How to handle suspected employee theft: a comprehensive guide

One of the unhappy realities of our society is the spectre of theft. Once an employee decides that they are owed what they haven't earned, there aren't many mental hoops they have to jump through to justify committing fraud or a crime. And it’s small businesses that are affected the most by it.

Employee theft is a sensitive subject, and it can be a difficult issue to handle tactfully. If you or your employees become suspicious of someone who works for you, the utmost care should be taken as you establish the facts. A false accusation of dishonest acts can lead to disaster and, in some cases, a defamation claim!

So, let's assume that your worst fears have come to fruition and you have reason to suspect an employee of theft. This blog will help you take the steps you need to take to get everything sorted out. We'll also be exploring different types of employee theft and some of the reasons employees steal. After all, the better you understand a situation, the more effective your reaction will be to it.

What is employee theft?

Employee theft is defined as an employee of a business misusing or taking assets from the company or their colleagues without express permission. These "assets" the employee stealing can be anything from petty cash or physical items to more amorphous items like financial records or business secrets.

Theft can occur at all levels of a business though the nature of the theft is often different between the lower and higher levels of the company. For example, an entry-level employee may steal directly from the cash register, while a high-level employee may embezzle funds directly from the company expense accounts.

What causes employee theft?

As we mentioned above, theft is a complicated and delicate issue. While theft in the workplace can never be justified, there are many different reasons an employee may decide to start stealing from you and other employees. Small business owners should take the time to understand the common reasons behind theft so that they better handle it should it happen at their company.

Below, we've compiled a list of several common reasons behind employee theft. It should be said that each case of theft, as with each employee, is unique and should be seen in its own context.

• Financial difficulties
• Personal instability
• Unsatisfied or upset with their employer
• Unhappy with their pay
• Don't think that theft hurts the company

Employee theft warning signs

Detecting theft is difficult, but there are signs to be aware of, such as:

• Discrepancies in cash totals
• Missing company merchandise or supplies
• Unexplained inventory shortages
• Copies of sensitive company data being made
• Partner businesses or customers being contacted by someone who recently left your company
• Current staff reporting on other staff or ex-staff activity

Employee behavior is another area to keep track of - especially if it is overly defensive, or very out of character. 

• Unwilling to handover tasks to other staff members
• Defensive when reporting on tasks, or refusal/avoidance to give reports
• Poorer than average work performance
• Unexplained favoritism of a supplier, business partner, or customer
• Personal lifestyle changes, that don’t match with salaries

However, it’s very important to emphasize that there could be several other reasons behind the examples listed above. Employee theft is one possibility, and it is then up to your judgment if it needs to be ruled out.

What to do if you suspect an employee of stealing

Suspected theft is a difficult subject to tackle. No one wants to think the worst of their employees, but sometimes the evidence starts mounting, and there is not much else you can do.

If you believe an employee has been stealing from you or your other employees, you need to take action. If the problem is allowed to persist, it can turn into a source of rot that can really damage your business. From someone stealing office supplies, to stealing cash or colleagues' belongings, both are offenses that can cause long-term harm to your company if left unchecked.

Before you escalate the problem, businesses must be careful to handle the suspected employee with tact and care. Employee theft is a very delicate issue that, if handled incorrectly, can lead to negative outcomes for all involved, including criminal charges.

Below, we've outlined the steps you should take if you believe an employee is stealing from you or their colleagues. Remember, the best way to handle employee theft is by preventing it from happening in the first place. Check out our blog on preventing employee theft for more information.

Step 1: Be prepared

You should have policies and guidelines in place that explicitly state:

• Employee theft of any kind is not tolerated at your company
• Examples of employee theft
• How your company will handle suspicions about theft
• The consequences of employee theft, including disciplinary action you will take

These documents are essential to reducing and responding to employee theft - as they are written proof, which is critical for any potential court cases.

They should be included in a staff code of conduct, which is sent to every employee. Make sure that all new employees are made aware of the company policies when they join the company. The better aware your employees are of company policy, the least likely they will be to steal in the future. To keep accountability, get staff to sign an acknowledgement that they understand the handbook.

