Tackling theft and stock loss

Shoplifting is a regular occurrence at the store

Although the majority of staff are honest, it is nevertheless important to have policies in place to protect a business from the small percentage of employees that potentially are not. Caroline McEnery of the HR Suite outlines the key issues employers should be aware of in relation to staff theft and fraud.



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26 July 2016

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Caroline McEnery, managing director, The HR Suite

Caroline McEnery, managing director, The HR Suite

It is estimated that a typical organisation can lose up to 5% of its annual revenue through employee fraud. According to Retail Ireland, 39% of retailers have experienced theft of stock by employees. While the majority of staff are honest and really look out for the best interests of the business, we must put the procedures and policies in place for the percentage that are dishonest. However, it is also important to note that employee fraud or theft is not limited to stock alone. Theft can be in many forms, both direct and indirect, including:

  • Conducting fraudulent refunds and keeping the cash themselves
  • Non-documentation of sales whereby the money paid never makes it into the till
  • Credit card misuse, including stealing customers’ details or conducting fraudulent refunds
  • Not scanning goods when serving friends/ family members
  • Misuse of time clocks or timesheets to manipulate hours worked and paid
  • Use of company resources for personal gain
  • Abuse of the sick leave policy
  • Misuse of company property (e.g. company vehicles or company phone)
  • Time wasting when at work (e.g. surfing the web or taking personal calls)

Awareness is crucial

The most important tool that any organisation can have in relation to theft and stock loss is awareness. Even in the best run companies, employee theft can happen. The important thing is to ensure that it is discussed, anticipated and that an action plan can be swiftly put in place should the issue arise. Once an organisation is aware that employee theft is a distinct possibility, there are three main areas to focus on.

Firstly, are there policies in place that clearly outline the company’s expectations in relation to honesty? Has the company made it perfectly clear as to what is considered to be honest or dishonest behaviour? It cannot be stressed enough how important it is to ensure that all of this is included in a company handbook or policy document and that there is evidence to show that all staff have been made aware of these policies. By setting the standard from the outset, we can avoid any grey areas when it comes to dealing with issues of employee dishonesty.

An ‘honesty policy’ can be implemented and issued to all employees. The honesty policy should run in conjunction with the company disciplinary and grievance policy whereby any employee who is suspected of breaching the honesty policy will be subject to an investigation in order to establish the full facts of the case.

The honesty policy should clearly identify what expectations employees are expected to meet and what they should do if they feel that the policy has been breached by another stakeholder.

Other policies that can be implemented to reduce indirect theft of company resources include an IT policy, a social media policy, and policies in relation to company vehicles, laptops, phones etc.

These policies should be reviewed and reissued to staff regularly and displayed in open areas such as staff noticeboards and canteens.

Internal controls

Secondly, are there sufficient internal controls in place to minimise potential loss? Control measures need to be implemented in obvious areas such as cash handling, stock handling, till procedures etc, but it is also important to have control measures in place in areas such as invoicing, payments and payroll. Weak internal controls may provide an opportunity for staff to commit theft or fraud.

Thirdly, are your people trained to deal with suspicion of employee theft and stock loss? Are supervisors, managers and business owners trained on how to conduct an investigation into an alleged theft by an employee?

There are a number of items to take into consideration when conducting investigations and, as always, it is important that there are clear policies in place around these:

  • CCTV

If CCTV is being used as evidence in an investigation, are you compliant with data protection legislation? Do you have a CCTV policy in place that explicitly states that CCTV can be used in a disciplinary investigation?

  • Search

Do you have a ‘right to search’ policy in place?

  • Separation of process

Are there sufficient independent parties in your organisation to ensure that you can conduct an investigation meeting, an outcome meeting and an appeal meeting if necessary – all conducted by a different person?

The immediate action taken on discovery of an alleged employee theft can have an influence in the entire disciplinary process so it is advised that all senior staff be trained in how to deal with allegations of this nature, and on the potential implications of correct procedure not being followed.

The HR Suite provides training on disciplinary investigations and employment law. This training can be tailored to your organisation to ensure that you get the maximum benefit. The HR suite can also deliver training in relation to stock loss and honesty.

If in any doubt as to how to approach or deal with an allegation of employee theft, you should seek out professional advice. The HR Suite provides advice and support in these situations, as well as being available to act on your behalf to carry out an investigation.










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