How to Combat Timecard Fraud

Timecard fraud is when an employee says they worked more time than they actually did, and then takes payment for it.

how-to-combat-timecard-fraud
How to catch, combat, and prevent timecard fraud

Most small and medium-sized businesses understand that timecard fraud is costly, but few realize how prevalent the practice is in the American workplace and how many different ways employees can steal from their company. Clocking in or out inaccurately or having a friend sign in for you are only 2 ways for staffers to “cheat the timesheet.” Knowing what to look for and how to combat timecard fraud can save your business thousands of dollars annually.

Employers like to believe their staff members are (actually) working the hours they submit, but timecard fraud is fairly common. Hourly workers aren’t the only ones who defraud their company. Salaried employees can also find ways to get paid for not working.

How prevalent is timecard fraud?

The American Payroll Association found 75% of businesses are affected by time theft, costing up to 7% of their gross annual payroll.

Forbes recently reported the average worker steals about 4.5 hours weekly from their employer — about 6 weeks per year. The American Payroll Association found 75% of businesses are affected by time theft, costing up to 7% of their gross annual payroll.

APA surveys found 43% of employees admit they exaggerated the number of hours worked at least once. Of these, 25% say they do so for 76% to 100% of the shifts they work. Yet another survey found 43% of employees admit they conduct personal business while on the clock; 42% admit to taking frequent breaks. You may not think timecard fraud is happening in your company, but the chances are, it is.

Types of timecard fraud

There are a variety of ways employees receive payment for not working. They range from the blatant to the subtle. Here are some:

  • Buddy punching: Asking a co-worker to clock in or out for you, whether to get you in on time or allow you to leave early. This can range from a few minutes to an entire shift
  • Starting late: Employees who don’t clock in but come to work late without reporting
  • Finishing early: Employees who leave early without asking for permission or signing off their shift
  • Taking or frequent long breaks: Taking longer than the allotted break time or taking unauthorized breaks during the shift
  • Working unauthorized overtime: Many companies find they pay time-and-a-half without prior permission to work overtime hours
  • Handling personal activities during work hours: Potentially the most common — conducting personal business, online gaming, checking personal email and social media, etc. while on the clock

Combating timecard theft begins with a strong policy

It’s always important for employees to understand what you expect of them in order to comply. Many companies do not have an established timecard theft policy in place, but companies should create one and distribute it to all staff members. The policy should include:

  • What is considered timecard fraud, including all the listed categories
  • Why it’s damaging to the business
  • What steps will be taken to discipline employees if they are caught

Remind employees that timecard fraud isn’t just a violation of company policy, it’s illegal. Theft, depending on the amount of time logged, could be a misdemeanor or felony offense. Managers or coworkers who assist with defrauding the company are guilty as well. Timecard theft hurts everyone and should not be tolerated.

Remind employees that timecard fraud isn’t just a violation of company policy, it’s illegal. Theft, depending on the amount of time logged, could be a misdemeanor or felony offense.

Catching timecard fraud in your organization

While a strong policy outlines the rules, it likely won’t stop timecard fraud on its own. You’ll need to assure the policy is being followed with action steps to assure every employee is paid for the hours they worked and no more. Here are some options that are out there:

Monitor timesheets 

Many employees submit timesheets manually or online that go directly to payroll processing, which can lead to mistakes and fraud. Timesheets should be monitored to assure the time worked aligns with the time scheduled, including any time off the employee used during the pay period. Making sure the time submitted is correct is one of the first steps to assuring the company isn’t paying more in wages than it should.

Enforce manager approval

Your timesheet fraud policy should stress that management and supervisory staff must verify the timesheet and will be responsible for any errors or omissions.

For most workers, a manager should approve the timesheet before it’s submitted for payroll processing. This practice should be more than just a checkmark. Managers are responsible for assuring the time submitted is accurate. Your timesheet fraud policy should stress that management and supervisory staff must verify the timesheet and will be responsible for any errors or omissions.

Compare timecards

If some worker’s timesheets always seem different than their peers, it might be time to investigate. They may be the go-to person who always covers for others when they call out, or they could be padding their sheets periodically. While differing categories of workers will have disparate hours per shift, similar staffers should all be clocking in approximately the same hours.

Use timekeeping systems

If you have the ability, create some type of online or even manual system for clocking in and out. It might be as simple as a sign-in/out sheet on the manager’s desk that needs to be initialed by a supervisor, or as sophisticated as an online system. If you’re using a higher-end computer system, make sure the employee has to sign in from their own workstation, rather than from home or allowing another staffer to use their sign-in credentials to start or stop the clock.

Some larger organizations have physical time clocks employees use to punch in and out. Often these fail to have a manager monitor the clock during shift starts and ends to assure staffers are only punching in their own timecard and not “buddy punching.”

Monitor computer screens

Wasting time online is a type of timecard fraud worrisome for businesses in several ways. Employees who surf the web while on the clock can waste hours of paid time. Staff members who work remotely can clock in and do virtually nothing all day. Both easily cost businesses thousands of dollars per year in non-productive hours.

Monitoring systems periodically take a screenshot of the employee’s screen, assuring they are not on non-work sites (like eBay). They also reveal if the employee’s screen has changed during the day. For those who clock in and do nothing, a day’s worth of stagnant images or screensaver pictures can be very revealing. Note: the legality of workplace monitoring depends on various federal and state constitutional provisions and laws regarding when employees have a right to privacy, and if and when employers must notify them that they are being monitored.

Install camera or other surveillance 

While you don’t want to monitor your employees 24/7, some surveillance might be warranted. When it comes to video feeds, don’t place cameras in lunch/break rooms or bathroom facilities, but you might consider placing them facing the doors to these areas. In that way, employee privacy is not infringed upon, but you will have captured how long they’re in there. If you want to install camera or video surveillance, you should include HR and legal professionals at the earliest stage of considering it. Employers implementing surveillance in the workplace should be working towards a companywide solution that is clear, understandable, and doesn’t lower morale.

Some systems are an easy install. Your home doorbell monitor shows when visitors arrive and leave: for small businesses this type of system could not only assure you know who’s near your property, but help you monitor when employees come to and leave work.

Other systems, like swipe cards that provide employee access to doors and areas not open to the public can be even more useful. In addition to letting employees enter, the data collected shows when they arrived. You might not have a swipe out system for when they leave, but it could be easily installed. There’s still the risk they’re asking others to use their card to get in, but that could be more complex than the average timecard thief might consider.

Timecard fraud costs business more than just financial resources. When good employees see their peers take advantage of the company, morale can be affected. Your policies, like time and attendance, are for all staff members — not just the ones who don’t get caught. Managing timecard fraud shows dedicated employees you value their effort and work ethic.

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