16 min read

What You Need to Know about Stopping Time Theft

Featured Image

The challenge of minimizing employee time theft is likely to be an issue at your company. Studies conducted by the American Payroll Association show that 75 percent of U.S.-based companies experience time theft. That means employee time theft is likely bloating your company's labor budget.  

Nor do these numbers speak to the economic losses a company suffers to their bottom line, due to loss of productivity. Employees commit time theft when they waste time or steal company time at work. 

Yet there is another time theft risk facing your company other than employees stealing time at work —Is your company stealing time from its workers?  

Blog photos inside (400 × 400 px)-Sep-05-2023-05-16-57-7661-PMCompanies can engage in time theft from their workers, also known as "wage theft”. According to the Economic Policy Institute (EPI), wage theft has cost those workers nearly $8 billion in lost wages

Large corporations facing wage theft lawsuits have paid legal fines and settlements that run into the hundreds of millions of dollars.  

These payouts represent the serious risks companies face. You need to be meticulous about paying workers accurately. You also need to document the worker time and attendance, and your payroll calculations.  

Continue reading as we are sharing tips to minimize common forms of time theft and reduce your risk of engaging in wage theft. 


Identifying and Preventing Wage Theft 

The EPI research identified seven main categories of wage theft:

  • Failing to pay overtime rates for overtime hours.  
  • Deducting meal and break time owed, without ensuring employees have taken it.  
  • Paying hourly rates below minimum wage due to working off-the-clock time.  
  • Requiring workers to perform certain work-related activities during off-the-clock time.  
  • Making illegal payroll deductions.  
  • Misclassifying employees as exempt from overtime or as independent contractors.  
  • Mismanaging tip earnings and allocations.  

Your company can be guilty of wage theft unintentionally. While we cannot offer legal advice, you should talk with HR and legal teams to create a plan to prevent accidental time theft from employees.  

 New Call-to-action


Understanding what pre - and post-shift activities must be compensated  

The biggest driver of wage theft is not counting time that should be compensated as work time. Failure to track work hours properly leads to other wage theft issues.  

time theftAre "pre-shift" meetings held off-the-clock? Under the Fair Labor Standards Act (FLSA), these meetings and other "pre-shift" work tasks are compensable. You are also miscalculating total work hours used to determine overtime hours and pay when you do not count this time. 

Under the FLSA, off-shift activities that are "integral and indispensable" to the worker's responsibilities are compensable. The FLSA does not offer bright line guidance as to what is considered "integral and indispensable."  Stay current on what courts in different jurisdictions have concluded is or is not compensable.  

Here is a sampling of what some courts have ruled:

  • Requiring workers to wait at designated bus stops for the company shuttle is not compensable. 
  • Time used to put on safety or special equipment required to perform one's duties is compensable time. The time they spent having to wait before they could put it on is not compensable. 
  • Security checks done on an employee post-shift is not compensable time.  
  • Certain workers are eligible for sleep-time pay, which would have a significant impact on overtime calculations.  

The FLSA currently allows companies to use neutral rounding strategies. A rounding practice that only benefits the company is not neutral. A court has held that the company president could be held personally liable for wage theft since he was present on the worksite and knew about the company’s non-neutral rounding policy. One neutral rounding strategy is to round clock-ins for the employee and clock-outs for the employer. 

A sophisticated time and attendance software could help enforce a neutral rounding policy. However, you cannot assume that neutral rounding practices will always be permitted. As time tracking software continues to advance, there is no reason employers cannot capture exact work hours by installing quality cloud-based time clocks throughout the workspace.  

Minimizing your company's exposure to wage theft penalties and back-pay awards  

Do not assume your company is not stealing time from employees; it may be unintentional. Payroll and HR can examine your pay practices to ensure the company is not engaging in wage theft. 

Steps to Minimize Common Types of Time Theft 

The American Society of Employers estimates that 20% of every dollar a U.S. company earns is lost to employee theft. That is not due only to time theft. However, we also know that buddy punching alone costs U.S. employers $373 million every year. Here’s how to stop paying for different forms of time theft. 

Make sure timesheets are accurate  

Blog photos inside (400 × 400 px)-Sep-05-2023-05-23-33-6401-PMThe frontline of time theft is the time reported. A startling 43% of workers exaggerate the hours worked in their reporting. 

Get rid of manual time reporting and time cards. Even for those employees who do not intend to misrepresent their hours, it is too easy to misreport actual time worked. Implementing an automated time and attendance software that captures workers' hours in real time minimizes time theft due to misreported work hours.  

However, clocking in and clocking out does still carry the risk of another type of time theft: “buddy punching.” Buddy punching occurs when one worker punches in or out for another, inflating their hours. Biometric time clocks are the most effective way to eliminate buddy punching. In all cases, you can post a notice at the time clock that buddy punching is cause for disciplinary action and is also fraud.  

New Call-to-action

Keeping employees working while they are on the clock  

Employees who are not working while on the clock is another common form of time theft. This could mean wasting time on social media or on personal tasks, sneaking off for smoke breaks, taking their lunch breaks on the clock or a nap. Any activity that leads the company to pay them for work time they are not actually working.  

The best approach for a supervisor to prevent time theft of this sort is to walk the floor. The supervisor does not need to do this 100% of the time. A supervisor who walks the floor often and not on a schedule keeps workers on their best behavior.

workday time clock Managing workers who want to take less break time or squeeze out extra overtime  

Another common form of time theft is workers who try to pad their work hours. A time clock attendance software can help prevent workers from clocking in early for a shift or from an extended break. Supervisors can have the employee time clock configured to block early clock-ins. A more advanced time and attendance system can also notify a supervisor who wants some flexibility to make an ad hoc decision about whether to allow employees to clock-in early.  

A robust time and attendance system should also provide supervisors with the right set of scheduling, notification, and reporting tools to help them manage expensive overtime hours. Some workers may decide to clock out late to accumulate enough hours to qualify as overtime or extend their shifts.  

One valuable tool is sending alerts to a supervisor when workers have not clocked out as scheduled. Another useful process is sending supervisors daily reports showing which workers are trending towards hitting overtime hours for the week. Supervisors can use this type of report to manage the situation before overtime pay gets triggered and a written warning is sent to the employee.  

Your Tools to Prevent Time Theft and Wage Theft 

Companies that aim to maintain financial integrity and employee trust must address time theft and wage theft.  

Studies have shown how common time theft is, undermining company resources and financial health. The possibility your company may unintentionally engage in wage theft is equally alarming. The risk of both emphasizes the need for your company to implement precise payroll tools and practices. 

When your company employs a robust cloud-based time and attendance system, it is staying vigilant against time theft that happens in time reporting. By doing so, you help reduce losses stemming from inaccurate work hour reports and buddy punching. With a well-balanced approach that harnesses technology and effective management, you help your company maintain a productive and ethical work environment. 

Click the button below to get a personalized demo of our TimeCom solution and witness how it can benefit your company against time theft. 

Request a Demo

Biometric Usage: Growing concerns over the privacy and security of biometrics are driving government regulations surrounding the definition of personal data and how to protect it. These regulations vary from country to country, state-to-state, and in some cases city by city. Most often the governing regulations are dictated based on the location where the information is being collected. It is important to understand the local regulations in the geographic areas in which you operate. If you are uncertain regarding your regulatory obligations, we encourage you to consult with your legal counsel.