• Colin Doyle CFO

Stopping the clock on employee time theft

A growing subtle threat of time theft in the workplace jeopardizes developing organizations, according to time-keeping software companies. Employees can unknowingly and casually steal time. Or they can willingly and fraudulently malinger. Time theft can morph into serious crimes, such as payroll fraud schemes. (See the sidebar, Ghost employees haunt organizations' payrolls.)

Charlie worked as an hourly, full-time staff accountant for a CPA firm. He usually punched in the digital time clock at 9 a.m. and punched out at 9 p.m. He always scattered his desk with files and papers to give the impression that he was overloaded with work. After punching in, he’d wander the building socializing with many of the employees and partners for up to 90 minutes each day.

Back at his desk, Charlie would spend a couple of hours catching up on his personal emails. Because both the firm and Charlie used Gmail for business, only the firm’s computer division could tell if he was sending personal or work messages. So, the perception to everybody else who passed by his office would be that he was working and using Gmail to send business emails.

Then it was time for Charlie’s most important activity of the day: his paid one-hour lunch break. He’d never eat at his desk; he’d always eat out with a colleague. He’d then come back to the office to work for about an hour and surf the internet for another hour. He’d then wander around the building and share his new knowledge with employees. At about 5 p.m., he’d go back to his desk, shuffle some papers around and wait for others to leave the office. He’d then often quietly slip out at about 5:30 to hang glide with colleagues and then come back at about 9 p.m. to punch out, thus adding time fraud to time theft. The company would now pay him overtime at 1½ times his hourly rate.

The company suspected he was stealing time, so its human resources department and an outsourced consultant conducted a time-management study, determined that Charlie wasn’t productive and recommended that the CPA firm terminate him. He’d lasted for six months only because he had excellent schmoozing skills, and he often invited bosses to hang glide with him. But then the CPA firm realized it wasn’t getting many billable hours out of Charlie, and he was out the door. The firm didn’t prosecute.

Sixty-two percent of days spent on productive work

Because he has connections, is popular and an accomplished talker, John became the accounting manager for payables at a wholesale fine jewelry company despite generating little work. He has a clear view from his office to see when the CEO, CFO and the controller come into the office. John makes sure he burns up about an hour in small talk with at least one of them every day.

John doesn’t have a college degree and no formal accounting background. He’s often late in producing work documents. And he’ll take extended lunch breaks and then later go missing for several hours at a time. He avoids mandatory meetings and surfs the internet for hours. Most people figure he completes an hour of work per day and steals the rest of the time. John, to his surprise, still survives at the firm. He continues to fraudulently sell himself.

Unfortunately, this tale is so common that many businesses conduct time-theft research. One large U.S.-based aerospace company has given up trying to calculate the exact amount of time their employees spend on projects. After the firm studied hundreds of programs and projects, they finally concluded in its in-house proprietary study that its workers only spend 62 percent of their time actually working on projects and the rest on non-productive work.

Time thieves surf the internet, shop online, conduct personal business, check their smartphones every five minutes, text and leave their desks for long periods to chat with colleagues.

Apparently, some employees only consider their presence as work and don’t consider their time-wasting habits to be fraud. However, they cost organizations billions of dollars per year for many companies in wasted salaries.

Installing automated time-tracking systems

Of course, the first step to improving productivity is making all employees aware that work time is an asset. Employee handbooks and training for new employees must include penalties for time theft. Supervisors should regularly discuss time management with employees and provide them with time-saving techniques and tools.

Organizations can use time-tracking software to record employees’ entrances and exits plus hours worked on specific projects and activities by linking to electronic time sheets — a valuable benefit for professions that survive on billable hours, such as CPAs and attorneys. The software also shows employees’ idle and non-productive time.

Automated time-tracking systems ensure that “total hours worked per day” — measured on the software’s time clock — matches hours logged on time sheets. The software can ensure that discrepancies between time clocks and time sheets generate error messages so employees can correct their behavior.

C-suite executives, managers and all white-collar employees will exhibit positive tone at the top if they also use time-tracking software protocol. They’ll demonstrate that keeping tabs on everybody’s attendance is a productive procedure for the organization.

However, organizations run the risk of misusing time-tracking software and causing unnecessary tension. For example, take James, a manager of a medium-size company. All employees had to punch out when they left for their 30-minute lunches and punch back in when they got back to work. Mary, one of his salaried staff employees, worked 60 hours on average per week. One day, James reviewed the timesheet software and saw that she’d taken 35 minutes for lunch. He found her and shouted that she’d disobeyed the rule. Mary wasn’t entitled to overtime because she was an exempt employee. After John stopped screaming, Mary apologized and told him that it wouldn’t happen again.

At the end of the work day, Mary left crying. “I will be looking for another job. James is a tyrant,” she told a few trusted employees. Mary’s resignation a month later was a big loss for the company. Managers must judiciously use timesheet software as a guide, not a bludgeon, or they’ll defeat their objectives of productivity. They can also minimize demoralizing effects of strict time accounting by setting reasonable parameters. Unproductive time could be set to a certain number of hours per week.

Protect your employees and organizations

How do we solve the predicament of preventing and deterring time theft while maximizing productivity? Balancing strict accounting of time without subverting employees’ morale is a juggling act. People aren’t machines. They’re social beings. But time theft can easily morph into fraud of many kinds. Protect your employees and organizations by suggesting to top management and human resources departments that they embed sophisticated time-tracking software, procedures and training.

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