At a glance, the words "employee theft" might conjure images of a worker sneaking out with a box of office pens or perhaps a ream of paper. But delve a little deeper, and it's evident that the topic encompasses much more than just tangible items. From using company time for personal tasks to more sophisticated forms of misappropriation, employee theft varies in its form and complexity. As we journey through this topic, we'll explore the different shades of employee theft and aim to provide a clearer picture of its impact on businesses. Recognizing and understanding these nuances not only helps organizations safeguard their assets but also ensures a fair and transparent work environment for all.

12 Types of Employee Theft

Employee theft is a serious problem that affects businesses of all sizes and industries. It can take many forms, ranging from small acts of dishonesty to more elaborate schemes.

By understanding the various ways in which employee theft can occur, organizations can take measures to protect themselves and their assets.

1. Time Theft: Using company time to conduct personal business or simply not working while on the clock.
2. Embezzlement: Misappropriating company funds for personal use.
3. Data Theft: Unauthorized access, use, or dissemination of company data or intellectual property.
4. Inventory: Stealing or misusing physical inventory or supplies.
5. Expense Account Fraud: Submitting inflated or entirely fraudulent expense reports.
6. Payroll Fraud: Manipulating time records or securing pay for unworked hours.
7. Skimming: Diverting business funds or payments before they are recorded in the company’s books.
8. Information Theft: Stealing sensitive or confidential information about the company or its clients.
9. Intellectual Property Theft: Unauthorized use or theft of company ideas, innovations, or creations.
10. Kickbacks and Bribery: Accepting or offering bribes or receiving unauthorized benefits from suppliers or clients.
11. Cyber Theft: Utilizing technology or the internet to steal company funds, data, or other assets.
12. Theft of Services: Receiving services without paying for their benefits.

Each type of employee theft presents its unique challenges, and addressing them requires diligence, clear policies, and consistent enforcement from organizations. We're going to talk about them in more detail below.  If you're looking to collect evidence that will help investigations of theft, we suggest reading our blog on types of evidence for successful workplace investigations.

What Is Time Theft?

Time theft occurs when employees are paid for time they have not actually worked or spent on job-related activities. It's a subtle form of employee theft that might seem innocuous but can significantly impact an organization’s productivity and bottom line over time. While it’s natural for employees to take short breaks or tend to urgent personal matters occasionally, time theft happens when such activities become habitual and start eating into work hours.

Understanding Time Theft:
Time theft can manifest in various ways, and it often goes unnoticed, especially when it occurs in small increments. It can range from frequent, extended breaks to using company time for personal tasks. It erodes work ethic and sets a precedent that can potentially encourage other employees to engage in similar behaviors.

Examples

• Extended Breaks: Taking longer lunch breaks or extra coffee breaks that go beyond the allotted time.
• Personal Tasks: Using company time to run personal errands, make personal phone calls, or browse the internet for non-work-related reasons.
• Late Arrivals or Early Departures: Consistently coming in late or leaving early without adjusting the time sheet or using leave.
• Buddy Punching: Clocking in or out for a colleague who is not present.

Addressing time theft requires a combination of clear policies, employee education, and efficient time-tracking systems. By fostering an environment of accountability and transparency, organizations can mitigate the impacts of time theft and ensure that both employers and employees uphold their end of the employment contract, creating a more harmonious and productive workplace.

What Is Embezzlement?

Embezzlement is a form of financial fraud where an individual, typically someone entrusted with the management or oversight of funds, misappropriates or misuses those funds for personal benefit. Unlike a straightforward theft, where an outsider might break in and steal, embezzlement is often committed by insiders—employees who have direct access to the company's financial resources. Because it's carried out by those within the organization, detecting embezzlement can be a complex challenge, often requiring meticulous auditing and a deep understanding of financial processes.

Understanding Embezzlement:
At its core, embezzlement is a breach of trust. The person committing the act has been granted access to company funds because of their position and abuses that trust for personal gain. The subtlety and intricacy with which embezzlements are typically conducted can make them difficult to spot, especially if the perpetrator has an in-depth knowledge of the company's financial operations.

