Employee Theft

The annual amount stolen from businesses by their employees is astounding. According to some reports the average amount of stolen goods by employees is around $175,000 and more than half of those crimes are committed by males. Small businesses are the hardest hit by these crimes, as profits trickled and they are left looking at losses they cannot afford to have.

Employee theft rarely reported by small business owners, poll suggests

More than half of small business owners in the country have experienced theft performed by one of their own workers. However, whether out of compassion for the wrongdoer or feeling the misconduct not being serious enough to alert the proper authorities, few wind up reporting the crime, according to a newly released survey.

Jay Kennedy, a recent MBA graduate from the University of Cincinnati’s Carl H. Linder College of Business, queried approximately 315 small business owners in Ohio’s third-largest city, asking entrepreneurs if they’d ever had someone working for them that stole money. Nearly 66% of respondents said that they had. However, when asked if they reported the crime, only 16% said that this was something they did to settle the matter.

“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. “After all, small businesses with 100 or fewer employees comprise 97% of all businesses in the United States.”

Approximately one-third of all bankruptcies that occur among small businesses stem from employee theft, according to the U.S. Chamber of Commerce, the report noted.

Understanding Why Employees Steal … And How to Stop It

Employee theft is a particularly big problem for small businesses.

Many small businesses have a serious problem on their hands: employees with sticky fingers.

A recent study by University of Cincinnati doctoral student Jay Kennedy revealed that 64 percent of small businesses have lost items to employee theft. Overall, the stolen goods ranged from cash to products sold by the business to tools and equipment.

Business News Daily recently reported on Kennedy’s findings, which highlighted that most employee thefts go unreported to police. Here, we follow up with Kennedy in an email interview to learn more about employee theft and why small businesses are susceptible to it.

Why do you think employee theft is so prevalent in small businesses?

I think it is a matter of opportunity. Small businesses have fewer employees, and these employees may have a wide range of responsibilities within the business. With this responsibility comes knowledge of oversight mechanisms in place at the business, as well as knowledge of suitable targets for theft. An employee who becomes motivated to engage in theft has access, knowledge of guardianship mechanisms and knowledge of the target that allow them to be more successful in their crimes than non-employee offenders would be.

Employee Theft: Why Most Small Businesses Don’t Report It

Most small business owners don’t get the police involved when they catch an employee stealing from them, new research finds.

While 64 percent of small businesses have experienced employee theft, only 16 percent of those reported the incident to police, the study found.

“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 study author Jay Kennedy, a University of Cincinnati criminal justice doctoral student.

Kennedy found four main reasons why employers are hesitant to get the authorities involved.

• No real victims: The business owner does not see the victimization as serious enough to warrant his or her time and trouble beyond firing the employee.
• Attorney advises against it: The business owner seeks counsel from a third party, usually his or her attorney, who often advises that the employer’s costs in time and effort for a successful prosecution outweigh any likely benefits to the employer. For instance, one company went through all the time and steps for a successful prosecution of an employee who stole $200,000. “The employee was convicted, put on probation and ordered to make restitution at the rate of $50 per month,” Kennedy said. “In essence, the small business will never recoup the stolen funds.”