Identifying Timecard Fraud, and How to Effectively Stop It?

Identifying Timecard Fraud and Preventing it from Happening Again

Discover effective strategies to protect your business from time sheet and timecard fraud.
TimeCard Fraud

While terms like "timecard fraud" and "time theft" are often used interchangeably, they carry subtle but important differences. Time theft is a broad term that encompasses any situation where an employee is paid for time not actually worked. This can range from falsifying, taking unauthorized breaks, or even engaging in personal activities during work hours to arriving late or leaving early without permission. While, timecard fraud typically involves employees altering their timecards to reflect hours they did not actually work, whether it's clocking in earlier or clocking out later than their actual work times.

What is Timecard Fraud

So, what exactly is timecard fraud? It's a deceitful practice where employees submit inaccurate time records to get paid for hours they didn't work. For example, an employee might report he or she worked an eight-hour shift when the individual only completed six hours, artificially inflating his or her timecard. This not only skews payroll but can also create an unfair work environment.

Unfortunately, this practice is more common than one might think, particularly in the form of buddy punching. According to the American Payroll Association (APA), more than 75% of companies experience financial loss from this practice.

Timecard Fraud Definition

Impact of Timecard Fraud on Organizations

Timecard fraud presents a substantial financial challenge for small businesses. For the sake of this example, let's consider a company with five employees, each earning $10 per hour. If each employee inflates his or her hours by the reported average of 4.5 hours per week, it results in an additional $225 weekly cost for the business. Annually, this could mean $11,700 in wages paid for unworked hours for the business.

Additionally, beyond the direct financial implications, timecard fraud can have wider consequences. It can lead to strained employee relations, as honest workers may feel the unfairness of colleagues receiving unearned pay. Moreover, if left unchecked, such behavior might become normalized, leading to a culture of dishonesty that could harm the company's reputation.

Timecard Errors Versus Intentional Card Fraud

However, it's important to distinguish between unintentional timecard errors and deliberate fraud. An error might occur when an employee forgets to clock out for lunch, inadvertently logging an extra 30 minutes. These honest mistakes are different from intentional deceit, where hours are knowingly inflated. Recognizing this difference is key to handling each situation appropriately and maintaining a just workplace.

Consequences of Employee Timecard Fraud

When employees commit timecard fraud, the consequences can be severe, depending on the level of fraud. Here's what can happen:

  • Disciplinary action: Employers may implement disciplinary measures, ranging from warnings to termination of employment.
  • Legal repercussions: In severe cases, legal action could be taken against the employee, including civil liability or criminal charges for theft.
  • Financial impact: The employee may be held accountable for repaying the falsely claimed hours.

Types of Time Fraud

Understanding the various forms of time fraud is key for employers to effectively address and prevent it. In the following sections, we will go over the most common types.

Employees Who Submitted Inflated Hours Worked

Work Hours Inflation

Inflation of work hours is a significant issue, especially in environments relying on manual time sheets. For example, in companies using paper time sheets, it's not uncommon for an employee to inaccurately record their arrival as 8 a.m., when they actually arrived at 8:30 a.m..

Fraudulent Entry of Data

The risk of fraudulent data entry rises notably when original time sheets are compromised and need re-entry. For example, in cases where original time sheets are lost or damaged, employees may have to recreate their time records. This situation presents an opportunity for dishonest employees to manipulate their hours. A worker could, for instance, claim to have worked extra hours during a particularly busy week, even if they didn't.

Errors Because of Delays

Errors due to delays in timekeeping systems present another challenge. Imagine a scenario where the time tracking system goes down. Hourly employees, unable to log their hours immediately, might later inaccurately recall their work hours. For instance, an employee who worked seven hours might, in good faith or otherwise, log eight hours, believing he or she worked a full day.

Long Break Times

Extended or unauthorized break times are a subtle form of time theft that can cumulatively have a significant impact. For example, an employee might routinely extend a 30-minute lunch break to 45 minutes without adjusting their time clock records. While it may seem minor on a day-to-day basis, this extra time adds up, leading to unpaid work hours for the employer.

Buddy Punching

Buddy punching is a form of time clock fraud that occurs when an employee clocks in or out for a colleague. For example, if John arrives late, Jane might clock in for him. This act not only distorts the number of hours genuinely worked but also undermines employee morale. It creates an environment where some employees feel burdened or unfairly treated due to the dishonesty of their coworkers.


Favoritism in the workplace can subtly contribute to time fraud. When a manager prefers a particular employee, he or she might overlook this individual's late arrivals or early departures, while others adhere to their schedules. Additionally, favoring certain employees for specific tasks, regardless of their suitability, can lead to inefficiencies and higher costs.