Examples

• Falsifying Records:Altering financial statements or receipts to cover up unauthorized transactions.
• Phantom Employees: Adding non-existent employees to the payroll and then funneling their 'salaries' to personal accounts.
• Padded Expense Reports: Inflating business expenses or creating fictitious expenses to receive reimbursements.
• Unauthorized Transactions: Making unauthorized purchases or transfers using company funds or accounts.
• Supplier Kickbacks: Overpaying suppliers in return for a personal kickback or creating fake supplier accounts and diverting payments to them.

For businesses, a proactive approach to preventing embezzlement includes regular and surprise financial audits, segregation of financial duties, and fostering a workplace culture that emphasizes ethics and transparency. Understanding and recognizing the signs of embezzlement can help companies safeguard their assets and maintain a foundation of trust with their employees.

What is Data Theft?

In an era where data is often considered more valuable than gold, its theft has become one of the most pressing concerns for businesses worldwide. Data theft refers to the unauthorized access, copying, or distribution of company-specific or personal information. With the digital transformation of businesses and the interconnectivity of systems, the avenues for potential breaches have expanded, making it even more crucial for organizations to prioritize data security and awareness.

Understanding Data Theft:
At the heart of data theft is a violation of both digital boundaries and trust. Whether the perpetrator is an external hacker or an insider exploiting their access, the theft often goes unnoticed until the data is misused, leading to financial, reputational, or operational repercussions for the company. Furthermore, given the intricate web of personal and professional data interwoven in today's digital platforms, data theft can have cascading effects, compromising not just corporate secrets but also the personal information of employees and customers.

Examples

• Unauthorized Downloads: Copying sensitive company files to personal drives or external storage without permission.
• Email Breaches: Accessing or distributing confidential emails without authorization.
• Cloud Misuse: Storing company information on unsecured personal cloud accounts, leading to potential breaches.
• Phishing Scams: Falling for deceptive emails or messages that trick employees into revealing confidential information.
• Insecure Disposal: Not securely deleting or disposing of old devices or drives containing company data, making it accessible to malicious actors.

Proactive measures, including regular cybersecurity training for employees, robust IT security protocols, and clear guidelines on data access and storage, can significantly reduce the risk of data theft. By staying vigilant and fostering a culture of cybersecurity awareness, businesses can better shield their invaluable data assets and maintain the digital trust they've built with clients and employees.

What is Inventory Theft?

Inventory, whether it's office supplies or high-value merchandise, represents tangible assets that directly impact a company's bottom line. Inventory theft, then, goes beyond the mere act of stealing physical items—it erodes profit margins, disrupts operations, and can even jeopardize business relationships if stock isn't available when needed. Given its tangible nature, such theft might seem easier to spot than other types, yet the subtle ways it can manifest often make it a recurring challenge for many businesses.

Understanding Inventory Theft:
The essence of inventory theft is unauthorized removal or misuse of items that belong to the company. While some incidents might involve large, noticeable thefts, many occur in small, almost unnoticeable increments. Over time, however, these minor losses can aggregate, leading to significant financial and operational shortfalls. Whether perpetrated by employees, contractors, or even external actors, such theft demonstrates a lack of respect for the organization and its resources.

Examples

• Pilferage: Taking small amounts of inventory or supplies for personal use, thinking it won't be noticed.
• Shrinkage Due to Carelessness: Misplacing or mishandling items, leading to damage or loss, but not reporting it.
• Falsifying Records: Altering inventory logs or sales records to cover up missing items.
• Unauthorized Discounts: Giving unauthorized discounts or "freebies" to friends or family, which indirectly reduces inventory without proper accounting.
• Collusion with Suppliers: Receiving fewer items than ordered but reporting and paying for the full quantity, with the difference split between the employee and the supplier.

To combat inventory theft, businesses should implement stringent inventory management processes, conduct regular audits, and promote a culture of responsibility and transparency. Ensuring that employees understand the implications of inventory theft—not just for the business but for their own job security and the company's future—can also deter potential thefts.

What is Expense Account Fraud?

Expense accounts are designed to streamline work-related purchases and reimbursements, offering employees flexibility when representing or working for the company. However, this system can sometimes be misused. Expense account fraud arises when employees exaggerate, falsify, or fabricate expenses with the intent to gain undue financial benefits. Such deceit, while seemingly minor at times, can cumulatively lead to significant financial losses for an organization, not to mention the erosion of trust and workplace integrity.

