Employee theft is a lot more prevalent than one might believe. According to studies done by the U.S Chamber of Commerce, an employee is actually 15 times more likely to steal from their employer than a shoplifter. Unfortunately, over 75% of employee theft goes undetected. Employee theft can reveal itself in a variety of avenues, including large-scale embezzlement, the awarding of free merchandise to others, and theft of inventory.

As a business owner, hearing these statistics can be alarming. Fortunately, we have provided the following article from Crime Doctor that both defines what constitutes employee theft and offers actions that you may take to prevent it.

Employee Theft

Retail Loss Prevention

by Chris E McGoey, CPP, CSP, CAM

Employee Theft

Employee Theft from a retail store is a term that is used when an employee steals merchandise, food, cash, or supplies while on the job. However, in the eyes of the law, employee theft is just theft…the elements of the crime are identical. To commit theft, the employee must “intend” to permanently deprive their employer of the value of the item stolen.

Employee theft can occur just like shoplifting by concealing merchandise in a purse, pocket, or bag and removing it from the store. It can also occur by stealing cash, allowing others to steal merchandise, eating food, and by refund, credit card, or check fraud. Employee theft can sometimes be charged as embezzlement due to the trusted fiduciary status of the employee. All of these methods lead to loss of inventory (shrinkage) and/or profit for the merchant.

Employee theft is an insidious crime because the merchant is paying a wage and benefits to the thief on top of paying for the cost of their dishonestly. Studies have shown that employees can do a lot more damage than shoplifters because they are trusted and have an insider’s knowledge of store security measures.

Employee Theft Profile

There is no real physical profile for a dishonest employee. Dishonest employees come in all shapes, sizes, ages, sexes, ethnic backgrounds, religions, levels of education, and economic status. You simply cannot accurately determine who is likely to steal based on their demographic status alone. However, an employer can make reasonable assessments based on their conduct, integrity, and judgment. A person’s past conduct, integrity, and judgment often provides the best indication of their future behavior.

Retail store employees have a constant opportunity to steal cash or merchandise…all they need is the desire and sufficient motivation to do so. What keeps most employees honest is moral character, loyalty, respect for the law and their employer, and the desire to be viewed as trustworthy. Studies support this by proving that shrinkage is significantly less in stores with reduced employee turnover and fewer part-time workers.

For others, the only barrier to dishonesty is the fear of getting caught. The employee thief risks getting fired, being arrested, jailed, and paying restitution. The criminal record and bad job reference will have a compounding effect that will follow them for years. Merchants must not be sending a clear message to their employees because most employee thieves that I have encountered never thought they would be caught.

Cost of Employee Theft

According to the University of Florida 2005 National Retail Security Survey, employee theft was estimated to be responsible for 47% of store inventory shrinkage. That represents an estimated employee theft price tag of about 17.6-billion dollars per year. This astounding figure makes employee dishonesty the greatest single threat to profitability at the store level.

The 2003 study found the average dollar loss per employee theft case to be $1,762.00 compared to $265.40 for the average shoplifting incident. Despite these facts, most retailers mistakenly focus their loss prevention budgets on shoplifting.

Loss Prevention

Preventing employee theft is a constant challenge for retailers. The industry knows that it must put systems in place to prevent or deter internal theft. To be effective, loss prevention systems must be designed to reduce the opportunity, desire, and motivation for employee theft.

One way of reducing employee theft motivation is to show a deep commitment to prevent losses at every level and a desire to prosecute thieves. This sends a message to employees that shoplifting losses cannot be used as an excuse for shrinkage and that all thieves will be prosecuted.

Basic loss prevention steps involve good procedures for hiring, training, and supervision of employees and managers. Procedures that are clearly defined, articulated, and fully implemented will reduce the opportunity, desire, and motivation for employees to steal…

Aside from setting up extensive security measures to ensure that employee theft is tracked and discontinued, another manner of preventing employee theft may be done through creating integrity and respect in the workplace. An employee that respects his or her supervisor will be less likely to steal than someone without a negative relationship or no relationship at all to those overseeing them. For an employee to act with decency, he or she must first be treated with that same decency.

Business insurance is a great way to protect your business from any potential employee dishonesty and fraud. At TJ Woods Insurance Agency, we can create business owners policy (BOP) packages that tailor to your personal needs. If employee theft is a concern of yours, we may include it in your insurance policy.  Contact us to learn more about what should be covered under your business insurance.