Employee theft is one of the biggest challenges businesses face today. It doesn’t just cause financial losses. It also damages trust, weakens company culture, and can even harm a business’s reputation.
According to Shiftbase, employee theft impacts nearly 95% of all businesses.
Whether it’s stolen goods, missing cash, or leaked data, theft from inside the company can be just as harmful as theft from outside.
This guide explains what employee theft is, the different ways it happens, Employee theft cases, and what businesses can do to prevent it, and also employee theft statistics.
What is Employee Theft?
Employee theft happens when a worker takes a company’s money, property, data, or services for personal gain without permission.
It can occur in any type of business, such as retail stores, factories, offices, restaurants, or even online companies. The biggest risk is that it often goes unnoticed for a long time, giving the thief more chances to cause harm.
Common Signs and Red Flags
- Discrepancies between records and actual cash or inventory
- Unauthorized access to cash registers or sensitive data
- Unusual behavior, such as reluctance to let others handle cash or sudden changes in work habits
- Excessive or unusual hours worked may indicate time theft
- Frequent voids, refunds, or discounts are manipulated by employees
- Sudden lifestyle changes (luxury purchases without explanation)
- Employees refusing to take vacations (worried their theft will be discovered)
- Missing documents, inventory mismatches, or unexplained financial losses
- Overly protective employees who don’t share tasks or information
14 Types of Employee Theft in the Workplace
Employee theft is a broad term encompassing various ways employees can misuse or steal company resources. Understanding the different types helps employers identify risks and implement effective prevention measures. Below are the key types of employee theft businesses often encounter:
1. Inventory Theft
Employees steal physical goods or products from stockrooms, warehouses, or sales floors, either for personal use or resale. This can cause significant inventory shrinkage and lost revenue.
2. Data Theft
This involves stealing confidential or proprietary information such as trade secrets, customer lists, financial data, or intellectual property. Data theft can also include copying sensitive files onto personal devices, risking company security.
3. Theft of Services
Employees use company resources or services without authorization for personal benefit, such as unauthorized calls, internet use, or company vehicles.
4. Payroll Theft
Manipulating payroll data, such as inflating hours, falsifying timesheets, creating fictitious employees (ghost employees), or cashing paychecks for others, to unlawfully increase pay.
5. Cash Theft
Direct stealing of money from cash registers, petty cash funds, or business transactions. This is common in retail and hospitality where cash handling is frequent.
6. Embezzlement
Entrusted employees misuse their access to company funds to divert money into personal accounts or for unauthorized uses. It is a serious and often well-planned fraud.
7. Intellectual Property Theft
Stealing or unauthorized use of company innovations such as patents, copyrighted content, proprietary designs, or software code.
8. Skimming
Stealing cash before it is recorded in the accounting system. For example, a cashier taking money from a customer but not ringing up the sale.
9. Accounting Fraud
Altering financial records, falsifying invoices, or manipulating company financial statements to hide theft or create fraudulent financial advantages.
10. Fraudulent Disbursements
Making unauthorized payments by submitting fake expense reports, invoices, or vendor payments to divert company funds.
11. Time Theft
Employees are getting paid for time they did not work. Includes buddy punching (clocking in for others), long breaks, early departures, or personal activities during work hours.
12. Kickbacks & Bribery
Employees accepting or giving bribes or kickbacks to influence business decisions or gain personal advantages.
13. Discount Abuse
Employees using unauthorized discounts for themselves, family, or friends, or manipulating the system to reduce prices without approval.
14. Supplies Theft
Stealing office or operational supplies such as stationery, tools, equipment, or company laptops for personal use.
How to Identify High-Risk Employees
Some employees may be more likely to commit theft. Warning signs include:
Behavioral Signs
- Acting secretive or refusing teamwork
- Avoiding audits or checks
- Hesitant to share responsibilities
Financial Signs
- Living beyond visible income
- Sudden loans or unexplained debts
Access Risks
- Employees who have unchecked control over cash, accounts, or sensitive data
How to Prevent Employee Theft in 8 Ways?
Employee theft can harm any business, but there are simple ways to prevent it before it occurs. Here are some simple tips:
1. Make Employees Feel Important
When workers feel respected and well-treated, they are less likely to engage in theft. Pay them fair wages, say thank you for their hard work, and give them good training and rewards.
2. Check Backgrounds Before Hiring
Look into the history of new workers before you hire them. This helps keep out people who might have a record of stealing or other problems.
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3. Use Security Cameras
Put cameras where money and goods are handled, like near cash registers and storage rooms. Cameras stop people from stealing because they know they might get caught.
4. Do Regular Checks
Count your stock often and review your money records. This helps find theft early and stops it from going on for a long time.
5. Keep Duties Separate
Don’t let one worker do everything with money or goods. For example, one person should not both handle money and keep the records. This way, theft is harder to hide.
6. Have Clear Rules and Consequences
Tell everyone that stealing is not allowed and that it will lead to losing their job or even legal trouble. Make sure employees know the rules and follow them strictly.
7. Encourage Employees to Speak Up
Give workers a way to report theft or suspicious behavior without fear, like an anonymous tip line.