Understanding Expense Account Fraud:
This type of deception revolves around the misuse of the reimbursement system. While many companies trust their employees to report expenses accurately, the lack of stringent checks or the ambiguity in expense guidelines can sometimes provide a fertile ground for fraud. Such deceit not only results in financial loss but can also foster a culture of dishonesty if left unchecked.

Examples

• Inflated Expenses: Submitting receipts for meals or travel that were more expensive than what was actually consumed or utilized.
• Personal Purchases: Buying personal items and misrepresenting them as business expenses.
• Duplicate Submissions: Submitting the same expense for reimbursement multiple times, hoping it won't be noticed.
• Fictitious Expenses: Creating fake receipts or invoices for expenses that were never incurred.
• Mischaracterizing Expenses: Reporting personal trips as business travels or disguising non-business expenses as valid business costs.

Combatting expense account fraud necessitates clear and detailed expense policies, regular audits of expense reports, and training sessions for employees on the importance of honest reporting. By cultivating a culture of transparency and holding individuals accountable, businesses can ensure that they're reimbursing genuine expenses without being taken advantage of.

What is Payroll Fraud?

Payroll fraud is a deceptive act where internal stakeholders manipulate the compensation system to gain unwarranted benefits. While it might sometimes fly under the radar, given the complexities of payroll processes, its cumulative impact can be detrimental to an organization's financial health.

Understanding Payroll Fraud:
Unlike direct thefts which are overt, payroll fraud often thrives in the shadows. It's usually executed by employees who understand the intricacies of the payroll system, exploiting loopholes or creating deceptive records. If unchecked, it not only results in direct financial loss but can also demoralize other employees who might feel they're being shortchanged or that dishonesty is tolerated.

Examples

• Ghost Employees: Setting up payroll for nonexistent employees and diverting their 'salaries' to actual bank accounts controlled by the fraudster.
• Unearned Overtime: Claiming payment for overtime hours that were never worked.
• Rate Alteration: Changing the pay rate in the payroll system temporarily to boost one's own earnings.
• Commission Schemes:Falsifying sales or commission records to receive higher bonuses or payouts.

Addressing payroll fraud requires a multifaceted approach. Implementing stringent checks and balances, periodic audits, and using advanced payroll systems that minimize manual entries can help. Moreover, fostering an organizational culture built on trust, integrity, and accountability ensures that employees understand the repercussions of such actions and think twice before attempting deceitful practices.

What is Skimming?

Unlike other financial misdeeds that leave traces in official records, skimming involves the diversion of funds before they even enter the accounting system, making it an elusive and challenging fraud to detect.

Understanding Skimming:
Skimming typically involves taking small amounts from daily sales or transactions, hoping the discrepancies go unnoticed amidst the business's broader financial operations. Because the stolen funds never appear in the books, skimming differs from embezzlement, where funds are misappropriated after being officially recorded. Its off-the-books nature is what gives skimming its stealthy edge, but it also means that over time, these small thefts can accrue into substantial losses.

Examples

• Undocumented Sales: An employee completes a sale but doesn't record it, pocketing the money instead.
• Short-Changing Customers: Providing less change than is due and keeping the difference.
• Phantom Refunds: Processing refunds for transactions that never occurred and taking the refunded amount.
• Under-reporting Income: Recording a sale at a lower value than what was actually received, and keeping the difference.
• Tampering with Receipts: Modifying receipts or transaction records to align with the skimmed amounts, creating an illusion of consistency.

For businesses to counter skimming, they need a robust internal control system. Regular and surprise cash counts, meticulous reconciliation of sales and receipts, and fostering a workplace environment where integrity is prized are all crucial steps. Installing surveillance systems and using point-of-sale systems that track and timestamp all transactions can also deter potential fraudsters and make skimming more challenging to execute.

What is Information Theft?

From trade secrets to client lists, the data a company holds can be its competitive edge or its Achilles' heel. Information theft, then, becomes a severe threat, where unauthorized individuals access, copy, or distribute proprietary information, potentially disrupting a company's operations, tarnishing its reputation, or compromising its competitive position.

Understanding Information Theft:
Information theft isn't just about stealing data; it's about the breach of trust, confidentiality, and the integrity of systems meant to protect that data. While external threats, like hackers, often come to mind, internal actors—disgruntled employees or those with ulterior motives—can also perpetrate this type of theft. The very essence of information theft revolves around exploiting vulnerabilities, be they in digital systems, processes, or human relationships.

