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The enemy within: dealing with employee theft

11 March 2014

Theft by employees is clearly a worrying issue for employers, so why is it happening and why do many choose not to report it?

According to a recent survey from the University of Cincinnati (UC), only 16 per cent of small businesses affected by employee theft actually report the crime to the police.

Employee theft is a common issue among small businesses, the survey found more than two-thirds (64 per cent) of participating organisations had experienced it, while in Australia some statistics show around 80 per cent of employees have or would consider stealing from their employer.

Furthermore, statistics show that in the U.S, one-third of small enterprise bankruptcies were reported to be the result of employee theft with the same figure applying to Australia, the Australian Retail Association also reports that the cost to retailers is estimated at $3 billion.

The American survey shows the most common item stolen by employees is cash, with 40 per cent of thefts focused purely on money. Depending on the business, employees can take anything between $5 and $2 million. Over time, the average amount stolen equalled $20,000 on average.

The UC report found 61 per cent of reported thefts were ongoing schemes stretching for as long as 20 years. The average duration was 16 months before an employee was found out.

"Generally, the theft is found out by sheer luck. Say the employee who is stealing goes on vacation, and someone else steps in to take over duties. The person stepping in notices something funny and begins asking questions," research leader Jay Kennedy explained in a media release.

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Employers were reluctant to report theft to the police for 4 main reasons:

  1. The employer did not see it as serious enough.
  2. Cost outweighed benefit – the time and money involved in pursuing the matter was not worth the potential remuneration.
  3. Emotional reasons – such as when the employee was a friend, long serving staff member or family member.
  4. The employer did not feel the police could help – employers gave various perspectives including they thought the police were too busy or would not have the skills to investigate, such as where complex finances were involved.

Looking at contributing factors and prevention strategies could help to reduce the risk of theft and ensure any problems are dealt with more quickly. It is important to remember that there may be underlying cultural issues where employee theft is a problem. Although it is commonly thought that employees steal because of financial need, this is often not the case with other factors coming in to play such as employees feeling entitled to take from the business when they perceive their pay to be low in comparison to profits or where they feel they are treated unfairly.

It is essential that any suspicions are properly investigated in order to protect the business from claims of defamation or unfair dismissal and to try and uncover if there is a wider problem in terms of poor monitoring systems, high risk practices or workplace culture. An independent workplace investigation can help to uncover evidence of poor conduct and also give insight into any contributing factors.

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