Time Theft: What It Is and How It’s Hurting Your Small Business

Everyone knows that efficiency is key to running a profitable small business. From improving logistics to using your payroll budget effectively, there are plenty of ways business owners can increase their margins and profit. But what happens when employees purposely sabotage efficiency in order to boost their own earnings? That’s called time theft and, as The Balance points out, it could be hurting your business.

What is time theft?

While the name might call to mind the Terry Gilliam-directed film Time Bandits, time theft is actually a serious problem. In the strictest sense, time theft is when hourly employees attempt to inflate their paychecks by incorrectly recording their hours or even asking another employee to clock in or out for them. More broadly, the term could be extended to include deliberate means of evading work such as taking extended on-the-clock breaks or simply not performing the duties they’ve been hired to do. 

Obviously some acts of time theft are far more blatant than others. For that reason, it’s important to look for various signs of time theft and know how to address them.

Preventing time theft

The first step in curbing time theft is to create a clear-cut policy on the practice and ensure your employees are aware of it. For example it’s always a good idea to have an employee handbook with all of your rules and expectations. Additionally you should obtain documentation from your employees acknowledging that they received and understand the material in their handbook. This will come in handy should there be a violation. 

Another important aspect of preventing time theft is being hands-on with your business and keeping abreast of what’s going on from day to day. This is important for two reasons: 1) taking an active role in your business’s operations and working alongside your employees can often improve morale (which, in turn, can cut down on time theft) and 2) you’ll be able to see how your employees operate and what efficiency adjustments can be made. Meanwhile, if you’re tucked away in your office all the time, you’ll have next to no idea what’s really happening at your business.

Of course the majority of time theft scenarios won’t be of the blatant variety. Instead they may be a product of poor leadership and unclear expectations. One possible solution you may consider is creating a daily tasks sheet that employees are expected to complete on their shifts. This will not only ensure that your workspace stays clean and organized but also gives employees jobs to complete when they’re not assisting customers or working on other projects.

Correcting time theft

Even if you follow all of the above steps and try to stop time theft from happening at your business, you won’t always be successful. So what do you do when you encounter it? That will likely depend on the situation at hand. 

If it’s just a matter of an employee not being as productive as you’d hope, you may want to have a conversation with them and coach them on your expectations. In other cases, like a worker taking an overlong break, you may give them a written warning and inform them of how seriously you take time theft. However, if you do come across an employee asking others to clock in/out for them or otherwise taking advantage of you, you may simply need to terminate that worker (depending on the labor laws of your state, this is where that signed handbook acknowledgment may come into play). Hopefully the majority of time theft incidents won’t reach this level, but don’t be afraid to take proper action when it’s required.  

Despite a somewhat confusing — if not humorous — name, time theft can be a serious issue for small business owners. Whether intentionally or not, your employees could be wasting your payroll budget and hurting your businesses profitability. For that reason it’s important to set clear policies on time theft, take a hands-on role in the day-to-day operations of your business, and know how to react when you encounter time theft at your company in order to keep your small business running as efficiently as possible.


Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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