Examples

• Unauthorized Access: Using someone else's login details or bypassing security measures to access restricted files or databases.
• Data Harvesting: Copying large quantities of data, like client databases or product blueprints, onto external storage devices or cloud accounts.
• Eavesdropping: Listening in on confidential meetings or discussions, either physically or using electronic devices, to gather insider information.
• Email and Communication Breaches:  Intercepting, reading, or forwarding confidential emails or messages without authorization.
• Social Engineering: Manipulating colleagues or clients to divulge sensitive information under false pretenses.

To safeguard against information theft, businesses must invest in both technological defenses like encryption and firewalls, and in the cultivation of a security-conscious culture. Regular training sessions that educate employees about the value of information and the various tactics used by thieves can be instrumental. Additionally, clear protocols around data access, storage, and sharing, combined with regular audits, can further bolster an organization's defense against information theft.

What is Intellectual Property Theft?

Intellectual property (IP) represents the brainchild of a business — it's the collective result of innovative thoughts, designs, methodologies, and original creations. These assets, though intangible, are pivotal for a company's competitive stance, growth, and overall value. Intellectual property theft, then, strikes at the heart of a business, usurping its innovative edge by appropriating ideas, designs, and strategies without permission or due credit.

Understanding Intellectual Property Theft:
IP theft is the unauthorized use, reproduction, or distribution of intellectual property. This includes patents, copyrights, trademarks, and trade secrets. Whether it's an employee leaving the company to start a competitive venture using stolen trade secrets or an external entity replicating a patented product, the repercussions can be long-lasting and damaging. Such theft not only results in potential revenue loss but can also dilute brand value, compromise market standing, and impede future innovation.

Examples

• Trade Secret Appropriation: An employee sharing confidential processes, formulas, or methodologies with a competitor or using them for personal gain.
• Replication of Designs: Duplicating a company's unique product design or marketing materials without consent.
• Software and Content Piracy: Unauthorized copying, distribution, or usage of copyrighted software, media, or content.
• Trademark Infringement: Using a company's logos, brand names, or slogans in an unauthorized manner, leading to brand confusion or dilution.
• Patent Violations: Producing or selling products that infringe on a company's patented innovations or techniques.

Protecting against intellectual property theft demands a multi-pronged approach. This includes legal measures like timely patenting, trademarking, and copyrighting of intellectual assets. Moreover, businesses should foster an organizational culture that respects IP rights, ensuring that employees understand the value of IP and the consequences of its theft. Regularly revisiting and updating non-disclosure agreements and conducting IP audits can further tighten the defenses against potential breaches.

What are Kickbacks & Bribery?

In the vast expanse of business interactions and trade dealings, integrity stands as a beacon, ensuring fairness, competition, and merit-based progress. Yet, in some dark corners, illicit practices like kickbacks and bribery attempt to distort this landscape, offering undue advantages in exchange for favors or influence. These corrupt practices don't just undermine business ethics; they also pose legal risks and can tarnish a company's reputation irreparably.

Understanding Kickbacks and Bribery:
At their core, both kickbacks and bribery involve the exchange of value to influence a business outcome improperly. A bribe can be seen as an offer, promise, or payment of something of value to sway the actions of an individual in a position of power. On the other hand, kickbacks are typically a return of funds, often secretly, for services rendered or to secure a business advantage. Both practices can be subtle, making them challenging to detect but their implications can be far-reaching, leading to skewed decision-making, unfair competition, and in many cases, legal repercussions.

Examples

• Procurement Bias: A supplier offers a company's procurement manager a personal incentive, such as a holiday trip, to ensure their bid is accepted irrespective of merit.
• Contracting Irregularities: A contractor returns a portion of the payment received to a company executive in exchange for ensuring they win the contract.
• Regulatory Leniency: Offering gifts or financial incentives to regulatory officials to overlook violations or fast-track approvals.
• Employment Favors: Promising or providing rewards in return for hiring or promoting a particular individual, bypassing regular meritocratic processes.
• Influenced Referrals: Medical practitioners or consultants receiving payments or incentives for referring clients to a particular service provider, irrespective of the client's best interest.

