to stealing inventory, larger businesses are the prime target of their employees. Due to more items available and more things to steal, employees often feel safer in those situations.
However, smaller businesses are afflicted the same way. Some even more than the others. They do have a smaller inventory so losing assets can affect them in a more serious way.
42.7% of inventory theft has been committed by people who have legal access to assets according to the recent employee theft statistics for 2020.
21. Sweethearting costs businesses about $100 billion annually.
Sweethearting involves an employee using their employee discount to help friends and family buy a certain item. It can also work in helping them receive a refund or even go beyond failing to scan the purchased item or overriding the price manually.
What is employee theft and how it works? Simply saying, sweethearting can be done both out of good nature or in malice. Sometimes people simply want to help out another person but in many cases, it can be due to personal gain.
All in all, businesses lose out on $100 billion a year because of it.
22. A “short ring” scheme can cost an employer thousands of dollars a year.
Something simple as a “short ring scheme” can end up costing employee thousands, of not more, dollars per year.
How to commit employee theft? The short ring scheme is the simplest one but a very devastating one at the same time.
It usually happens at bars and is committed by bartenders and waitresses. You sell a drink that costs $10 and labels it as $5-worth drink in the registry and simply pocket the difference.
It is extremely hard to catch and can only be determined if one carefully checks the inventory.
23. Businesses experience a loss of $400 billion a year in lost productivity.
(Source: Epay Systems)
Time stealing is one of the hardest forms of theft to determine among employees. However, it is still something that many employers consider in their employee theft policy.
Studies say that low productivity directly caused by time theft has resulted in businesses losing out on $400 billion dollars a year.
Additionally, 74% of employers experience great losses because of buddy punching. This is when an employee punches in or clocks in for their colleagues. 10 minutes here and there and time loss builds up.
Research conducted by Nucleus Research says that these types of losses account for 2.2% of gross payroll.
24. 75% of thieves will never be caught.
(Source: Epay Systems)
Based on the employee theft statistics created by the US Chamber of Commerce, 75% of thieves are never going to be caught.
Three out of four employees will something like a product, time, or intellectual property.
25. A quarter of thefts are $1 million or more.
From the $50 billion stolen annually by employees, a quarter of them amounts to $1 million or more.
45% asset misappropriation ranges between $10,000 to $500,000, with medium sum of $175,000.
10% of employees steal a sum lesser than $10,000 with the idea that smaller sums are not going to be detectable.
26. 75% of employees have stolen at least once from their employer.
Most employers are afraid that after stealing once, the employees will continue their bad habits and continue to commit multiple felonies later on.
If you are wondering what percentage of employees steel, about 75% have only done it once.
The figures luckily go lower for two times offenders, as there are 38% of people who have done it twice.
27. A bookkeeper embezzled $500,000 during a period of seven years.
One of the greatest examples of major theft is committed by a lone bookkeeper who worked for a high-end remodeling firm. The bookkeeper stole a total amount of $500,000 during a period of seven years, marking it as a sever embezzlement example seen in contemporary times.
To make things more interesting, he was only found out because the manager was puzzled by the fact that even with lucrative contracts the firm was constantly short of money.
28. 66% of employees are responsible for cyber breaches.
(Source: HR Drive)
According to the research conducted by Willis Towers Watson, 66% of employees are responsible for various types of cyber breaches. Actually, Dtex Systems found out that 95% of employees tried to break security and internet restrictions of their company.
This could lead to stealing knowledge which can prove to be more dangerous than other types of theft. Perpetrates are earning money from the stolen information and it could lead to much more significant money losses like the one who
29. 34.5% of embezzlement schemes are funds theft.
(Source: Security Magazine)
The most common type of an embezzlement scheme, and the easiest, is funds theft. This happens 34.5% of the time.
It is promptly followed by check fraud that happens 22.1% of the time.
Embezzlement statistics for 2018 says that 70% of check frauds happen at companies that have 100 workers or less.
30. High-loss frauds usually happen over longer periods.
(Source: Security Magazine)
A perfect scheme usually takes longer to perform. Sometimes being patient can pay off in dividends. Some workers tend to do so in order to incur larger amounts of money.
