What Is Timesheet Fraud and How To Prevent It?

As a company, if you are still relying on paper timesheets on spreadsheets to manage employees’ time and attendance, you are opening yourself to timesheet fraud. When a business manages employees’ time manually, it is prone to inefficiencies, inaccuracies, and non-compliance with working time provisions. It is not uncommon for such businesses to have timesheet fraud problems. Companies lose not only vast sums but also productivity due to such activities. An apt example of how severe timesheet fraud consequences can be is Saba software. The company was charged with timesheet fraud crimes, and SEC directed it to pay $1.7million in fines.

In this article, we will detail everything about timesheet fraud that you must be aware of. We will discuss ways to increase management controls and how to eradicate deliberate forgery.

What is timesheet fraud?

Timesheet fraud is when employees at organizations that allow them to enter information regarding attendance into timesheets intentionally manipulate the data. Most of these businesses have a culture of employees recording the clock in and clock out time manually. The HR managers confirm these records for their validity later on. However, this opens an opportunity for some employees to manipulate the information in the timesheets by exaggerating the data.

Merely rounding up the attendance time to the next hour is a case of fraud. Such timesheet fraud cases might not look too alarming, but when these extra minutes are compounded, they buildup into hours or even days. It is the responsibility of HR managers to ensure that all workers put in accurate attendance information in timesheets. Inaccuracies in attendance data can cost your business much money without you even realizing its impact.

It will help if you familiarise yourself with what timesheet fraud is to ensure that no such activity occurs in your organization.

Is falsifying a timesheet a crime?

Yes, there are legal provisions against timesheet fraud, which can lead to job loss or legal proceedings against the offenders. Companies can terminate the employment contract or file civil liability and criminal charges against employee padding hours.

Companies must communicate the timesheet fraud consequences to the employees and mention them in their employee contracts. In some cases, employees getting paid for the hours they have not worked can be trialled as guilty of theft. In some countries, time theft by the employees is taken as defrauding.

Companies have the right to press charges against workers who commit timesheet fraud or indulge in time theft activities. However, this approach can be expensive. A much more suitable option is to terminate the employment contract.

What is the most common type of timesheet fraud?

For HR managers, it is crucial to understand what constitutes a timesheet fraud. Sometimes employees can commit such frauds out of carelessness accidentally. When you know the different types of timesheet frauds, you can take the appropriate action. Here are some most common types of time fraud:

1. Exaggerating work hours

The most common type of time fraud in companies that use hard copy timesheets is inflation of work hours. Employees can intentionally record incorrect arrival and leaving times.

2. Human error causing inaccuracies

HR managers can commit mistakes when the data from manual timesheets are migrated to the payroll software. Here the intention is not to save time theft, but due to inaccurate attendance records, problems arise. Such inaccuracies increase with the number of times the data has to be copied or added manually. An easy solution to get rid of it is to use an automatic attendance system like Truein that easily integrates with the payroll software.

3. Buddy Punching

When companies rely on outdated card punching attendance systems, they are prone to the practice of buddy punching. Here an employee puts in false arrival and leaving time on behalf of a colleague. Buddy punching is one of the most common types of timesheet fraud.

4. Long breaks

Some employees can exploit the lunch breaks by taking longer time breaks than the allotted one. This practice can significantly affect the productivity within a team and the work culture of other employees who might be affected by such behaviour. Even unauthorized breaks during work hours are time theft. Many employees are often seen doing their personal work and lengthening their lunch/tea breaks.

5. Favouritism

Unlike other types of time fraud, this is committed by managers and supervisors who tend to favour an employee over others. Favouritism is when managers or supervisors overlook absenteeism, lateness, or long breaks off an employee they like or share personal interests with.

How to prevent timesheet fraud?

There are several ways to curb the menace of timesheet fraud. The right solution depends on what type of fraud the organization faces.

Check and approve the timesheet regularly

If your company cannot get rid of manual submission of timesheets, you can instil strict policies around timesheet management. Ask managers and supervisors to check and approve the timesheet regularly. Clearly define strict actions against the employees who will indulge in time theft activities.

Such steps will encourage workers to record the accurate time promptly. Also, ensure that workers submit their timesheets without delay because the more time they take, the more prone they will be to commit mistakes.