Addressing the challenges posed by kickbacks and bribery requires both proactive and reactive measures. Companies should foster a culture of integrity, ensuring employees and stakeholders understand the grave implications of engaging in such practices. Implementing strict codes of conduct, offering whistleblower protections, and regularly training employees on the nuances of these illicit dealings can create a bulwark against their onset. Moreover, swift and transparent action against any identified instances will further cement a company's stance against such malpractices.

What is Cyber Theft?

The digital realm has unlocked unprecedented avenues for business growth, efficiency, and global outreach. However, it has also unveiled novel threats that can jeopardize a company's assets, reputation, and even viability. One such insidious threat is cyber theft perpetrated by internal actors – the very employees entrusted with upholding the company's mission. This form of digital deceit presents a unique challenge as it emerges from within the trusted walls of an organization, making it both a technological and cultural concern.

Understanding Cyber Theft by Employees:
While external cyberattacks and data breaches often make headlines, internal cyber theft can be just as, if not more, damaging. This form of theft involves employees leveraging their access rights, understanding of internal systems, or trust within the organization to illicitly access, modify, or transfer digital assets for personal gain or malicious intent. The motives can range from financial benefit to revenge, and the methods can be both brazen and covert.

Examples

• Data Exfiltration: Transferring sensitive company data, such as customer information or proprietary algorithms, to external sources, possibly for sale or personal use.
• Unauthorized Access: Using one's credentials or exploiting system vulnerabilities to access restricted areas of the company's digital infrastructure.
• Digital Espionage: Monitoring or intercepting digital communications, perhaps to gain a competitive edge or for personal leverage.
• Asset Misappropriation: Using company software, digital tools, or subscriptions for personal projects without permission.
• Sabotage: Intentionally altering, deleting, or corrupting data or digital systems out of spite, resentment, or to harm the company's operations.

To counter internal cyber theft, organizations need a holistic strategy. This involves employing stringent access controls, monitoring network activity, and regularly auditing digital accesses and transactions. Equally critical is fostering an organizational culture of trust, ethics, and accountability. Employees should be educated about the grave consequences of cyber theft, not only for the company but also for their careers and the broader community. Implementing robust whistleblower programs and ensuring that grievances are addressed transparently can further reduce the temptation and instances of internal digital malfeasance.

What is Theft of Services?

In the bustling spectrum of business exchanges, not all transactions involve tangible goods. Often, the exchange centers around services – intangible but inherently valuable. Theft of services, while lacking the physicality of traditional theft, is a significant concern for many businesses. It occurs when one receives a service but avoids the payment or fair compensation that's due. This form of theft, often seen as minor or inconspicuous, can erode revenue streams and destabilize business operations over time.

Understanding Theft of Services:
Theft of services is essentially getting a benefit without the rightful exchange of value. It might manifest as dodging subscription fees, manipulating billing, or using resources without proper authorization. Though it might seem like a "victimless" act to some, in reality, it undermines businesses, leading to potential losses, skewed market competition, and even job cuts in the long run.

Examples

• Unpaid Subscriptions: Accessing premium content or tools without a valid subscription, often by sharing or stealing login credentials.
• Misusing Company Resources: Leveraging company assets, like internet or phone lines, for personal projects without permission or compensation.
• Manipulating Work Hours: Clocking in extra hours or inflating the duration of tasks to receive undue compensation.
• Unauthorized Facility Use: Using company facilities, like meeting rooms or equipment, for personal events or projects without permission or payment.
• Bypassing Service Meters: Tampering with metering devices, like electricity or water meters, to avoid accurate billing.

Addressing theft of services requires a mix of vigilance, awareness, and clear guidelines. Companies should set transparent policies detailing the use and compensation for services and resources. Regular audits, both of tangible assets and digital accesses, can help in timely detection. Moreover, fostering a culture of ethics, where employees respect and understand the value of services, can create a natural barrier against such thefts. Offering anonymous channels for reporting suspicions or incidents can further discourage theft of services and ensure a trustworthy business environment.

Get to the Bottom of Employee Theft With AllVoices

Handle investigations and any employee relations issues with AllVoices.  An anonymous and safe platform for employees to report any fraudulent behavior. By creating an open and honest environment, businesses can effectively prevent fraud from occurring in the first place.

AllVoices offers a comprehensive reporting system that allows employees to submit reports of misconduct anonymously. This ensures that employees feel safe and protected while also allowing businesses to gather valuable information about unethical activities within their organization.