Diverting small sums of money over a longer period of time where an employee stealing money from an employer for at least five years happens in 28.7% of cases.
The average loss established for the cases that span for five or more years is $2.2 million. While in case of situations that last longer than 10 years the average loss incurred is $5.4 million.
31. 36.5% of shoplifting cases are external.
41% of retailers that were surveyed reported an increased amount of inventory shrink. Out of that 36.5% was done by shoplifters coming from outside. Outside shoplifters are outpacing internal employee theft according to the recent shoplifting statistics 2019.
However, each dishonest employee per average dollar loss costs an employer $1,203.
32. Always keep in mind the 10-10-80 rule.
(Source: Streamline Telecom)
An appropriate way of preventing theft is following the 10-10-80 rules. This means that an employer should regard the situation where 10% will never steal, 10% will most likely steal, with the remaining 80% being somewhere in the middle.
If you ask yourself “Where does employee theft normally take place?” the most obvious answer is within the office. But situations tend to vary and there are more ways for people to acquire assets of funds from the employer for their own benefits.
If all the necessary precautions are taken into account, employee theft could be largely prevented. A regular employer has to think of various ways to make sure that the middle 80% does not turn into the ones that will definitely steal.
Employee Theft Prevention
Now when you know where the danger comes from and you are aware of how frequently it happens, it’s time to learn how to protect yourself from it.
Preventing theft completely is nearly impossible. But what you can do is to lower the possibility of it by taking certain precautions. This should start during the interview! Thoroughly conducting interviews with added background and drug testing should lessen the likeliness of employing a person who might do harm to the company.
How to prevent employee theft?
Here are some good pieces of advice:
- Fix the organization structure: Never give too much power to a single employee. Authorization should be balanced by making it a collaborative effort.
- Have a good relationship with your employee: Theft usually occurs when an employee is feeling mistreated or abused at work by the employer. In that situation, they don’t feel any remorse about performing illegal deeds. Building trust between an employer and an employee is necessary.
- Do not create a lone-employee environment: Employee theft is usually committed by an individual. So by creating teams or groups of two at work should lessen the opportunity for an employee to do something illegal.
- Install surveillance: Some employee theft examples include employee pilferage which results in inventory shrinkage. But there are bigger problems to worry about. All could be prevented with regular surveillance. Employees are less likely to steal when they know they are being watched.
- Protect your assets: All of the important assets that you possess, including good or merchandise, should be kept in tightly secured areas.
- Improve internal control: Regular assessments about things happening in the company should be performed. Document everything that your business is doing and perform audits from time to time to ensure regularity.
- Lead by example: Internal theft can be lessened by a significant margin if the employer shows morals and exceptional work ethics. People usually follow the leader and if an employer behaves in an unethical way, for instance, skims time during work, an employee is more likely to follow the same behavior.
These would be just some of the precautions that employers should take to protect the company from unwanted theft.
However, no system is foolproof!
Combining protection methods and using more of them will decrease the likelihood of theft happening.
What makes employees steal from their employer?
This is one of the burning questions that we were able to cover in our article.
The answers are ambiguous and multiple. There are too many aspects to think about in order to prevent it from happening. It is an issue that employers will need to find creative ways to deal with it.
It will continue to happen. It’s inevitable. Unemployment statistics also support this fact – many people are laid off due to fraud happening at work.
It mostly depends on the society and opportunity. Our employee theft statistics say that people who are facing a bad financial situation are more likely to do it out of desperation.
But rich people only want to get richer as well so they do it as well.
The danger comes from everywhere and employee theft can happen when you least expect it.
Keep your eyes open!
- Credit Donkey
- Hayes International
- Chicago Tribune
- Sheer ID
- Axe Resolutions
- Axe Resolutions
- Axe Resolutions
- Brandon Gaille
- The Atlantic
- The Atlantic
- Epay Systems
- Epay Systems
- HR Drive
- Security Magazine
- Security Magazine
- Streamline Telecom