You are responsible for ensuring that shift schedules and workloads are optimized, so workers do not feel unnecessary pressure. If the timelines are unrealistic and shift schedules are too overbearing, workers might be forced to commit buddy punching. Review the shift schedule with employees to make it easy for them.

Install CCTV cameras to monitor employee activity

It is advisable to install CCTV cameras to monitor employee activity on the floor. This will help in managing problems like long breaks and buddy punching.

Switch to automated attendance systems

Adopting automated attendance systems can eliminate inaccuracies in attendance recording and curb activities such as buddy punching. While biometric attendance systems are standard, their performance and accuracy are not as efficient as modern AI-powered face recognition attendance systems like Truein.

Truein is a highly effective solution to prevent timesheet fraud as it uses facial recognition technology to mark attendance. There is no scope for exploiting the attendance system by clocking in inappropriately.

Moreover, it eliminates the need to manually manage timesheets as it integrates with some of the most popular payroll systems. The employee attendance data is directly imported into the payroll software. It saves a lot of time for HR managers and reduces overhead expenses by promptly providing accurate labour data for the payroll calculation. It has robust scheduling, reporting, and leave management features that help companies manage business operations effectively, thus increasing their productivity.

Conclusion

Timesheet fraud can be a significant productivity issue and affect revenue if left unchecked. It is the responsibility of HR managers to prevent time fraud cases. If your company doesn’t have strict attendance policies or if there is a communication gap between managers and workers, it is essential to bridge the gap and clearly state the consequences of indulging in timesheet fraud activities. Thus, companies must take all the precautions necessary to prevent timesheet fraud before taking legal action against employees. We hope this guide will help.

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4 Different Types Of Time Theft and 5 Ways To Prevent It?

A successful business is built on many pillars, but most important of all is a reliable workforce. If you can trust your employees with respecting the rules at the workplace, it becomes easier to focus on other aspects of business growth. However, time theft can be a real nuisance if not dealt with.

According to several studies, time theft is one of the biggest reasons for the loss in business. A study estimates that most U.S. companies lose 20% of every dollar earned because of employee time theft.

The most widely implemented scrutiny method to prevent employees from stealing business property is installing CCTV cameras on the premises. However, this doesn’t work when employees are doctoring timesheets or punching in for a colleague.

You will be surprised to know that 30% of business failures are caused by some sort of employee theft or embezzlement. While one may argue that time theft is not the same as the removal of physical property, it nonetheless results in losses as it escalates labour costs and also wastes financial resources.

If you are struggling with the same issue and want to put an end to employee time theft, it is recommended that you start by recognizing how time theft can take place.

4 Different Types of Time Theft

Simply put, time theft is when employees are not working for the hours they are paid for. Although, once in a while it is acceptable, if it is a regular practice, it amounts to time theft. According to a study, an average employee steals 4.5 hours a week from their employer, that’s a total of 6 work weeks every year.

The most common ways in which employees do time theft are:

1. Buddy Punching

Buddy punching is when an employee punches into the time clock for a colleague if they are running late or leave early. It is the easiest way to trick the attendance system into thinking that the employee worked for the full day. As per an American Payroll Association study, more than 75% of companies lose money due to the practice of buddy punching.

2. Extended Breaks

Arguably, most innocent-looking time theft is when employees take too long breaks. While it is known that taking regular breaks keeps the productivity high in employees, but it must be closely monitored. Turning a 60-minute lunch break into a 75-minute break or extending 15-minute breaks by adding 5 minutes extra might not seem too drastic but when done consistently, the minutes add up pretty quickly.

For instance, smoke breaks have proved to be costly for companies. A study found that an average smoker takes roughly 6 days of smoke breaks a year, and this is only an average figure. For some industries, it adds up to 20 days a year.

3. Time Clock Theft

Time clock theft is when an employee manipulates or lies about the time they work for. Often, employees do not do it with the wrong intention and round up their hours to make it easier for payroll to calculate the work hours, however a few minutes every day start to add up over weeks or a month.

But some employees purposefully commit time theft. They can do it by simply asking their work buddy to clock in for them regularly. Others might intentionally not clock in and then lie about it later on. Another tricky practice is to clock in before they start working on the floor. Employees might enter the building, but they aren’t working when they should be.

