Understanding Time Theft at Work

One of the largest expenses businesses face may not be the most obvious, and that’s time theft. For many employers, the theft of company time is far and away one of the biggest business expenses organizations face, with QuickBooks estimating about $11 billion in revenue lost due to time theft incidents. What’s worse, nearly half of US employees have admitted to committing time theft in the past.

Business expenses are just the tip of the iceberg; employers may also see a diminishing company culture, reduced employee morale, and a big cut to productivity and overall output. Employers must understand the basics of time theft, the common examples, the impact it can have on businesses, how to prevent it, and how to address it to ensure the organization’s financial and reputational safety.

What Is Time Theft?

Time theft, also referred to as “time fraud” or “time stealing”, is the act of an employee taking work hours to perform non-work-related activities. Depending on the nature of the incident, some employees may not realize what they are doing, while in other scenarios, employees may purposefully be inflating their hours worked or doing something other than working when on the clock.

The reasons employees tend to commit time theft vary, but may include the following:

Disengagement or dissatisfaction with work
Lack of proper supervision or outdated time capture methods
Existing culture amongst employees within the company
Distractions
Unclear policies
Incentive to gain more overtime

It’s important to note that while time theft is commonly associated with hourly work, time theft can also occur with salaried employees as well.

Common Examples of Time Theft

Time theft can be seen in many different ways, with some methods harder for managers to spot than others. Here are some of the most common examples of time theft you should be aware of:

Buddy Punching: A specific form of time theft where an employee colludes with a coworker to have them clock in and out for the employee, even when they’re not scheduled to work
Time Padding: Whether on purpose or by accident, employees may record their clock-in time earlier than their arrival or record their clock-out time later than when they actually leave
Extended Breaks: Employees may spend more time than is allowed while on a paid break
Performing Personal Activities on Company Time: This can include disengaged employees on their phones, employees performing personal errands, or socializing
Misuse of Remote Work: Some employees performing work remotely may be clocked in while not fully engaged in their work obligations

The Business Impact of Time Theft

While time theft can go unnoticed for a considerable amount of time, the impact it can have on your bottom line can be devastating. What’s more, time theft can also become a huge compliance liability that may affect the organization beyond just the employees committing it.

Some of the negative effects time theft can have on your business include:

Significant Financial Loss: When time theft occurs, employers are now paying out hours employees did not work for, essentially giving away wages for free
Blows to Company Culture: For employees who witness others abusing the system and getting away with it, their morale decreases, and their flight risk increases
Decrease in Overall Productivity: Employees committing time theft aren’t actually participating in their job, effectively using company time to do no work
Compliance Risks: Time theft can lead to wage and hour violations under the FLSA and state-specific laws, contributing to payroll, tax, and overtime issues

Preventing Time Theft at Work

With the potential risks and losses your organization could face if employees commit time theft, employers should take action to put a stop to misguided or fraudulent behavior.

Here’s how you can take control of the situation and prevent time theft from affecting your day-to-day operations:

Set & Enforce Rules: Be strict but fair when addressing attendance or discipline policies and review the employee handbook to ensure it's up to date, compliant, and effective
Use Mobile Time Clock Options: With some HCM mobile apps, features are designed to provide convenience for punching in/out for work-stie employees while allowing managers to enable geo-fencing capabilities to limit where employees can clock-in/out of
Biometric Scanning: Eliminates “buddy punching” and other methods where employees can punch in/out on behalf of their peers using precise security measures
Exercise Regular Audits: Carefully reviewing timesheets, timecards, and digital punching submission through a time clock system will help reveal the source of the problem
Incentivize Attendance: Consider offering rewards such as bonuses, extra PTO, or prizes for employees who follow attendance rules

Ultimately, having a modern time clock solution in place will prevent time theft by keeping an accurate log of employee time, while allowing employers to easily access its data entries and make necessary adjustments when applicable.

Addressing Time Theft When It Occurs

Enforcing the attendance policy will require you to confront and potentially reprimand the employee to prevent behaviors that lead to time theft from happening again.

