Employee Fraud - A Growing Epidemic
While the words “employee fraud” have a very nasty sound to them, the damage done through employee fraud can be extremely nasty as well. Whether you’re part of a large business or are a small business owner, you probably have a couple of employees that you consider trusted and reliable – key employees that you feel are valuable to your business.
How would you feel if you suddenly learned that these very employees have been stealing from you? This is often the case with employee fraud. We’ve all heard the phrase “inside job”… also known as employee fraud. Is there any way you can prevent employee fraud?
What Exactly Is Employee Fraud?
The term “employee fraud” may have a different meaning, depending on who is asked. While an employee may think it’s perfectly alright to take home a couple of rubber bands or paper clips, others may realize that this is employee theft, which is a form of employee fraud. Employee fraud is when an employee knowingly lies, deceives or steals from a company with the intent to obtain benefits or compensation of some type.
The U.S. Department of Commerce reported that employee theft is responsible for one-third of all business bankruptcies. What may seem like a small theft can actually add up to much more. Businesses with fewer than 100 employers who were victims of employee fraud experienced a median loss of about $200,000 per incident, according to an Association of Certified Fraud Examiners 2008 report.
Major Types Of Employee Fraud
We all know that stealing is stealing; however, while many don’t think of the rubber band/paper clip incident as stealing, it’s a form of employee fraud. While employee fraud can take place in many forms, listed below are the three most common forms of employee fraud.
- Monetary Theft – Many forms of employee fraud involve the actual theft of money. This is typically not done by simply opening a drawer and taking out money. More often an employee may “skim” money by taking a little extra off a deposit and not registering it or not ringing up a sale but taking the cash. Another method, in larger businesses, may be having fake vendors so when invoices are paid, the money is kept.
- Physical Theft – This is what people most often think of when they hear about employee theft. Employees may actually take inventory home, whether it is small paper clips or large items such as electronics, automotive parts or similar items. The stolen items often are not noticed until inventory is counted.
- Workers’ Compensation Fraud – Worker’s compensation fraud is not only a very common form of employee fraud but a very costly one. Employees may get injured at home or away from work and claim it as a work-related accident and collect compensation benefits. While they may actually get injured at work, the injury may not be as serious as they claim. Consequently, the company is paying them benefits for injuries and the employee may be out having fun.
How Can Small Business's Protect Themselves From Employee Fraud?
While there is no one thing you can do to ensure you are never a victim of employee fraud, there are measures you can take to lessen the chance of this happening. Always hire dependable, reliable employees; perform criminal background checks on potential employees. If professional and employment references are provided, take the time to check them out. The few minutes it may take to do this may save you thousands of dollars down the road.
Because they have few resources, small businesses are more susceptible to and more likely to be victims of employee fraud. While most business owners take steps to try to prevent employee theft or fraud, few of them take the most effective measures. Check your insurance policy. Does it offer coverage against employee theft or fraud? Do yourself a favor – check out employee fraud protection today!