4. Excessive personal time

Working hours are more productive when employees do not feel bound or restrictive. This is why it is a positive perk to allow employees to take a personal call or reply to a personal email when emergencies happen. However, when an employee starts to abuse the system and consistently takes excessive personal time it moves into the time theft category.

The most common instance of excessive personal time is when an employee runs their own business while at work. It can be anything, replying to customer emails or reaching out to them on social media platforms.

How to prevent time theft

Now that you are aware of how time theft is usually committed by employees and how disastrous it can be for your business, it is time to nip the evil in the bud.

1. Revise or Establish Time Theft Policies

Do you have clear time theft policies in place? If you do, when was the last time you reviewed the policies?

The time theft policies must be strategically framed such that your employees do not feel any unnecessary compulsion. Be aware of what you are asking of your employees. Make sure the policies are relevant and understandable. It is also important to adhere to employment standards in time theft policies.

Time theft policies that are too restrictive will make your employees feel unfair and ultimately result in a low rate of compliance. Implementing time theft policies that are employee-friendly can make a huge difference in your company’s morale.

2. Use tech to enhance accountability

Punch clocks and manual attendance registers are not going to make an impact and resolve the issue of time theft. You need to upgrade to more reliable attendance solutions like biometric systems. The fingerprint attendance system is the most commonly used biometric system that has replaced card swiping methods. However, in recent years, the pandemic has highlighted the need for systems that minimize human contact. Facial recognition attendance systems provide a solution to this issue. 

Attendance systems like Truein work on AI algorithms that allow employees to use their smartphones to clock in with face recognition.

3. Develop employee morale

When you increase employee morale their engagement and productivity increase simultaneously. It also makes employees more loyal to the organization. Often employee productivity decreases when workers see other employees getting away with time theft. Implementing time theft policies and using advanced attendance systems will curb such getaways, but what about those who are honest with their work hours?

Rewarding and recognizing such employees will encourage employee morale. Furthermore, you must try to create an environment of transparency, honesty, and trust. This will prevent time theft.

4. Be realistic with expectations of your staff

There lies a big difference between encouraging your workers to boost productivity and overworking them. Ensure that you are setting up realistic goals to be achieved by employees including managers.

If you set up unrealistic expectations that lead to break time getting cut or over time, your employees will start looking for ways to compensate for lost time. This is something you will not want. Be open about your expectations with your employees and communicate what is permitted during work hours and whatnot.

5. Make attendance system easy

No employee wants to manually put in work time or manage attendance sheets. You should work on making attendance systems less tedious. Smart attendance systems like Truein streamline the overall process and also reduce the cost incurred in hiring the human resource to manage attendance records.

FAQs About Employee Time Theft

Is employee time theft illegal?

While no legal policies are governing how the instances of time thefts must be dealt with, but companies have their policies. In some cases, time theft makes for the grounds for suspending an employee.

Is time theft common?

Yes. According to a study, 75% of employees do time theft at least once.

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What Is Buddy Punching and How To Prevent It?

Like most businesses, you also want your employees to be cordial and look out for one another.

What to do when some employees start exploiting this relationship and start punching each other in and out at work? This is known as buddy punching or buddy clocking where some employees may illegally punch in for other employees.

As a business owner, It isn't a pleasant experience to realize your employees are committing time theft, it creates a culture of dishonesty, and you can end up paying for work that was never done.

In the United States alone, it is estimated that time theft is costing businesses $50 billion annually. 

What is buddy punching?

Simply put, buddy punching is when one employee clocks in for another employee and does attendance punching on their behalf. This is a common occurrence in instances like when an employee is running late and asks a colleague to clock in for them to avoid notice or detection by the floor manager or supervisor.

According to a 2017 Pollfish survey involving 1,000 employees, 16% admitted to buddy punching. Furthermore, the study also found that the most common mistake committed while submitting timesheets is employees adding an extra 15 minutes to their clock time.

This might not seem like a challenge, but when you put things into perspective you realize the deeper consequence this can have on the annual payroll bill.