Here’s how you may want to handle addressing time theft when it occurs:

Investigate the Situation: Evaluate the severity, frequency, and potential reasoning of the incident
1. Example: Employees caught padding their hours multiple times would likely receive a greater punishment than an employee who clocked out late once by accident and forgot to correct it
Document Incidents: As it occurs each time, be sure to have clear documentation that describes what happened and who the affected parties are
Discipline Employees Accordingly: You should base your discipline strategy on your findings; a more severe instance should require harsher punishments than inoffensive ones
1. For instances where discipline should be administered, it's important that a company policy is in place that follows consistent enforcement for both managers and employees to understand, emphasizing the importance of reviewing your employee handbook regularly
Focus Less on Termination, More on Correction: Termination or even legal action should be the absolute last resort; give your people a chance to grow from their mistakes whenever possible
Monitor for Future Theft: After you take action and discuss time theft with offending employees, you’ll want to monitor the situation post-discussion to check on the progress of the employee, whether they have learned from their actions, or if another incident of time theft occurs again

Frequently Asked Questions

Is Time Theft Illegal?

Technically, yes. While there are no federal laws that target time theft, it can be considered a form of fraud, especially in severe cases where individuals are falsifying time records. Though in most cases, instances are often minor and are handled internally through the organization as a form of employee misconduct.

How Common Is Time Theft?

Time theft is far more common than most employers realize. It can occur across any workforce, whether hourly or salaried roles are involved, and is more frequent in businesses that do not have clear attendance policies or modern timekeeping solutions.

Does Remote Work Increase the Risk of Time Theft?

Yes, remote work absolutely increases the risk of time theft, as there is limited visibility into the employee’s activity when working remotely. However, this can be prevented and controlled with the proper tools and performance-based management.

What is “Buddy Punching”?

Buddy punching is when one employee clocks in or out on behalf of another. While this is one of the more common causes of malicious time theft, using biometric time clock systems helps maintain security between each employee’s own timekeeping functions.

What’s the Best Way to Address Time Theft for Socializing or “Cyberloafing”?

Depending on how frequent these instances occur, it may be best to address excessiv scoializing ot ephone use with employees one-on-one first and explain the impact of the situation. If this issue is workplace-wide, it may be best to emphasize company policy by hosting a meeting or training session with the staff to ensure employees understand the issue at hand.

What Are Common Examples of Time Theft?

Some of the most common examples of time theft include…

Buddy Punching
Time Padding
Extended Breaks
Performing Personal Activities on Company Time
Misuse of Remote Work

In most cases, these infringements are minor. However, employers should monitor for more serious instances, such as buddy punching or falsifying timesheets.

What Are Appropriate Punishments for Time Theft?

The appropriate punishment for time theft depends on the severity and frequency of the behavior. For minor or first-time offenses, employers often start with a verbal or written warning while reinforcing company policy. Repeated or more serious violations may require formal disciplinary actions, such as suspension or termination. It’s key to apply policies consistently, document incidents thoroughly, and ensure your approach aligns with company guidelines and employment laws for complete compliance.

Is Time Theft for Salaried Employees Possible?

Yes, time theft is not limited to hourly employees. Salaried employees can also engage in time theft if they consistently fail to meet expected work hours, productivity standards, or job responsibilities while still receiving full compensation. For salaried roles, time theft is often measured more by output and accountability rather than strictly tracked hours, making clear performance expectations and regular check-ins essential.

Is Time Theft a Felony?

In most cases, time theft is handled as an internal disciplinary matter rather than a criminal offense. However, in situations involving significant financial loss or intentional fraud, such as large-scale falsification of time records, it could potentially rise to criminal-level charges. Whether it is classified as a misdemeanor or a felony depends on the severity, intent, and applicable state laws. Employers should consult legal counsel when dealing with serious or repeated cases.

Get Help Managing Time Theft in the Workplace

Timekeeping is no easy task as is, and time theft only adds to the challenges. Not only is it not ideal to reprimand employees misusing company time, but having to absorb the costs to your bottom line and company culture can lead to a poor reputation.

That’s why having solutions to accurately track employee time is essential; to ensure you’re on top of your employees’ hours, keeping your payroll processes accurate, and ensuring compliance with federal and state wage and hour laws.