How to deal with employee theft

Employee theft is one of those topics no employer wants to think about, but it’s something that can and does happen in organisations of all sizes. Whether it’s cash going missing, sensitive data being leaked, or staff quietly shaving time off their working hours, the impact can be damaging to both the company’s financials and trust in their team.

What are the different types of employee theft?

Theft in the workplace isn’t just limited to stolen cash from the till (although this is sometimes the case). It can take many other, less obvious forms. Employee theft can include:

Cash theft

This could be direct, like physically taking money or a petty cash box, or more subtle, such as creating fake invoices, processing false refunds, or falsifying performance data to trigger bonuses or commission payments.

Company property

Items such as tools, equipment, electronics, or even stock taken for personal use or resale.

Intellectual property

This includes designs, ideas, trade secrets, or creative work being stolen or shared with competitors.

Confidential data

This can include customer databases, pricing strategies, employee information, or other sensitive documents being taken.

Time theft

Not working during declared working hours, stretching out breaks, or falsely claiming overtime. This is often overlooked, but it’s still a form of theft and can add up to significant costs over time.

Red flags that could signal employee theft

While a single sign doesn’t necessarily mean theft is taking place, spotting patterns and acting on them early can make all the difference. Here are some of the most common red flags to be aware of:

Not taking holidays

Some employees avoid taking full weeks off because they’re worried their absence will expose irregularities. This is particularly telling when they only take the occasional day off but never seem to take a longer break away from work.

Suspiciously round figures

For example, an invoice for exactly £1,000 when that’s not the norm for your business could indicate fabrication and is worth taking a closer look at.

Significant changes in behaviour

An employee who was previously friendly and engaged might suddenly become withdrawn, secretive, or short-tempered. They may also start avoiding colleagues or working behind closed doors.

Noticeable lifestyle changes

Sudden spending sprees, expensive purchases, or new habits that don’t match a person’s known salary or financial situation could be a sign that money is coming from elsewhere.

Frequent discrepancies

Regular stock or cash shortfalls found during audits, or mismatches in financial records without explanation, can potentially point to ongoing theft.

Working late or at unusual times

Coming in when no one else is around or staying late repeatedly without a clear business reason could mean they’re trying to access areas or systems unnoticed.

Missing financial documents

Payroll records, invoices, or receipts that frequently go missing or can’t be located might suggest deliberate attempts to hide evidence.

Complaints from vendors or customers

For example, a supplier chasing an unpaid bill you thought had been settled, or a customer insisting they’ve paid when your records say otherwise. This could mean payments are being redirected or mishandled.

How to respond if you suspect theft is taking place

If you suspect an employee of theft, the way you handle it is critical. Get it wrong and you could damage your case or risk claims of unfair dismissal. Here’s how best to approach the situation:

Investigate thoroughly and discreetly

Keep initial enquiries low-key to prevent evidence being destroyed or altered. Speak to relevant people, check systems, and gather documents without alerting the suspected employee too soon.

Suspend with full pay if needed

If early findings suggest theft may have occurred, suspend the employee on full pay while you carry out a full investigation. This keeps them away from sensitive areas and systems while still being fair financially.

Restrict their access immediately

Once they are aware of the allegation, remove their ability to log into company systems, email accounts, or restricted areas. This reduces the risk of interference.

Be clear in your allegations

Don’t use vague wording before a disciplinary hearing. For example, saying “you’re being disciplined for suspected theft” is much clearer than “you’re being disciplined due to money going missing.” Ambiguity can undermine your position later.

Gather enough evidence for reasonable belief

You don’t need to prove guilt beyond reasonable doubt, as you would in a criminal case, but you must have a reasonable belief based on a reasonable investigation.

Follow your disciplinary process

Even if you believe the theft is obvious, skipping steps can make dismissal automatically unfair. “Instant dismissal” still requires a proper process.

Decide on police involvement

This depends on the seriousness of the theft. Be aware that involving the police may pause your internal investigation for a number of months while the police carry out theirs, which can lead to longer and more costly periods of suspension.

Consider legal action

For example, if data has been stolen, you could apply for a court order to stop it from being used or shared.

Preventing employee theft in the first place

The best way to deal with employee theft is to reduce the chance of it happening at all. As they say, prevention is better than cure. Strong systems and clear policies can make it harder to commit theft and easier to detect if it happens. Here are some of the ways you can prevent employee theft from happening in the first place:

Implement multi-person authority processes

Structure processes so no single person has full control over key areas, especially in finance. For example, payroll should be checked and approved by two different people.

Provide mandatory fraud prevention training

Providing training will help employees understand what counts as theft and know how to spot any suspicious activity.

Utilise secure IT systems

Use software that can automatically flag unusual behaviour, like large downloads or sensitive data being sent to personal email addresses.

Invest in biometric timekeeping tools

For example, having employees use fingerprint or facial recognition systems to clock in and out can prevent staff from covering for each other and, in turn, reduce the risk of time theft.

Consider stop and search policies

In environments where team members have access to valuable stock, consider random checks, but only where your policies and contracts make this clear to all employees.

Be clear with privacy notices

Similar to the above point, it’s important to be upfront with the fact that emails, browsing history, CCTV, lockers, bags, and anything else may be monitored or searched for investigation purposes.

Thorough background checks during the recruitment process

Before you take anyone on as an employee, be sure to gather several references and ask for more details if you come across any unexplained employment gaps on their CV – this will help you understand exactly who you’re hiring.

Offer anonymous reporting channels

Ensure you provide your employees with a confidential way to raise concerns, so they feel safe speaking up if they notice something wrong or any suspicious activity within the company.

Don’t deal with employee theft alone

Handling employee theft is never easy, but by spotting the signs early, following the right processes, and building prevention into your everyday operations, you can protect your business from both financial and reputational damage.

At Vero HR, we guide employers through sensitive workplace challenges – from investigations to disciplinary processes – ensuring you remain compliant while keeping your organisation safe. If you’d like tailored advice on handling or preventing employee theft, our team is on hand to help.

Get in touch with us today to chat with a member of the team and learn more.