Small Business Startup News

Less Than One In Five Businesses Report Incidents Of Employee Theft

Written by Tim Morral
Published: 2/28/2014

Fox Business reports on the reasons why employers are hesitant to report incidents of employee theft to the police, despite a significant financial cost to the business.

Employee theft is a serious concern for small businesses. In addition to the financial costs (which are substantial), instances of internal theft threaten employee morale and create chaos in the workplace.

Most Retail Theft Goes Unreported

While store-based businesses are heavily invested in dealing with retail employees who steal, all businesses--regardless of whether they are located in retail or other sectors--are potential targets for employee theft.

But Fox Business recently reported that the majority of employers don't report incidents of employee theft to the police. Instead, small business employers typically opt to handle theft in-house by simply terminating the employee and taking other actions that shield the company from public scrutiny.

Based on a study by University of Cincinnati criminal justice doctoral student, Jay Kennedy, the report showed that although 64 percent of small businesses have experienced incidents, just 16 percent of the employers affected by employee theft reported those incidents to the police.

What makes the lack of reporting even more surprising is the financial costs employers have experienced due to employee theft. With more than 40 percent of incidents involving the theft of cash, cash thefts ranged from $5 to $2 million. The average cash theft totaled $20,000 per incident.

"It's important to look at this topic because such theft represents a loss to the tax base and would also seem to put such businesses at risk, and so, put our overall economy at risk," said Kennedy.

The top reasons why employers elected not to report theft authorities included:

  • Lack of Real Victims -- Employers often see employee theft as a victimless crime that doesn't warrant time and attention beyond terminating the offending employee.
  • Attorney Counsel -- In many cases, the employer's lawyer advised against prosecuting the theft, since the time and cost of prosecution usually outweighs the benefit.
  • Emotional Connections -- Legally prosecuting an employee that has been part of a small business for an extended period of time isn't easy, and many employers are hesitant to prosecute due to emotional ties.
  • View of the Legal System -- Employers sometimes see the justice system as ineffective, incompetent and incapable of successfully resolving complex financial crimes.

Only 20 percent of employees who stole from their employers were managers or supervisors. The majority (60%) were front line or general employees. Surprisingly, a mere 2% of cashiers were likely to steal cash from the company till.

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