The latest U.S. Bureau of Labor Statistics data indicates that there are more than 78 million hourly workers currently. If we assume that 16% of them participated in buddy punching and added 15 minutes to a co-worker’s timesheet, this will end up adding more than $373 million to the employers’ annual payroll bill.

In some extreme cases, some employees use buddy punching to take entire days off work without getting caught or accrue extra overtime. This not only tricks employers into paying for large chunks of time employees have not worked for, but is also detrimental to the morale of an honest workforce.

Whether you are a large enterprise or a small business with tight margins, buddy punching is time theft and dishonesty that must be dealt with.

Negative Effects of Buddy Punching: More than just extra business cost

The cost implication is not only the negative impact buddy punching has in the workplace, there are many more. If you are not able to prevent buddy punching it can correlate with the following problems in your workplace.

Rise in buddy punching culture

When new team members witness seasoned employees participating in time theft, they think of it as a norm. Especially, if there is no feedback around buddy punching, employees will feel it acceptable to continue to do so. This will also result in slacking on their responsibilities.

Low morale for high performing staff

Employee absenteeism due to buddy punching puts pressure on the rest of the workforce as they need to pick up the slack and do extra work. This is outright unfair for honest employees who exhibit strong performance. They are compensated the same amount for all the extra work. Lack of equal treatment and fairness is one of the major reasons for employee turnover in the workplace.

How to prevent buddy punching at work

1. Have a strict zero-tolerance policy

The most effective way to eliminate buddy punching is to address it head-on without showing any leniency. Putting a formal buddy punching policy in place will ensure your employees are aware of the consequences they can face. Having a clear zero-tolerance policy will also let the new employees know of the stance the company has against time theft.

If you do not have a zero-tolerance policy already in place, work on one, print it out and put it where all staff can see it. A formal buddy punching policy also gives grounds for termination.

2. Install CCTV

A seemingly simple solution to prevent budding punching is to record who is clocking in. Installing CCTV cameras at the right places, you can verify whether the employee was present at the time and place when they were clocked in or clocked out.

While this solution seems simple, it has its shortfalls. Primarily monitoring CCTV footage is a time-consuming task. It is a full-time task to figure out who is where and at what time. Also, the cameras and other equipment require frequent maintenance. As all the components are serialized, even if one breaks down everything can stop working.

3. Update legacy attendance systems with modern attendance systems

While card punching systems are a norm, they do leave a lot of scope for time theft. Biometric attendance systems offer an excellent improvement. As it requires thumbprints, face recognition or retinal scans to clock in an employee, it is a failsafe mechanism to ensure that the right employee is clocking in.

With biometric clocks employees were able to limit time theft to only 3% of the employees of the total who were buddy punching previously.

Face recognition attendance systems make time theft virtually impossible and can keep employees from abusing the timekeeping system. To better adapt to the needs of a contact-free work environment in the post-pandemic era there are touchless face recognition based employee attendance systems available like the one offered by Truein.

4. GPS Tracking

In workplaces where employees roam over a larger area, preventing buddy punching can be challenging as managers need more resources to track employees. An easy solution is to use timekeeping software and mobile GPS. Such systems can track an employee’s location as well as their hours. Timekeeping solutions with inbuilt GPS tracking and/or geofencing are available, which allow an employee to clock in only when they are within a certain radius of the business.

GPS tracking employees for timekeeping is not expensive as GPS can be activated on their smartphones.

5. Geofencing

A more restricted and arguably the most effective way to manage employees and avoid buddy punching is geofencing. As geofencing relies on GPS, WiFi and cellular data, it can create an invisible barrier within which a person can clock in.

You can decide at what distance you want your employees to be able to clock in, be in the parking lot or the front door. Once this digital barrier is set, employees can mark attendance only when they are inside. You can enable automatic punching for employees when they are within a certain distance or allow manual clock in through an app. With geofencing, employees cannot clock in when they are away from work, or can’t be buddy punched by any other employee.

6. Try Truein Solutions

A company focused on providing seamless staff attendance, Truein leverages the advancements in Artificial Intelligence technologies to prevent the menace of buddy punching. Their touchless face recognition based employee attendance system enables employees to clock in using their phones or tablets. There is no complicated hardware needed to implement their attendance system. Truein's attendance system also offers selfie-based geofencingleave management and automated reports.

