Timesheet or time card fraud is when an employee puts down hours they did not work and collects payment for those hours. There are rules and laws against it, but some employees still try to game the system to get more pay and commit time theft.
For businesses, time is money, especially if you are a small business. Adding 10 to 15 minutes usually goes unnoticed, but it can become problematic. For the business owner, it is taking money from their pocket. The American Payroll Association (APA) reported that time theft costs companies up to 7 percent of their gross annual payroll. For every $100,000 paid out, businesses lose about $7,000 just from employees misrepresenting their time cards.
The Fair Labor Standards Act requires employers to record and pay all of their employee’s hours worked and save those records for at least two years, but it does not specify which type of timekeeping system the employer should use. Still, the burden of tracking and accurately paying falls on the employer. It is in the company’s best interest to have a time-tracking system that will make it easier to ensure timesheet accuracy, help prevent time fraud, and mitigate any accidental errors.
So what are the ways that employees could be padding their Timesheets / Time Cards?
Inflating Hours/False Entries
Using paper-based timesheets makes it easy for the employee to write in the time they were supposed to be in, but actually, they started 10 to 20 minutes later.
Even if you use machine-stamped time cards, they can wait to clock out long after they quit working or even punch in before starting. These extra minutes can add up to many additional paid hours for time that was not productive.
If managers are not consistently checking employee time cards for errors, you could pay employees for hours that they did not work. Check out an example of how an employee adding an extra 25 minutes a week can add up and cost you over time.
Buddy punching is the old standby for employees when using a punch clock. Clocking in a co-worker when they are running late, so they look like they were at work on time, is another concern to be on the lookout for. If this goes unnoticed by management, then it can become costly for the company.
Learn more about how you can stop buddy punching.
Break Abuse or Taking Personal Time
Employees who take extra long-scheduled breaks, extended lunches, or even taking care of personal situations while on the clock, it will add up over time. You need to make sure you have clear policies in place that detail the scheduled breaks, lunches, and returning to work on time. Employers should also detail which activities are prohibited, such as using the internet or the company phones for personal use while they are clocked into work.
In a survey conducted back in 2015 about employee time theft, it was found that forty-three percent of 139 hourly employees committed time card theft by inflating their hours worked. When those 60 employees were asked what combination or method was used to achieve time theft, 45% said recording incorrect times, 43% said they spent time on personal business, 42% said they took frequent breaks, and 23% were buddy punched by a co-worker.
Working Unauthorized hours
Working extra hours that have not been authorized is another form of time fraud. You may want to have a policy that their manager must sign off for any additional work hours. That way, you know that those hours were necessary.
When employees fill out timesheets at the end of their pay period, the time reported may not be accurate compared to when logged daily. Do you think that they can accurately remember their lunchtimes from a few weeks ago? The reality is, they will not. Although it may not necessarily be intentional, it is still considered fraud.
How do you resolve these situations?
The following suggestions are a few ways that you can limit timesheet/time card fraud.
You should develop written policies regarding timekeeping, breaks, lunch breaks, and starting and quitting times. Spend some time to go over these policies with your employees to endure they understand them and where the policies will be posted. Note that policies are a great deterrent only if management abides by them as well. If you set policies and do not enforce them, your employees will know they do not need to comply with the policies.
It would also benefit you to train your supervisors to check employee’s time cards daily to make sure times are correct. Also, have them review the time cards before they are submitted to payroll. The supervisors should also question the employees on any time recorded that does not seem correct. The employees will then take fewer risks if they see that the time cards are being reviewed.
One of the ways would be to use a web-based time-keeping system that can minimize or prevent fraud. OnTheClock.com is one of these web-based systems whose capabilities include fingerprint sign-in, GPS punch location recording, limiting mobile punches to a specific location, punch location restrictions, IP restrictions, group punch, and browser authentication. You can pick which option works best for your situation. Managers can also review to make sure they are accurate and approve time cards before submitting them for payroll.