Time Theft Guide: How to Spot it and How to Stop It

Employee theft is an unfortunate reality. Theft of food, alcohol, and cash happens—but more commonly, employee theft occurs in the form of time theft.

Time theft is when employees are paid for time they weren't scheduled or didn't actually work, and it can come in a variety of forms.

It often looks harmless. Employees may clock in before taking care of last-minute personal errands or leave a few minutes early on a slow day. But a few minutes here and there adds up, hurting your bottom line by the end of the year.

What is time theft?

Simply put, time theft is when an employee is paid for time that they did not actually work. Time theft can be willful and intentional, where an employee consciously logs hours they did not work, but it’s often accidental and not malicious.

For example, employees filling out manual timesheets can make mistakes (“I could’ve sworn I worked on Tuesday!”). Or they might incorrectly estimate how long they worked (“I’m not exactly sure when I rolled in, so let’s just call it 8:00 a.m.”).

Preventing time theft starts with understanding where and how it happens so you can implement effective preventative measures. While time theft is a common issue in many industries, it's particularly prevalent in sectors with hourly workers, like the restaurant industry.

What's the difference between time fraud and time theft?

Both time fraud and time theft mean that an employee was paid for hours they didn’t work, but there are subtle differences between these two concepts.

Time theft: This is when employees get paid for the time they didn’t actually work, typically in fairly small increments that are connected to the time the employee did work. For example, punching in early, taking inappropriate personal breaks, taking a lunch without clocking out, or taking off early and relying on a buddy punch.

Time fraud: This is a more deliberate action where an employee intentionally and significantly falsifies their reported working hours, such as logging a nonexistent shift. Time fraud is considered more serious. It can aggressively hurt a business’s finances, and it can also lead to legal action against the offending employee.

Time theft is often seen as a less severe issue than time fraud. But, while each instance might seem minor, collectively, time theft can significantly impact a business's labor costs and overall productivity.

How much can time theft cost my business?

Let's say you have an employee on the schedule for 8:00 a.m. to 5:00 p.m., and they make $15 an hour. But they came in at 7:50 a.m., clocked in, and poured themselves a coffee before starting work at 8 a.m. It was a slow day too, so they left ten minutes early and texted their friend to clock them out at 5 p.m.

From the employee's perspective, it may seem harmless. And it's easy to let slide as an employer—what's 20 minutes?

Well, let's do the math:

If the employee does this every day of their five-day workweek, that can add up to around 85 hours a year—costing your business $1,200 for time not actually worked.

That's $12,000 for a small business with 10 employees.

Or $120,000 for a multi-location business with 100 employees.

You wouldn't hesitate to stop someone from taking $1,200 worth of meat or alcohol from you—so why let time theft add up?

How to spot it: The different forms of time theft

Employees can steal time in different ways. By understanding the ways it can occur, business owners and managers have a much higher chance of identifying it before it racks up a hefty bill.

Here are a few ways time theft can happen.

Buddy punching

When an employee clocks in or out for another employee, this is known as “buddy punching.” For example, one of your two openers is running a bit late and has the other punch them in before they arrive.

This can occur if you use a PIN-based system or time cards, and it’s common enough to have a nickname that’s almost universally understood among hourly wage workers.

Inaccurate time cards

People are generally bad at filling out timesheets. When you have employees manually enter their hours into a spreadsheet, mistakes are almost guaranteed. Honest mistakes happen, but you’re the one who ends up paying for them.

Manual time entry also makes it easy for employees to manipulate numbers. They can negate a late arrival, trim down a break, or give themselves a few extra hours.

Extended breaks

Employees may add a few minutes to their lunch or break, coming back after 17 or 34 minutes rather than 15 or 30. Lunch breaks may be off the clock, but with a manual time entry system, people will typically give themselves the benefit of the doubt on how long they were out.

Extended breaks can add up over time and end up costing you a significant amount. An employee may also take break time but not record it, which can lead to compliance issues down the line.

