How to Prevent and Handle Employee Theft in Retail Stores

When you’re thinking about protecting your business from shoplifting or theft, you’re probably thinking about external threats. Well, unfortunately, there’s a threat that might be even higher on your list: internal theft.

We’re not saying that every single one of your employees is considering stealing money, or inventory, from your business, but it does happen. And, you’ll need to know the different types of employee theft to look out for, how to prevent it, and how to deal with internal theft. Let’s get started.

• What is employee theft?
• Why do employees steal?
• Different types of employee theft
• How to prevent employee theft
• How to deal with employee theft

What is employee theft?

Employee theft is generally defined as any stealing, use, or misuse of an employer’s assets without permission. 

You should note that employee theft is not just stealing. It comes in many different shapes and sizes. If you have an image of one of your employees trying to crack open your safe in the dead of night, you might be thinking a bit too simply about what employee theft can look like. There are many different types of theft that we’ll cover in more detail below.

Not sure it’s something worth worrying about? Well, employee theft is on the rise. In 2022/23, there were 6,558 thefts by employee offences reported in England and Wales, compared with 5,633 in the previous reporting year. Insurance company, Zurich UK, have seen a rise in claims for commercial crime, too, with companies facing average losses of £140,000.

Employee theft isn’t something that should be taken lightly. Left unchecked, overtime, this can result in reduced profits, poor staff morale, higher consumer prices, and even bankruptcy, in rather extreme cases. If companies don’t have the right protection and preventative measures in place, employee theft can, and will, destroy a business in some capacity.

Why do employees steal?

It’s difficult to understand what motivates employees to steal from their employers. Rose Sutton, Senior Speciality Lines Claims Expert, at Zurich, has said that: “as cost of living pressures mount, employee theft has significantly increased, suggesting some workers could be turning to desperate measures to make ends meet.” 

There are of course other reasons. Some employees may not even realise they’re stealing, or misusing company assets, like those who participate in “sweethearting,” who may believe that they’re just helping out a friend with their employment perks. Some may be stealing for revenge on the store for some reason. Some might think they deserve a raise that they haven’t gotten. And, some might simply think they can get away with it. Whatever the reason is, putting an end to potential theft should be of utmost importance for any retailer.

Different types of employee theft

There are many different ways your employees can steal from you. Here are some of the most common practices:

Stealing products

Employees might steal products from you, whether to keep for themselves or to sell somewhere on the internet. One classic method for stealing products is to hide something in the rubbish when they take it out, which they will retrieve from the bins later. Employees may also hide small items on their person, or in their bags.

Gift card theft

Gift card theft is very popular these days, largely because it’s difficult to detect. There are various methods to pull off this scam, but typically, employees will issue fake refunds to gift cards they will keep. They may also give a customer purchasing a gift card a blank gift card while keeping the loaded one. 

“Sweethearting”

“Sweethearting” is when a cashier will opt to not ring up goods that a friend or family member wishes to take from the store. It can also be when a cashier falsely gives their store discount to their friends or family members.

Identity theft

This final method of internal theft may not be directed against the store, but is within the same grouping of activities and could cost your store its reputation. Retail employees have ample opportunities to steal customers’ identities. 

Skimming

Employees have been skimming off the top of the cash drawer for years. Employees who know that you won’t care about a discrepancy of a few quid in the cash drawer may take advantage of you by slowly skimming quite a large amount of cash over time.

How to prevent employee theft

The first thing to know is that it’s best to simply prevent these situations from happening. Once an employee is actually stealing, it can be a tricky situation to handle.

1. Run background checks on all new employees.

Running a background check is a fairly standard process that will help you weed out any bad eggs up front. Here are some tips for conducting background checks:

• Use background checks, just don’t use “the box.” That means, don’t ask someone if they have a criminal background on their paper application just to weed people out. Conduct interviews first and get to know someone first to avoid unnecessary discrimination.
• Be consistent and run the same process on each applicant.
• Look for patterns, rather than a single good or bad act.
• Use a professional agency.

2. Ensure that all employees are well-trained on policy to prevent accidental loss.

As previously mentioned, employees might make mistakes on the job. Whether it’s entering the wrong number of inventory, or giving the wrong discount, mistakes happen and they can really add up. Work with your employees so that they know your policies and check their work.

3. Institute modern inventory management and ePOS software to make it easier to monitor for discrepancies.

You certainly could audit receipts every day, or week, or month to try to discover patterns of loss in your store. But you could also just implement a modern inventory management and ePOS system that will pull reports for you every day. 

These reports will make it easy for you to notice patterns (like if the cash register has been consistently down a few quid) and will make it noticeable when you do inventory checks what exactly is missing.

4. Count your cash drawers every day.

You do want to count your cash drawers every day to keep full tabs on how much cash is in them at all times. Running these counts will deter skimming and help you detect it, as well.

5. Use a buddy system for the rubbish.

Given that the rubbish is a popular method for employee stealing, have your employees take it out together. Thieves are less likely to try to stuff something in a rubbish bag when someone is there watching them.

6. Implement surveillance software.

Surveillance software isn’t just video cameras anymore. Now the cameras are equipped with software that can help them detect such activities as “sweethearting” and alert you to the problem. It’s pretty incredible. These systems are especially good for documenting instances of employee theft.

How to deal with employee theft

If you’ve implemented the tips we’ve already covered, you will have reduced the risk of employee theft quite dramatically. However, if someone does slip through the cracks, here’s how we recommend to deal with it:

1. Collect and document as much evidence as possible.

You cannot just accuse an employee of theft. If you’re wrong or unable to prove it, your company may face legal retribution. Instead, carefully document everything that you can. Run audits, collect receipts, and put together the correct video footage.

2. Call your local police station for advice.

Your local police station can provide you with advice on how to document employee theft and even give you interviewing tips. Don’t pass up this help.

3. Interview the employee.

When you finally have an airtight case, bring your employee in for an interview to confront them with your evidence. Be sure to do it when others are in the store and do not tip your employee off beforehand as the subject matter. Here are some tips before you interview them:

• Prepare all the paperwork in advance, including their dismissal paperwork and, if possible, their final check.
• Keep a witness in the room. Typically another store manager or HR person.
• Begin the interview by telling the employee you just wish to review some LP procedures.
• Though you should already know as much as you can ahead of time, don’t tip your cards. Using various tactics, you may be able to get the employee to confess to crimes you didn’t know they had committed.
• If you are going to prosecute the employee legally, call the police after the employee has confessed, but continue the interview until the police arrive. And do note: your employee is legally allowed to get up and leave the meeting with you at any time, and you must do nothing to prevent them from doing so.

4. Terminate their contract

If you’ve confirmed the employee has been stealing, you can then move forwards with terminating their contract. 

You do not necessarily need to prosecute your employee legally, especially if the theft is marginal, but you cannot have anyone working for you whom you do not trust.

Conclusion

Internal theft can cost you thousands of pounds and is one of the biggest threats to your business. But by enacting careful policies and using the right technology, you can mitigate a great deal of your loss.