8. Monitor Time and Work
Keep an eye on work hours to stop theft of time, like employees getting paid for time they didn’t work.
Insurance Against Employee Theft
Even with strong controls, no company is 100% safe from employee theft. That’s why many businesses choose to add employee theft insurance (also called “employee dishonesty coverage”) to protect themselves from financial losses caused by dishonest workers.
What is Employee Theft Insurance?
It is a special type of insurance that pays for losses if an employee steals money, property, data, or other assets from the business. This can include theft of cash, embezzlement, forgery, fraud, or misuse of company resources.
Is it Part of Regular Property Insurance?
Usually, no. Standard property or theft insurance only covers losses caused by outsiders (like burglars or break-ins). Employee theft insurance specifically covers insiders—the people you hired and trusted.
Why Businesses Need Employee Theft Insurance?
- Covers Big Losses: Even one dishonest employee can cost thousands or millions.
- Protects Against Different Types of Theft: From stolen inventory to fake payroll records.
- Reduces Financial Risk: Insurance helps businesses survive after theft without losing stability.
- Boosts Confidence: Owners and investors know the company is protected.
What Employee Theft Insurance Typically Covers?
- Stolen money or checks
- Forged documents or signatures
- Embezzlement of company funds
- Stolen stock, equipment, or office supplies
- Digital fraud or misuse of online accounts (depending on the policy)
What Employee Theft Insurance Usually Doesn’t Cover?
- Theft by business partners or company owners
- Losses caused by poor management or errors
- Cases where theft cannot be proven with evidence
Consequences of Employee Theft
Employee theft can have serious effects:
For Employers
- Big financial losses
- Higher insurance premiums
- Damaged reputation and customer trust
For Employees
- Immediate job loss
- Legal action, fines, or jail time
- Criminal record affecting future jobs
On Workplace Culture
- Reduced trust among workers
- More monitoring and stricter rules
- Higher stress and lower morale
If an Employee is Accused
Sometimes employees are wrongly accused. In such cases:
- Hire a lawyer to defend rights.
- Provide proof such as time logs or receipts.
- Consider plea deals if the evidence is strong.
Modern Trends in Employee Theft
Modern trends in employee theft are evolving, influenced by changes in work environments, technology, and employee behavior:
Impact of Remote Work
The American Society of Employers suggests that time theft alone can drain nearly 20% of a company’s profits.
Although physical theft, like stealing cash or supplies, may decrease with fewer employees on-site, remote setups create challenges in monitoring and trust between employers and employees.
Demographic Insights
Younger employees like Gen Z and millennials admit to higher levels of workplace theft compared to older generations. (business.com)
Also, employees with 1 to 10 years of tenure are more likely to engage in theft than new hires or very long-term employees.
Surprisingly, higher-paid employees in flexible or remote roles may pose higher risks due to less supervision.
Increasing Dishonesty
Studies show an increase in dishonesty and internal theft in recent years. More than 75% of employees admit to stealing from their employer at least once ( CalRest.org), highlighting the widespread nature of the problem.
Disciplinary Action for Theft in the Workplace
If an employee is caught stealing, the company has to deal with it carefully and fairly. The goal is to protect the business while making sure the process is legal and respectful.
Step 1: Look into the Case
- Collect proof quietly before saying anything.
- Check cameras, stock records, or computer logs.
- Talk to people who might have seen something.
Step 2: Start the Disciplinary Process
- Give the employee a written note explaining the issue.
- Hold a meeting where they can tell their side of the story.
- In some places, the employee can bring a colleague or union rep with them.
Step 3: Possible Outcomes
- Warning: For very small issues.
- Suspension: The employee stays home while the company investigates.
- Demotion or loss of privileges: If trust is damaged, but the case is not severe.
- Firing: For serious or proven theft.
Step 4: Involving the Law
If the theft is big or involves fraud, the company may:
- Call the police.
- Try to recover money through the court.
- File a claim with insurance if covered.
Step 5: Keep Records
Write down every step—evidence, warnings, meeting notes, and final decisions. This protects the company if the employee later challenges the action.
How to Protect Your Business in the Future
- Technology Safeguards – Biometric logins, cameras, and AI expense tracking.
- Culture of Trust – Fair pay, recognition, and open communication.
- Ongoing Audits – Surprise checks and independent reviews.
Employee Theft: FAQs
Why does employee theft matter?
It costs businesses money, hurts trust, lowers morale, and can damage a company’s reputation.
What do you call employee theft?
It’s often called workplace theft or occupational fraud.
What is the main reason for employee theft?
The most common reasons are financial pressure, lack of oversight, or thinking the company won’t notice.
Can an employer dismiss an employee for theft?
Yes. Theft is considered gross misconduct and can lead to immediate dismissal if proven.
Final Thoughts
Employee theft isn’t only about losing money; it also damages trust and creates long-term problems.
The good news is that businesses can protect themselves with clear rules, regular checks, strong systems, and a healthy workplace culture.
This way, they don’t just avoid losses but also create a company where honesty and responsibility are part of everyday life.
