Businesses see rise in employee theft

To many employers' chagrin, the workers guilty of the most grandiose theft frequently turn out to be those deemed to be highly trustworthy, says Mich.

"They are people being given access to systems and information that allow them to commit fraud," he says. Their crimes -- typically theft of small amounts of money over long periods of time -- often go unnoticed until economic downturns, he adds, because that's when companies generally become more vigilant about counting pennies.

A 2007 study from Pricewaterhouse shows that senior-level employees with an average tenure of 7.5 years are responsible for 25% of all reported internal fraud. Overall, 85% of fraudsters are male, 44% are between the ages of 31 and 40, 38% possess at least a bachelor's degree and 12% typically hold a postgraduate degree or higher.

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Since workplace pilfering sometimes goes undetected, it's unclear how much more severe the problem is now than in healthier times. According to Jack L. Haynes International, employee theft in the retail sector has been on the rise every year since 2003.

A survey the firm conducted earlier this year of 24 large retailers with more than 2.3 million employees found that roughly one out of every 28 workers was apprehended for stealing in 2007, an increase of nearly 18% from 2006.

Retail employers typically track their inventories closely, which is why they're able to provide such detailed data, says Doyle.

Workers who steal even small amounts of money or goods from an employer risk big repercussions. In addition to sacking internal thieves, many employers file civil lawsuits against them, says Bob Riordan, partner and leader of the labor-and-employment practice group at Alston & Bird. Some even press criminal charges, which can result in jail time.

An employer's best defense against worker theft is prevention, asserts Riordan. "You want to maintain an environment where your employees have some sense of a code of conduct or integrity," he says.

The installation of video cameras, tracking devices and other monitoring tools can also help deter workers from pilfering, but employers should first review local laws on the practice.

"There is an increasing trend at the state level to prohibit invasive monitoring," warns Riordan.

Also consider how the strategy might affect employee morale. "You need to be aware of the culture of the workplace you're dealing with," he says. "Video monitoring in a warehouse might be fine, but in an office environment it might be viewed as crossing the line."

A survey from the Institute for Corporate Productivity shows that about 17% of respondents recently added extra security measures and 20% are conducting audits more frequently in the wake of increased employee theft or because of suspicions of theft.

And 28% say they're communicating with employees more about internal theft.

Still, no matter what preventive methods employers take, breaches are likely to occur on occasion, even in good economic times, says Black & Decker's Zierk.

"You're bound to run into periodic issues," he says. "In every company I've ever worked for, part of my time has been spent dealing with people who use poor judgment."

This article was reported and written by Sarah E. Needleman for The Wall Street Journal.

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