Read through these documents carefully, so you know what your next steps, set out by your company, should be.

In addition, make sure you have a system of checking access to key company documents, money and payments, and other potential stealable items. While you can’t predict every theft (or even have time to when you’re running a small business), doing regular checks and authorizing procedures is essential. Don’t have just one employee having sole charge over issuing payments, payroll or reconciling accounts, if possible! Here are a few extra tips:

• Keep a close eye on financial statements
• Regularly enforce password changes
• Build data security processes, like cloud storage data and wiping data from devices
• Maintain your approved supplier lists to check there are not unexpected additions
• Include surveillance cameras if you deal with a lot of cash transactions, to deter theft
• Lock up inventory items, supplies or stock, and know who has access
• Restrict access to sensitive data
• Undertake unannounced audits, such as regular random cash counts

Step 2: Raise awareness

Try not to assume the worst. In some cases of theft, the employee may not even be aware that their behavior counts as theft. An employee copying computer files to work on at home, taking company property, or committing time theft by dealing with personal matters during work hours could have completely honest intentions.

Depending on the severity of the theft, during your next all-hands after the suspected theft, make sure your employees are aware of your company's anti-theft policies. Don't make any accusations; just lay out the anti-theft policy and ensure your team understands it. With any luck, the employee you suspect of stealing will realize they are violating company policy and quickly amend their behavior.

You should also advise employees that they can come to you and report their concerns privately. Approaching management about an issue with their co-worker is intimidating, and your workers need to feel like they are in a safe environment.

Step 3: Start compiling evidence and conduct an investigation

Once you have ascertained that theft is continuing, despite your warnings, it's time to start to preserve evidence. Any and all physical evidence you collect will help you conduct a thorough investigation.

Evidence can include footage from security cameras, computer files that show strange spending patterns, documentation of inventory shortages, and witness statements. As you gather facts and compile documentation, the full picture of the theft will start to take shape. The more evidence you have, the better your internal investigation will be.

Step 4: Interview and confront the accused employee

As part of a full-blown investigation, you should conduct interviews with the alleged thief. Explain the complaint and show them the evidence you've gathered. You're not a lawyer, so you may want to have your legal counsel on hand to help explain the seriousness of the situation.

Be aware that if you all work in a union setting, your employee may be allowed to bring a union representative with them to the interview. Check your collective bargaining agreements and ensure your employees know their rights.

If your employee admits to the theft, the interview is where you outline the consequences for their actions. You should also do this if you have undeniable evidence, even if the employee refuses to fess up. In most cases, it’s advisable to have at least one other senior business figure with you when you conduct these meetings, to confirm that your company process was followed fairly.

Ultimately it is up to you what happens, but it is a decision that should not be taken likely.

Depending on the seriousness of the theft, you may decide to press charges. Ideally, legal action should be the last resort as it will have a big effect on your business and your employee's life. Make sure you're prepared for any subsequent legal action once you file the police report.

POS with security at its core

Theft, like all negative employee behavior, can have a very damaging effect on your business. You should be able to rest easy knowing that you’re prepared for the worst should it happen.

The Epos Now Complete Solution can help you get that peace of mind back. Our systems are designed to keep your data safe and ensure that every transaction is secure. Our cloud-based system holds your all-important data securely in off-site servers, and you can set employee access levels.

In addition to the tight security measures, Epos Now customers have access to many exciting features. Our customers can take advantage of our fully-integrated payment processing service, 24/7 support should you need it, and access to our suite of award-winning apps.

Interested in reading more of our articles? We publish new blogs every week! Check out the following:

• Hire the right business manager
• Improve employee morale and motivation
• Motivation techniques for leaders
• Learn how to avoid staff burnout
• Reduce employee turnover
• Hiring the right employees
• Effective employer's review

If you're interested in hearing how Epos Now can help your business, please get in touch with our team of experts below.