Logging Regular Time as Overtime

A common time sheet fraud involves employees recording regular work hours as overtime. For instance, an employee might work a standard eight-hour day but log two of those hours as overtime, attracted by the higher pay rate. This not only inflates labor costs but also distorts the company's understanding of its actual labor needs.

Ghost Employee

Ghost employee fraud involves paying wages to a nonexistent person. An example of this could be an employee who creates a fictitious worker in the payroll system or keeps a former employee on the records, diverting these wages to himself or herself. This not only results in financial loss but also damages the integrity of the company's payroll and timekeeping systems.

Working Unauthorized hours

Unauthorized work hours are another form of time fraud. For instance, an employee might stay late to complete tasks but fails to obtain prior approval for overtime, intentionally seeking extra pay. This not only inflates the payroll expenses but also raises questions about workload management and oversight.

Detecting Timecard Fraud in Your Business

Identifying timecard fraud is crucial for maintaining financial integrity and fairness in your business. Here are ways to detect such fraud:

Patterns of inconsistent check-In times: Inconsistencies in check-in times are a red flag in timecard data. For example, if an employee's arrival times fluctuate wildly from day to day without explanation, it might indicate potential time fraud. Monitoring these patterns through your time and attendance system can help identify irregularities and prompt further investigation.

Frequent adjustments to logged hours: Regular modifications to logged hours in employee time sheets can signal misuse. If an employee consistently changes their recorded work hours after the fact, especially if these adjustments always increase the number of hours worked, it's worth examining these changes more closely.

Unusual employee activity around timekeeping systems: Pay attention to odd behaviors around timekeeping systems. For instance, if an employee spends an unusual amount of time at the time clock or seems to be tampering with it, this could indicate an attempt to manipulate time records.

Inconsistencies in employee work output and time logs: Discrepancies between an employee's reported hours and his or her actual work output can be telling. If the amount of work completed doesn't align with the hours logged, this mismatch may suggest time fraud.

Unexplained overtime or shortened breaks: Unexplained or frequent claims of overtime or consistently shortened break times logged on time sheets should be scrutinized. These could be attempts to increase pay unjustifiably.

Discrepancies between reported hours and actual work: Significant differences between the hours an employee reports and the hours they are actually seen working can indicate time fraud. Regularly comparing reported hours with actual presence or work output is crucial in detecting this type of fraud.

Steps to Address Suspected Employee Time Theft

Step 1: Avoid Jumping to Conclusions

It's crucial not to accuse an employee of time theft based solely on rumors or intuition. Before taking any action, thoroughly investigate the situation to gather concrete evidence. This approach ensures fairness and accuracy in addressing potential timecard discrepancies. Proceeding without bias and with a focus on fact-finding is essential in maintaining a just and respectful workplace environment.

Step 2: Review Your Company's Time Theft Policies

Before proceeding, revisit your company's policies on time theft and fraud. Understanding what constitutes a policy violation is key. This step helps determine the appropriate response and potential consequences for the employee.

Step 3: Collect Evidence of Potential Time Fraud

Now, it's time to gather tangible evidence of the suspected time fraud. Review time sheets for discrepancies, analyze surveillance footage, if available, and collect accounts from witnesses or colleagues. Document every piece of evidence meticulously.

Also, maintain detailed records of your investigation process, including any interviews conducted. Store all collected evidence securely and create written reports of each investigative step. These comprehensive records are crucial not only for making informed decisions but also for providing a clear trail of evidence if legal action becomes necessary or if the situation escalates.

Step 4: Schedule a Meeting with the Employee

Once you have substantial evidence, arrange a private meeting with the employee involved. Follow your company's established protocols for such discussions, ensuring that all necessary parties, like HR or union representatives, are present.

During the meeting, present your findings clearly and allow the employee the opportunity to share his or her perspective. It's crucial to consider any possible extenuating circumstances that might be revealed. Throughout this conversation, document the exchanges thoroughly.

Step 5: Follow Established Company Procedures

After the meeting, it's crucial to follow your company's established procedures for handling employee misconduct. This might involve coordinating with HR, consulting with executive leaders, or even involving your legal department. Adhering to these procedures ensures any disciplinary actions taken are fair, consistent, and legally compliant.

Step 6: Decide on Appropriate Actions

After reviewing the evidence and hearing the employee's side, decide on a course of action in line with your company's policies. The disciplinary measures could range from a verbal warning to termination, depending on the seriousness of the time fraud. Communicate your decision to the employee clearly and with respect, preferably in a face-to-face meeting, and provide him or her with a written summary of the outcome.

