Employee crime: the cost and some control measures.

Employee crime has gained much attention in the media in the last few years. Is it occurring more or is it just being reported more? The answer seems to be both. United States business owners and managers have long recognized that employee crime is a huge problem. Unfortunately, its dimensions

According to Neil Snyder, a University of Virginia business professor and co-author of Reducing Employee Theft (Quorum Books), losses just from employee theft have reached an estimated $120 billion a year.(1) And this does not include other employee-related crimes such as fraudulent reporting of financial statements.

Kenneth Weiss, a security consultant based in Massachusetts, believes about 30% of American workers plan to steal from their employers, another 30% are normally good employees but may give in to temptation occasionally, and the remaining 40% are basically honest.(2) These figures seem to generally agree with some other estimates.

According to a National Retail Federation study released last year, employee theft made up approximately 38% of all "shrinkage." roughly the same percentage as shoplifting.(3)

FDIC investigators report that one-third of all bank failures in the late 1980's were primarily caused by internal fraud.(4)

Justice Department statistics show that federal convictions were obtained for 10.733 while-collar criminals in 1985, an 18% increase from 1980.(5)

With all of this reported dishonesty, it seems employers would be ready to raise the white flag and surrender. However, because of the recent recession, businesses are focusing on employee crime more than ever. A company generally can expect to lose 1% to 2% of its annual sales to crime, most of which is committed by insiders.(6) For a company the size of IBM, this amount can exceed $500 million a year. Richard Hollinger, a University of Florida sociologist, says this "can mean the difference between viability and failure" for many companies.(7)

With such high dollar losses at stake, it is not surprising that companies are beginning to take employee crime so seriously. Employers are beginning to realize that what have been called costs of security are actually investments in their businesses.

Types of Employee Crime

Employees have always committed crimes at the workplace. However, as technology has advanced, so too have opportunities for employees to steal. Employees still commit the more "blue-collar" type offenses, but technology has enabled them to defraud companies in previously unheard of ways. Some typical employee crimes follow.