How To Handle Employee Theft: A Guide for Business Owners

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How To Handle Employee Theft Guide for Business Owners

We all like to think we’re a good judge of character. Then again, many of us had Barry Bonds posters on our walls growing up so maybe that’s not an attribute any of us should be too quick to claim.

Especially when running a small business, sometimes you just don’t have the time, resources, or energy to investigate a potential employee as closely as you should. And sometimes that oversight leads to them taking things that don’t belong to them – AKA employee theft.

Employee theft actually accounts for eight times more losses to companies than shoplifting.

But it’s a dicey issue, and wrongly accusing an employee of stealing – whether it’s a bartender or a bookkeeper – can lead to serious ramifications for your business. So how do you handle employee theft? Here’s a step-by-step guide on how to deal with employee theft before, during and after.

Look for the Signs

  • Sudden money – Did you not give an employee a raise and all of a sudden he’s telling you about the epic dinner he had at a local new hotspot or the brand new $600 Gucci loafers he just bought? Ask where that money came from and see how they react.
  • Check your books – Slight cash variances happen, especially in service industry jobs. But if the differences are large, or abnormally frequent, try and find the source
  • Missing items – Not just paperclips out of your stockroom, but things like missing electronics or cash from other employees can signal that there is a thief among you.
  • Missing inventory – The same goes with business inventory Sure, you may have shoplifters or damages, but if nobody’s been caught and your security footage doesn’t show much, then it may mean that it’s an inside job.

If You Think An Employee is Stealing

  • Gather evidence – Though you’d probably rather sit next to a crying baby and an obese man on a trans-Atlantic flight, going through your surveillance tapes is the first way to start building a case against an employee that is stealing from your business.
  • Audit records – Put any records you have that have drawn your suspicion in a separate file, then take the time to go through and audit why they may have come out abnormally.
  • Document all theft – Assuming you find anything, make a strong file of every instance you can prove of employee theft and begin to build your case.
  • Prepare an interview – Because a good thief is often also a good liar, straight up calling the employee into a room and saying “Are you stealing?” isn’t going to get you very far. So take some time – and consult with an interview or interrogation specialist – to determine how exactly you want to go about questioning the employee.
  • Wait – Sometimes you can’t afford to, but often thieving employees who think you’re onto them will stop stealing for a while. Give them time, they’ll start up again and then you can gather more proof.
  • Record everything you’ve done – An employee who steals may not go quietly. So in addition to documenting your evidence, record any interviews, get statements from other employees, and gather and document any other evidence you might need in a lawsuit.
  • If you’ve got enough, fire them – Keeping an employee who is stealing is simply an invitation to steal more, and a sign to other employees that stealing is ok. But make sure you know 100% they’re stealing, know you have tangible proof, and make sure you’ve got backup documentation before firing your employee.

After You’ve Fired Them

  • Escort them until they’re gone – Just like with any firing, make sure you or someone who can handle security walks the person back to his or her desk, watches as they clean out their stuff, and escorts them off the premises.
  • Determine whether to involve authorities – If the theft is large enough, you may want to press criminal charges. But be aware that most stolen money is probably spent, and though you might win a lawsuit or criminal case, you may not recover much money. And a police investigation may agitate your former employee and lead to even more problems.
  • Don’t dock their final check – Most states have laws about how much money you can withhold for employee theft from a final check. Find out what your laws are before considering this option.
  • Change all passwords – And not just the ones that employee had access to. If he was stealing, he may well have had access to a lot more than you think.
  • Contact your bank – And terminate any account (or at least get new cards) that the stealing employee was involved with. Make all necessary security changes there as well to ensure the fired employee has no access.
  • Backup your computer files – An angry ex-employee might also be able to hack into your system easier than you think. Especially one cunning enough to steal from you. So backup everything you have in case of a large-scale deletion.

Now some of these steps may not be completely necessary. An employee stealing office supplies is probably not going to extract vengeance by wiping out your entire database, but these are all definitely things to consider. Even long-time employees we know and love can be capable of employee theft, and handling it correctly can at least ensure the damage doesn’t go much past what’s already gone.

Image courtesy of jesadaphorn / FreeDigitalPhotos.net


Matt Meltzer

Matt Meltzer is a professor of business communication at the University of Miami. He is a veteran of the United States Marine Corps and holds a bachelors degree in business administration from UM, as well as a Masters of Mass Communication from the University of Florida.

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