If the individual's employment continues, reiterate your company's stance on time theft, outlining expected behavior and potential repercussions for future violations. This step is crucial in ensuring the employee understands the seriousness of the situation and the expectations moving forward.

Preventing Time Sheet Fraud in the Workplace

Preventing time sheet fraud is vital for maintaining a fair and productive workplace. Here are strategies to help safeguard your business:

Monitor time sheets: Keep a close eye on employee time sheets. Regular monitoring can quickly identify discrepancies or patterns of fraud.

Use time-tracking software: Utilize digital time tracking systems. These systems offer more accuracy and less opportunity for manual manipulation compared to traditional time sheets.

Flexible work schedules: Offering flexibility can reduce the temptation to commit time fraud. When employees have more control over their schedules, they are less likely to feel the need to falsify their hours.

Prohibit unapproved overtime: Make sure employees know that all overtime must be preapproved. This policy helps prevent unauthorized extra hours from being added to time sheets.

Address even minor fraud cases: Don't overlook small discrepancies. Addressing even minor cases can deter more significant fraud.

Educate your employees on the risks of time sheet fraud: Regularly inform your staff about the seriousness of time sheet fraud and its impact on the company and their colleagues. Awareness can be a powerful deterrent.



If you catch an employee falsifying timecards, address the issue promptly. First, gather evidence of the misconduct. Then, have a private meeting with the employee to discuss the situation, allowing the individual an opportunity to explain what happened. Depending on the severity and your company's policies, disciplinary actions may range from a warning to termination.


Yes, you can fire an employee for time theft. It's a serious offense that can justify termination. However, it's important to follow your company's disciplinary procedures and ensure you have solid evidence of the time theft before taking such a drastic step.

Yes, timecard fraud is illegal. It involves deliberately falsifying work hours, which is considered a form of theft or fraud. This dishonesty can lead to legal consequences for the employee involved.

No, timecard fraud itself is not specifically listed as a federal crime in the U.S. There is no single federal law against it. However, it can still have serious consequences depending on the situation.


Timecard fraud within a company is typically reported to the human resources department or a direct supervisor.