And it’s not just meal breaks or designated breaks. People can extend all sorts of break-like moments in the workplace, like:

• Bathroom breaks
• Cigarette breaks
• Phone calls
• Personal tasks and errands

Personal activities on company time

Employees who misuse company time by taking multiple smoke breaks, stepping away to take calls, or running quick errands during slow times are technically committing time theft.

Of course, life happens, and some personal time is inevitable. Sometimes emergencies come up, or phone calls have to be taken. It’s up to you how tight a ship you want to run. But when goodwill is abused, it can end up costing you extra payroll.

Make sure you clearly define when it's okay for employees to take a call or run down the street, and call it out when it happens too much.

Personal activities you might watch out for include:

• Phone activities (social media, texting, games, online shopping)
• Quick errands at nearby businesses
• Sitting down for a cup of coffee or snack outside scheduled breaks
• Smoking outside of designated breaks

Slow working

Slow working is when an employee deliberately works slower than necessary to stretch out their hours into overtime. For example, a restaurant employee might drag out the time it takes to clean their section so they can stay on the clock longer.

This is another form of time theft or wage theft—one that’s even more costly because it pays out at time and a half!

Faking hours

Faking hours is when an employee purposefully inflates their hours on their timesheets, claiming to work a few minutes or hours longer than they actually worked. This can happen via buddy punching or dishonest manual timekeeping.

How to prevent employee time theft

The best way to stop time theft is to prevent it from happening in the first place. There are several simple preventative measures that can ensure intentional time theft is nearly impossible.

Have clear time theft policies in place

In the restaurant business, communication is at the core of success (and 7shifts’ Team CommunicationApp can help with that).

Make sure that your employees know what your policies toward late/early clock-ins are by establishing clear, transparent time clock rules. Give employees detailed explanations for how you expect them to track their time, and make sure they know the consequences of time theft.

Instructions for making corrections to their time cards can go a long way in preventing mistakes too. A proper employee handbook that includes those details can be a great solution.

The policies you set are up to you—just be sure they are clear policies—and clearly communicated.

For example, you might allow employees to clock in a few minutes early if they arrive before their shift starts. But do employees know what you expect them to do with this time? Is it free time for personal use, or do you expect them to get an early start?

You may also allow employees to adjust their time to show on-time arrival if they're late due to public transit delays. Whatever decisions you make, communicate them clearly and budget for these kinds of overages when forecasting your labor costs. It's always better to come in under than to go over.

Recommended Download: Free Restaurant Labor Cost Calculator Template

Upgrade your time-tracking software and tech

If you're still using paper time cards or a manually updated spreadsheet to track hours, get rid of it. Upgrade to a digital, automated time-clocking system.

Time-clocking tech makes it easy for you to monitor employee time and attendance. You’ll be able to verify they're taking the right breaks and clocking in and out according to their scheduled hours.

These tools can help identify bad habits before they morph into costly problems. Some even allow for personal passcodes, photo identification, or geofencing to prevent buddy punching from ever taking place.

“Most modern workplaces have multiple means of recording hours, like a punch-in clock backed up by video surveillance in public areas of the restaurant. This two-part system is important because many would-be time thieves will ask or threaten co-workers into logging into the time clock for them,” says Vincent P. White, a partner in the employment law firm White, Hilferty, and Albanese.

Give your managers top-level visibility

Tools aren't any good without proper access, so make sure you're giving your managers access to the time-clocking tools. They should be able to view reports, make changes or corrections, and access data from their computers, tablets, or mobile devices.

This ensures they’re able to monitor the time clock and catch errors before they become problems.

Promote an honest work culture

Nothing encourages time theft more than time theft. When new employees see seasoned workers doing it, you get a work culture full of time theft, self-serving attitudes, and worse.

Instead, build the kind of restaurant work culture employees want to be a part of. Start by promoting transparency and being flexible and kind when you can.

If employees see others getting harshly disciplined for being a few minutes late, they’ll get the message—and do whatever they can to avoid a similar encounter. But if employees see kindness, empathy, and reasonableness when life happens, they’re more likely to be honest with you.