Here is a case study on how we solved the buddy punching issue in real estate industry.

Conclusion

Largely buddy punching is a side effect of more pressing attendance issues, rather than being the problem itself. You must take a closer look at your attendance policy to ensure that it is fair towards employees and not too constrictive.

Still, buddy punching can be the Achilles’ heel for any business and must be prevented. Having an effective attendance solution that relies on modern technologies like AI, facial recognition and geofencing are recommended to prevent negative impacts on productivity and costs.

Frequently Asked Questions

Is Buddy Punching Illegal?

The legal policies governing how companies handle buddy punching vary by state and country. However, in most cases, time theft through buddy punching does constitute fraud and can be ample grounds for termination without warning.

How should you tackle/deal with employees who have been caught buddy punching?

Most employees practising buddy punching are found to have a sense of entitlement. Rather than terminating their employment, you must issue a warning notice. Also, establish clear communication feedback where managers can explain the consequences of buddy punching to their teams.

What industries can most benefit from the prevention of buddy punching?

Retail, construction, hospitality and information technology witness buddy punching more than any other industry.

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How To Resolve Buddy Punching Issues At Construction Sites

Construction industry uses large scale manpower and has a unique challenge of dealing with the ever-changing contract staff attendance. We’ve helped construction companies get over their biggest bane with a practical solution, especially designed for them. 

The current attendance scenario in the construction industry

Construction companies would agree that there are no fixed sites. New sites come up and old ones close down all too often. It is not practical to install machines to track attendance. Manual attendance by the security guard is the most common practice. The result?

Buddy punching:

Who is signing attendance for whom? Nobody would ever know. The actual site may have ten people, but the company may be paying for twelve. Small leakages like these in the contract labour attendance system can result in big cheques and losses eventually. 

It can also have legal and security implications too as there is no real way of knowing who you are employing. 

Manual errors:

Even in a perfect world where everyone is honest and truthful at attendance time, there is scope for mistakes. There can be date errors or spelling errors. Contract labour may not be educated enough to realize it and it may go completely unnoticed. 

Reconciliation pain:

Manual attendance at the end of the day, week or month has to be converted into excels for payroll processing. It can be many days of unproductive work, further prone to errors. 

How can construction industry have better attendance monitoring?

Truein face attendance is one app with many solutions for the construction industry. Let’s break it down for simplicity.

Portability:

Your sites keep changing so you don’t have to invest in attendance infrastructure. Install any temporary stand to hold a tablet at the gate and let workers simply walk in using face attendance. Don’t have a closed gated site? Truein face attendance needs no hardware. It works on any Android or iOS mobile too. The security guard can be given a mobile to take face attendance of contract workers on site. 

No proxy:

What you see is what you get! A face recognition-based system cannot be fudged or overridden. Besides, Truein works in the most complex scenarios too:

  • Construction site has low-light or works in night shift? Our system works. 
  • Construction site is in a remote location with no internet? Truein works offline too. 

Truein works practically hundred percent of times so there is no scope for parallel systems like manual registers. 

Fast onboarding:

When you have contract staff that keeps changing every day, you cannot afford to have a slow or long onboarding system. How about a one-click system? The new joinee captures his face from the kiosk or mobile and his onboarding is completed. Every other detail like reporting manager, contractor agency, shift assignment etc. can be managed in our web dashboard later. 

Geo-fencing:

If you want to restrict the attendance of a worker to one site, you can do that using our technology. We allow you to fence the attendance by marking the GPS location. He can mark his attendance only within those geographical boundaries. 

All entries get stamped with location and time, so you have a verifiable audit trail at all times. 

Practically no-fuss, quick and accurate system is what we have to offer. 

What’s more? We have clients in the construction industry who have used our system for more than four years at multiple sites on a large scale. Tried and tested? You got it! 

Testimonial from a leading construction brand

Girish Nambalkar from SJ Contracts says, “Using a face attendance system at construction sites was a big challenge. Team Truein calmly understood our requirement and provided required customization too. Truein is an excellent solution. As of today, we are using Truein attendance system at our 22 sites. We found that Truein is more user-friendly and easier to use. The required reports ae also generated by the individual users irrespective of his location.”

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