The high cost of employee theft

HIgh cost of employe theft

It’s hard to imagine trusted employees might be stealing from your store, but a raft of statistics indicate that’s the case with the latest revealing employee theft could account for a quarter (24.37 per cent) of retail loss.

So how do you guard your store from a thief behind the counter?

Some sobering stats

In the past year alone Australian retailers have lost around AUD $3 billion to retail shrink, with employees contributing an estimated $750 million to that figure.

Compounding the problem is a prevalent mindset that employers are ripe for the taking with human resources firm iHR Australia noting statistics indicate 80 per cent employees have been involved or would consider stealing from their employers.

Meanwhile, the Australian Retailers Association explains: “Internal theft tends to be more sophisticated, has a greater financial impact per incident, and is more difficult to detect than external theft.”

The cost

The trouble with employee theft is the hit is often higher than everyday shoplifting, with the New York Times noting a global study found dishonest employees averaged USD$1890 in theft, compared with USD$438 for shoplifters.

But it’s not just the financial cost.Tower Systems explains employee theft takes a very real emotional toll as well.

“Often, the person caught stealing from a retail business is one of the most trusted employees. This is where the high emotional cost kicks in. It is not uncommon for them to be a long-term employee who has the trust and respect of the business owners.  Often, it has been a relative of the owner or at least someone treated as a relative or a member of the family.”

So why do employees steal?

While there are varied reasons that an employee may steal, the Australia Retailers Association cites three common themes.

  • Need: To support family or lifestyle
  • Revenge: Bitterness about their situation or anger toward management, often emotionally driven.
  • Thrills: The adrenaline rush brought on by the risk of getting caught (often there is no financial need to steal).

How employees steal

In many cases employee theft comes down to opportunity, meaning as much attention should be paid to internal security as to general shoplifting prevention strategies. Common methods that retailers report are:

Under ringing – In this scenario the cashier uses the Point of Sale to ring up an item at less than its listed price, collects the full amount and pockets the difference.

Product theft – This is just the straight theft of a product.

Skimming – An oldie, but still prevalent, skimming involves pocketing a small amount of money from the till in the hope it will go unnoticed or won’t matter when the till is counted at the close of day.

Sweet hearting – Sweet hearting can involve a series of strategies but sees employees fail to ring up or discount items for the benefit of friends.

Gift card theft – Typically difficult to detect, git card theft involves an employee issuing fake refunds for gift cards that they keep. It also involves handing a customer a blank gift card while they keep the loaded one.

Refunds – In this case the cashier rings up a false refund and keeps the cash.

Tackling employee theft

Like all areas of loss prevention, tackling employee theft requires a multi-faceted approach. It is part technology and part education, but it starts with the employees you choose.

Employee screening – Ensure all new employees are effectively vetted and screened by conducting interviews, checking them on the internet and contacting previous employers along with referees.

Clear policy – Create a clear policy regarding employee theft and fraud. Educate your staff as to the internal controls used to prevent theft and the disciplinary implications. A strategy that encourages anonymous reporting of theft assists with this, along with educating staff abut the signs and effects of theft.

The Point of Sale – The Point of Sale is where many cases of theft occur, so look to POS software which requires staff to log in with unique access codes so you can see who is at the register, when. Use reporting features to track gift card sales and examine all discounts and returns.

Use technology – There is a host of technology that allows greater visibility of staff and products. This includes smart locks like the Invue range that offer the convenience of a single type key which can be programmed to limit the access staff have to specific cabinets or their department. Importantly these keys can track which staff members access what cabinet, drawer or spider wrap and when they do it.

RFID allows the constant monitoring of products so management can understand what items are available at any point in time. This increases accuracy of stock monitoring which in the long run helps to reduce theft. When applied at the point of manufacture, RFID tags also offer an understanding of where exactly items are in the supply chain.

Meanwhile RF or AM tags and EAS ensure items can’t simply be pocketed.

Monitoring – Staff monitoring, whether via CCTV or supervision acts to deter employees from theft. Monitoring can also involve regular locker and bag checks or employing security staff to watch the entire store.

The environment – The culture and environment of a retail outlet plays a huge role in the deterrence of theft. Foster a positive working environment where employees are treated fairly and with respect and there will be fewer or no incidents of stealing out of revenge.