How to Stay Protected Against Losses Resulting from Employee Embezzlement

Mar 15, 2023

Employee Benefits

employee embezzlement

Some employees admit to stealing funds or property from their employers, causing financial losses. A report reveals that employee embezzlement causes businesses to lose approximately 5% of their annual revenue. Standard business insurance policies also do not cover employee theft and related incidents. Then, how can you protect your company assets from your employees? Read on to find out.

What Does It Cost to Fraudulent Activities?

The median losses caused by employee theft or fraud are $125,000 to $140,000. Over 21% of such cases caused losses of nearly $1 million. The embezzlement schemes go on for 14-18 months before it is detected, and over half of the victimized companies have not recovered any of their embezzlement losses. Also, the 2018 Hiscox Embezzlement Study reveals that in 4 out of 5 fraud cases, more than one perpetrator is involved.

Common Ways Employees Steal from Employers

Here are some ways employees and vendors steal funds from an employer:

  • Creating fictitious vendors
  • Stealing company property or owners’ or managers’ personal property
  • Skimming or illegal use of company credit cards
  • Embezzling cash kept for day-to-day business operations
  • Inaccurate expenses report or overstatements of paid bills
  • Check, and payment tampering, including writing company, checks or diverting company payments to personal accounts
  • Payroll theft, including paying fictitious employees and inaccurate recording of payroll

Reasons Why Employees Steal from Employers

Embezzlers can be long-time workers of a company, and they can steal for many reasons ranging from disgruntlement with the company to their financial problems. The Hiscox report reveals that 33% of perpetrators work in the accounting/finance department, and 85% of embezzlement is committed by managers or higher officials. Nevertheless, embezzlement can happen in any company area and can be committed by any employee for any reason.

Warning Signs of Embezzlers

Often, embezzlers:

  • Can pick up things quickly
  • Are eager to learn about different areas of operation, so they can easily manipulate them for their gain.
  • Work for long hours without going on vacations to prevent others from discovering their routines and moves
  • Live a luxurious lifestyle
  • Break rules and take risks
  • Express dissatisfaction with the company

How to Prevent Employee Embezzlement?

To prevent employee theft in your company, you must:

  • Ensure more than one person is monitoring every transaction
  • Regularly review bank statements to detect inconsistencies or any unknown payments made
  • Set up a proper system for accounting, payroll, and accounts payable function

According to the Association of Certified Fraud Examiners (ACFE), 43% of occupational frauds are detected by tips. So, train your employees on preventing fraud and reporting suspicious activity to prevent occupational fraud. Also, taking severe legal action against embezzlers can help prevent future thefts.

Buy Employee Benefits Package

If you take care of your employees and offer them what they deserve, they will not commit embezzlement. One such way is buying an employee benefits package. This package includes a wide range of benefits for your employees, including healthcare benefits, supplemental benefits, voluntary benefits, disability benefits, etc. So, you can protect them while providing effective solutions for their well-being and peace of mind.

Get a Comprehensive Employee Benefits Package from Knight Insurance

At Knight Insurance Services, we offer a personalized employee benefits package with several advantages to help employers focus on their business while ensuring that their employees are well-taken care of. For over 100 years, we have been dedicated to meeting the unique requirements of our valued customers through our comprehensive insurance policies. Contact us today to learn more about our employee benefits package.