Time Card Fraud is a Big Problem. Here's How to Stop It.

Trust is at the core of every employer-employee relationship. You trust your people to do their jobs, and they trust you to compensate them for their work. Most of the time, it works. However, there's always the person looking to bend the rules or get away with doing less. And when it comes to employee time theft, small bits of stolen time adds up to real money and can impact your bottom line.

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Employee time theft is when an employee gets paid for work that they didn't do, or for time that they didn't actually put into their work.

One oft-cited study by the American Payroll Association notes that 75% of companies experience some form of time card fraud. The time theft can cost organizations up to 7% of their total payroll annually—in many cases, that's enough to hire additional staff. There are numerous ways employee time theft can happen, and being aware of them is essential.

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Fortunately, it's also becoming much easier to prevent time theft before it becomes an issue. The right people platform can help by providing time fraud prevention features ranging from geofencing job sites to setting rules for lunch breaks and hours worked each day. By educating yourself on how time theft happens and leveraging technology to deter it, you can ensure your employees are as productive as possible.

Understanding time card fraud

There's no one way to steal time from an employer—there are actually several. Before you can stop time theft, you need to understand the many ways that it can occur. Here are some of the most common ways that employees steal company time: 

Buddy punching

This isn't a humorous shoulder jab among friends. Instead, it's when co-workers clock in for one another. If you're still using paper time cards and/or time clocks to track time and attendance, fraudulent clocking in is much easier to accomplish.

Exaggerated work hours

By adding 15 minutes to each day or an extra hour here and there, employees can falsify their time cards to reflect more time than they worked. This can happen with either an electronic timesheet or paper and unless a manager is paying close attention to each entry—it's hard to catch.  

Extended lunches and breaks

Many states mandate some amount of break time within an eight-hour workday. But when employees take longer than the required 15-minutes or 30-minutes and don't record it, that's time theft. Whether intentional or not, extending mandatory breaks for personal time costs employers productivity and ultimately, money. 

Not working, but on the clock

Jobs that have employees out in the field, whether working job sites alone or in small groups, or visiting customers individually, are ripe for time theft. That's because employees can easily log into a time tracking app and be on the clock, but instead of working, they're taking care of personal business. 

Overtime favoritism

Sometimes employees need to work overtime to complete a job or meet a deadline. However, when given a choice, the most cost-effective way to address additional work is to use employees who have yet to reach their 40-hour week. With overtime favoritism, managers may intentionally choose employees who are already over their hours and give them even more.

Preventing time theft with technology

Smart people platforms not only make it easier to prevent time theft, but they ensure your company remains compliant with labor laws. Here are five ways that Hourly can help your organization avoid card time theft:

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1.  Know your employees' real-time locations. GPS and geofencing make it possible to know whether people are at the job site. With Hourly, employees can only clock in once they're in the appropriate place.  
2.  Create custom time tracking rules. Hourly allows you to designate the length of workdays and the length of breaks. So you can track employees that clock in after a 45-minute lunch that was supposed to be 30-minutes. Or monitor who leaves a job 15 minutes before the end of an eight-hour day. 
3. Automatically calculate overtime. Decisions about who works overtime—or who still has time available within their regular week—become that much easiereasy when you can automate overtime tracking. Use Hourly's data analysis to decide whether overtime makes sense or if there's a more affordable way to get the job done.
4. Set reminders for breaks. While you don't want employees abusing their break time, you also need them to take breaks. Automated break reminders ensure employees stop work as required by labor laws. It's an easy, reportable way to stay in compliance with regulations.
5. Eliminate manual time card hurdles. Of course, time clocks and paper timesheets—and apps that allow employees to enter their hours manually—open the door for false reports. With Hourly, employees clock in and out via their smartphones. There's no data entry required, and your company can track hours worked in real-time.

Time card fraud is a common problem, but it doesn't have to be an issue for your company. With Hourly, you can prevent employee time theft and ensure your employees are as efficient and productive as possible. 

Employee time theft: Frequently asked questions

Here are some of the common questions and concerns employers have regarding time theft and time card fraud. 

Can you fire an employee for time theft?

The short answer is yes. The longer answer is that you'll want to be able to document and prove that the employee was stealing time and not working the hours that he or she claimed. Be sure your policies for tracking time are clear and provided to employees on their first day. Make sure employees have access to time tracking tools. And if you believe an employee is stealing time, document it properly before you take action.

It time theft illegal? 

In extreme cases, it could be. However, federal labor laws mostly address that employees be paid for the time that they worked and reported via their time cards. So from a legal perspective, employers that suspect, but can't prove that their employees stole time, still need to pay them for the time they recorded. Otherwise, they could face a lawsuit. If you do suspect time theft, you need to conduct an investigation, document your findings, and deal with the employee in a way that's consistent with your HR policies and advice from legal counsel. 

What is considered time theft? 

Time theft happens in many intentional, and even unintentional, ways. As we noted above, employees may make fraudulent time card entries, have their coworkers punch them in, or clock in but not actually work. More commonly, employees may just be goofing off on the job, surfing the internet, or browsing social media when they're supposed to be working. 

Is conducting personal business at work time theft? 

There's no right answer here. For example, most employees will take a personal phone call or two at work, and that's likely expected. However, if an employee is on his phone all the time, then time theft may become an issue. Conducting a side business while all the clock or taking large chunks of time to run personal errands is also problematic. Set clear expectations for your employees about what's permitted when it comes to personal business at work and address potential problems early before they get out of hand. 

What's the best way to prevent time theft? 

Creating policies for time tracking and reporting is important. So is moving away from paper time tracking systems such as timesheets and time clocks. Automating employee time tracking makes it harder to falsify records and ensures that your company can easily document when and where employees are working.