Time theft laws

If you suspect that your business is the victim of time theft, you may choose to seek legal action if it’s serious enough. But before you do, there are a few things to keep in mind.

The Fair Labor Standards Act (FLSA) requires any business to pay an employee for the hours they work—as reported on their timesheets.

Even if you suspect that some of that time may be stolen—intentionally or not—refusal to pay it may land you in a lawsuit. An employee can sue for an amount equal to double the missing wages in back pay, plus any legal costs and fees.

There are different levels of time theft, with differing criminal and legal implications for offenders. The severity of the punishment can also depend on the amount of stolen money.

Jeffrey Patterson (Miller Canfield) explains:

“These issues were addressed [in a case where] the employee was discovered to have been making multiple trips from the job site to his home, along with many recorded hours of his work vehicle sitting idle during the workday. The employee, however, submitted timesheets claiming full payment for attending scheduled jobs on those same days. The employer proceeded to terminate the employee’s employment for time theft, dishonesty, and breach of trust.
“Key to the employer’s success in defending against this complaint was their ability to document and prove the employee’s behavior, lack of remorse, and the extent of the deception and time theft engaged in. In your workplace, you should similarly consider implementing measures to prevent time theft, protect your business, and defend yourself if necessary.”

Is time theft a crime?

Time theft is considered a crime, but jurisdictions vary widely in how they define and prosecute it, so be sure to check with local authorities.

For example, “felony theft” is a threshold that varies from state to state—$300 in Illinois but $2,500 in Texas. Generally, if the time theft exceeds that threshold, the crime moves from misdemeanor to felony.

Here are a few examples of behaviors that could fall into each category. Bear in mind that these examples are general and may not be entirely accurate depending on where you live and work.

• Misdemeanor: An employee takes a longer break than allotted, fails to adjust their timesheet after arriving late or leaving early, or leaves to run a quick personal errand while on the clock.
• Felony: An employee buddy punches in or out for another employee, inflates their hours on their timesheet, or sleeps on the job.
• Aggravated felony: An employee works multiple days of unnecessary overtime or adds a significant number of unworked hours to their timesheet.

What can you do once employee time theft occurs?

If you suspect that time theft has occurred in your restaurant, you have several options to address it. But the first step involves making sure you have proof.

“With the right safety measures in place, such as a time clock with a video camera facing it, time theft can be extremely easy to prove. In that situation, a common tactic employers utilize is to offer the employee the chance to make restitution. If they don't, a civil suit could be an expensive option for the employer and may not be worth it. But they could always just turn things over to the police,” says Vincent P. White.

Here are the three steps you should take when time theft has occurred.

1. Investigate

Theft of time should be investigated with the same rigor as theft of property.Findlaw.com says that any investigation should follow specific guidelines.

These include involving neutral third parties, committing to confidentiality, and making sure it is well documented. You will also need to work with an attorney and certified public accountant. A thorough and lawful investigation is essential before moving forward.

2. Disciplinary action

If you can prove that time theft occurred, and you've determined that the time theft was intentional, you may seek disciplinary action against the employee. This is entirely up to your discretion. It can range from suspension to termination, if necessary.

3. Seek restitution

You may also choose to seek restitution (back payment) for the wages paid. This is generally done by working with your insurance company, attorney, and a CPA. In cases where the amount paid out due to time theft is rather large, litigation may be required to get that money back. This is a costly option that is often not worth it.

“Time theft can generally become a felony criminal charge when it meets the threshold dollar value of a felony in your local jurisdiction. For example, if you live in an area where stealing $2,500.00 could constitute a felony, then time theft could be viewed as a felony there when the value of the hours stolen reached $2,500," says Vincent P. White.

Protecting your business from time theft pays off

Time theft is a common problem for restaurants, often adding up to thousands of dollars a year in labor costs for unworked hours. And no one wants to have to call attorneys, fire employees, or take these claims to court. By using tech-enabled time clocking and scheduling software, you can prevent time theft from happening at all. This makes for a healthier and happier workplace for all parties involved.