OnTheClock Employee Time Tracking

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OnTheClock Team

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a thought From Jerry Newman on 3/22/2022 ...
I worked for a school district in washington state and I was in a union. The district accused me of time card fraud and said they have me on camera leaving work early many times. I was told they would put me on suspension and go back on the cameras every month since i started or if I quit and sign a paper stating I am quitting they will not prosecute and not as for the money back. Is that legal?? can they do this thank you.
reply from OTC - Hi Jerry. We're sorry to hear about your situation. We are not legal experts, but an employer is required to pay an employee for the time they worked. Other than this, we cannot provide legal advice as we don't have the authority to do so. We recommend reaching out to a legal expert for advice. We hope this helps.
a thought From Geoffrey Elder on 2/17/2021 ...
But what about employers not paying for time worked? Every website I've found goes on and on about employees committing fraud, but my employer is shaving hours off my time card and I have the evidence (video) of it happening.
reply from OTC - Hi Geoffrey, employers are required to pay employees for hours they worked. This is the law! We are not legal experts, so we cannot provide legal advice, but we do know employers must pay employees for hours they work. We hope this helps.
a thought From Lora on 9/4/2020 ...
What if my manager asked me to fix my missed punches because they were lazy? As the assistant manager, my 30 minute lunches were always interrupted when the other manager was not working and most times even when they were working and I would miss my in lunch punch. My manager warned me not to get No/OT hours for not taking a full 30 minutes and would encourage an electronic punch and suggest I not work the extra time after that was interrupted. For example, knowing I was on lunch they would talk to me during my lunch for 10 minutes and tell me to clock in on time but have me sit and enjoy an extra 10 minutes on paid time. After HR did an audit on our time cards they found too many edits. As an assistant manager, I was never told not to alter my own punches, nor was I trained on how to do payroll or understand the laws. I also had access to my own time card so it was confusing when I was ultimately terminated for this. I explained what happened but was ignored and asked to submit proof (texts) to help start a separate investigation on my manager.
reply from OTC - Hello Lora, we are sorry to hear about your situation. Thank you for sharing your story with us. In the future it may be wise to have additional documentation of your breaks and hours worked. You can always use our time clock system as a means to track your hours worked and breaks. Have a great day and thanks again for commenting on our employee time clock blog.
a thought From Tina Jenkins on 8/18/2020 ...
What if an employer is fixing hours so they don't have to pay overtime?
reply from OTC - Hello Tina, thank you for the question. Let us start off with saying we are not attorneys or legal experts. With that being said, it is illegal for an employer to change employee hours worked in order to avoid paying overtime. Please reference our blog Does an Employer Have to Pay if an Employee Forgets to Clock In/Out. This will provide additional information. We recommend speaking to your local Licensing and Regulatory Affairs department for further guidance. We hope this information is helpful.
a thought From Ren on 2/24/2020 ...
We have an employee that is constantly altering his punch in times to reflect that he came in 2 hours or more earlier than he actually did (1-2 times a week). It's very blatant to the point that it is predictable when it will happen. In addition to this, he also takes 2 hour long lunches and we only deduct for the allotted half hour. We have since installed a camera but he continues. I do the payroll and when I notice he does not clock in when he walks in, I have begun doing it for him so he can't lie later when I do payroll. We are a very small business and it hurts us (financially) when money is being stolen, is there anything we can do that will protect us as the employer just trying to keep him honest?
reply from OTC - Hell Ren and thank you for reaching out. Our recommendation for your situation is to implement a time tracking solution like OnTheClock that allows GPS and location control. This will provide you with the ability to prevent time punching from a location other than what is assigned for your employees. Also, an employer must pay hourly employees for the time they work - it's that simple. If an employee is logging hours that he or she did not work, then employers are not obligated to pay for that time. Our modern time clock also prevents time card editing. This prevents employees from making any changes to their time cards and reflects their actual punch in/out times. If an employee is stealing time from you, they are considered a thief. You have to ask yourself if this is someone you want working for the company. With this being said, we are not legal experts and we recommend consulting with an attorney to learn your options. We hope this information has been helpful.
a thought From Kody on 2/21/2020 ...
If an employee related to the manager is stealing time from an owner that seems to want to look the other way is there really anything legally that can be done or is it just unfair? I am finishing out my two weeks anyways but truth be told I would love to find a way to take down this deceptive duo. This employee is allowed to clock in and then go home for the rest of the day while the rest pick up the slack. After bringing it up once this employees time card was taken away and hidden so it could not be checked. It just seems to be a small case of discrimination. Why cant everyone do that to be fair?
reply from OTC - Hello Kody. It seems like the company owner is okay with this situation based on your information. It is our opinion there is nothing much you can do other than express your feelings in a positive and professional manner to HR or the company owner. Sorry we are not able to provide further advice.
a thought From Dylan on 2/3/2020 ...
What if I accidentally messed up my timesheet and put in hours that I worked when I didn't? And then got approved and am getting paid for them before they could fix my timesheet.
reply from OTC - Hi Dylan. Thanks for the question. We recommend taking the honest route. By you bringing up this error to your supervisor, it could prevent possible issues down the road. We hope this helps.
a thought From Marvus on 12/2/2019 ...
What happen if the person changes hours on time card but he works for temp agency??
reply from OTC - Hi Marvus, thank you for reaching out. It does not matter if an employee works for a temp agency or is directly hired, their time card should never be altered to reflect hours in which that employee did not work. This could come with heavy consequences including termination. We recommend all employees to be honest with their hours worked and to sign up with an employee time clock system like ours to start accurately tracking time. We hope this helps.
a thought From Heather on 11/11/2019 ...
What if its the manager them selves and it was reported and nothing was done .
reply from OTC - Hi Heather, thank you for reaching out to our time clock company. We would recommend bringing this topic up to your HR department. Unfortunately there are times when individuals abuse the power they are given. We hope this is helpful as this is the only advice that we are specialized to give. Have a great day.
a thought From Kay on 6/28/2019 ...
What if I as a salary employee is being a victim of another employee or person with payroll access reporting clocked in and out times for a full time position and hours, and being accused and terminated for consistent no call no shows?
reply from OTC - Hi Kay, thanks for reaching out. In this particular instance, we always recommend that you speak with your HR department. Provide facts and evidence if possible while explaining your situation. We are strong believers that Human Resources is their to help the employees, not the other way around. We hope this helps and have a great day!
a thought From Bird on 4/18/2019 ...
There’s an employee that takes an hour lunch does not punch out. Comes back after an hour clocks out for 30min and clocks back in. There are no cameras and everything is done on our computers with hardly any monitoring. How do I report them?
reply from OTC - Thank you for the comment. Unfortunately time theft is a very serious issue and costs U.S. employers more than $400 billion in lost productivity every year. If you have an HR Department that you feel comfortable speaking with regarding this situation then it would be a good idea to explain your feelings to them. Recommending a better time clock system that has GPS and Geo-fencing features is a great idea as well. Here is an article you can read and also recommend your management department or HR department to read: This will give some additional information on how to handle this situation. We hope this helps :)

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