Employees’ timesheet fraud is a problem that many businesses face in today’s society. In fact, statistics have shown that time theft can cost companies up to $1.5 million annually.
For instance, employees may put in hours that they did not work for and sometimes get away with it and get paid for it.
Your company relies on your employees’ loyalty and honesty—thus, you usually give them the benefit of the doubt. But are they honest?
This article will help you understand what timesheet fraud is and how to deal with it.
What Exactly is Timesheet Fraud?
Most businesses allow their employees to key in their information into time datasheets. The manager’s responsibility comes in when confirming that these hours are correct. However, some employees take this as an opportunity to manipulate the timesheets by keying in exaggerated information.
It is important to note that the mere rounding up of the time to the next hour is one case of time fraud. Yes, several minutes might seem like no big deal, but these minutes gradually build up, turning into hours or even days.
Imagine if an employer was to add fifteen minutes on their timesheet every day. How many hours will these minutes accrue to by the end of the year?
Now multiply that by the total number of employees in your business. The minutes amount to something, don’t they?
Is Timesheet Falsification a Crime?
Yes, when an employee commits time fraud, it can lead to job loss and is also punishable by law. In addition to an employment contract getting terminated, a falsified timesheet can also lead to civil liability and criminal charges.
Take Massachusetts, for example. When you obtain property from another person through pretenses with an intent to defraud them, it constitutes larceny. Such a crime not only carries a one-year minimum prison sentence but also has a $300 fine.
An employee obtaining money for hours not worked for can also be guilty of theft. The employer defines this as defrauding.
This means that an employer has the right to press charges against any employee who commits time fraud. However, this is not an advisable road to take. The most suitable option is terminating the contract.
Most Common Types of Timesheet Fraud
An employee may commit timesheet fraud both knowingly and accidentally. When done accidentally, it exposes the employees as careless and flawed. However, if committed willingly, it shows that the employees are dishonest and untrustworthy.
Below are some of the most common types of time fraud
Inflation of work hours
This is especially common in businesses that use hard copy timesheets. It makes it easy for employees to enter incorrect arrival and leaving times.
False entry of data
Sometimes you find yourself in a situation where the initial timesheets have a problem and have to be rewritten or retyped. In such a case, it is easy for the employee to manipulate the numbers during the second entry.
The more time you have to reenter the information, the higher the chances of the timesheet becoming inaccurate.
Errors due to delays
There are times when the timesheet systems experience problems. This will prompt the employees to wait until later when the system undergoes repairs. They take such an opportunity and key in more hours than they have worked.
Some employees take a longer time during break than the allotted one. Some even take unauthorized breaks when they are supposed to be working.
Buddy punching is when an employee keys in false arrival and leaving time on behalf of a co-employee who hasn’t even arrived yet or left earlier.
Favoritism is mainly committed by managers and supervisors, where they tend to favor a coworker, relative, or friend. They schedule them for a specific task that would have had a better and cheaper outcome if another employer did it.
They may also overlook the lateness of some employees.
How to Prevent Timesheet Fraud
The solution to timesheet fraud will depend on the type of problem.
Below are some of the ways you can fix time fraud.
Getting tougher on submission
This can be an effective way to fix time fraud as a result of manual submission. For example, as the manager, you can instill strict policies that dictate the exact time the employees submit the timesheets.
This will encourage them to record the accurate time promptly and submit the timesheets to you. The good thing about this is that it leaves no room for them to guess the time after working for multiple days.
You can also review the rota plans and workloads to combat buddy punching in addition to the timesheets. An employee might ask another employee to clock in on their behalf since there won’t be at work until later. With reviews, every employee works according to the time given.
If you haven’t, incorporate digital time clocking.
Replacing manual timesheets with digital ones will make it hard for the employees to manipulate the timesheets. For example, you can invest in a digital system that uses the employee cards to automatically clock them in at the workstation or terminal and out when they leave. This saves time and provides more accurate results.
Another effective digital time clocking method is mobile clock-ins. There are efficient systems that will allow your employees to clock in using mobile phones while adhering to locational restrictions. This means that no employee will be able to clock in when they are not on site. Interesting, right?
Switch to biometric attendance systems
Biometric time and attendance systems are particularly effective in eliminating buddy punching. It is a stricter option where the employees have their identity authenticated via the devices biometric modality of choice; iris, face, or fingerprint. This means that employees won’t have the chance to exploit your system by clocking in inappropriately.
Moreover, with a biometric attendance system, the company eliminates the need to keep time manually. This means that your employees will save time and reduce overhead by providing accurate labor data for the payroll department. This will also help you manage your business’s operations effectively, thus increasing your business’s productivity.
With this technology you can also utilize it to function as a visitor management system to keep on top of guest visits.
Formulate a clear time theft policy
It would be best to come up with a time theft policy and explain it to the employees. The policy should include the behaviors considered as time theft, the behaviors not considered as time theft, and the consequences they can face by breaking the rules.
Communicating the policy to your employees should not only pass through email. You should also discuss the reasons for creating the policy and ensure that they become conversant with it.
Develop a Company Culture
One thing that can help you win the hearts and honesty of your employees is by ensuring that they feel like a part of the company. A good, healthy, and positive company culture can come in handy.
One thing that most employers fail to attend to is employee satisfaction. However, the benefits that you get from a satisfied team are immense.
Timesheet fraud is both a common and expensive problem. Many businesses lose a lot of money as a result of such malpractices. However, the problem is that it can take years to find out that employees are stealing time, and the longer it goes on, the more it costs you.
Therefore, every business owner needs to prevent timesheet fraud before it becomes a menace and affects your business negatively.