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Employee theft is a serious issue that can hurt your business, damage trust, and lead to legal consequences. Whether it’s stolen cash, merchandise, or fraudulent transactions, taking the right steps is crucial. Handling theft properly means protecting your business while ensuring fair and legal action. In this guide, we’ll cover how to address employee theft, the potential consequences for those involved, and how to prevent future incidents.
What is employee theft in the workplace?
Sometimes called internal theft, employee theft refers to any unauthorized taking, misuse, or misappropriation of an organization’s assets, either tangible or intangible, by its employees. This form of theft can encompass a wide range of activities, from physically taking items from a company without permission to misusing time, data, or resources.
While often associated with tangible goods in retail environments, employee theft can occur in various sectors and can have far-reaching financial and reputational implications for a business.
Types of employee theft in the workplace
Here are some of the types of employee theft:
- Cash theft: Directly taking money from the cash register without recording the transaction.
- Merchandise theft: Similar to shoplifting, it is the unauthorized removal of items or products from the store.
- Time theft: Employees claiming pay for hours not worked or breaks not entitled toare guilty of time theft.
- Expense account fraud: Expense account fraud is the inflating or fabricating business expenses for personal gain.
- Data theft: Illegally copying or distributing proprietary company data or customer information is data theft.
- Supply theft: This is when employees take office supplies or other company materials for personal use.
- Kickbacks: Kickbacks are benefits received from vendors in exchange for preferential treatment.
- Refund fraud: One form of POS employee theft, this involves creating false refund transactions and pocketing the money.
- Payroll fraud: Payroll fraud is manipulating the payroll system to receive undue compensation.
- Discount abuse: Discount abuse is when employees purposely misuse discounts to reduce the price of items for themselves or their friends and family.
What are some of the consequences of employee theft in the workplace?
Employee theft can have profound consequences for a retail business. Financially, it directly reduces profits, which can be particularly harmful for businesses operating on thin margins.
Moreover, theft can erode trust among staff, leading to decreased morale and potential conflicts. From a reputational standpoint, if news of employee theft becomes public, it can deter customers from shopping at the establishment, fearing potential fraud or mismanagement. Over time, unchecked employee theft can even jeopardize the sustainability of the business.
Written warning
Most employers resort to giving a written warning as the initial response to minor theft incidents. This action serves as an official record of the misconduct, and it is often the first step in an organization’s disciplinary process. While a written warning might seem lenient, it can lead to further consequences if the behavior continues.
Mandatory training
Some employers require employees involved in theft to undergo mandatory training. Such training sessions aim to educate employees about the implications and consequences of theft. It’s a proactive approach, emphasizing prevention and ensuring employees understand company policies and ethical standards.
Restitution
When an employee is found to have stolen from the company, restitution often becomes a part of the resolution. Restitution involves the offender repaying the company for the value of stolen items. According to the U.S. Department of Justice, restitution orders can be made to compensate the victim for losses, ensuring that the offender takes financial responsibility for their actions.
Loss of bonuses or incentives
Employee theft can result in the withholding of bonuses or incentives. Such penalties not only serve as a direct financial consequence for the employee but also deter other employees from committing similar offenses. Many retail organizations have policies outlining the withholding of financial rewards in cases of employee misconduct.
Limitation on responsibilities
Following an incident of theft, employees might experience a limitation in their job responsibilities. Such restrictions can range from limiting access to certain store areas, reducing their authority, or confining them to supervised roles. Restricting duties is a way for employers to minimize risks and prevent further incidents.
Suspension
Suspension, often without pay, is a more severe response to theft. Employers use it as a cooling-off period or a time for investigations to be conducted. During this time, the employee is not allowed to come to work, and they may not receive their regular pay. Suspensions can serve as a strong deterrent for others, emphasizing the company’s stance on theft.
Termination of employment
Termination is one of the most severe consequences for employee theft. Repeated offenses or theft of high-value items often lead to this outcome. Termination sends a clear message about the company’s zero-tolerance policy towards theft, ensuring a safer and more trustworthy environment for other employees.
Reputation damage
Word of mouth and industry talk can damage an individual’s reputation following an incident of theft. Such reputation damage can make it difficult for the individual to find future employment or even maintain personal relationships. The retail industry, in particular, values trustworthiness, and a tainted reputation can be a significant hurdle.
Loss of professional licenses
In some retail sectors, especially those dealing with specialized products or services, theft convictions might lead to the loss of professional licenses or certifications. Such a loss can effectively end one’s career in that sector, emphasizing the long-term consequences of theft.
Civil lawsuits
Beyond criminal charges, businesses may opt to file civil lawsuits against the offending employee. Civil suits aim to recover damages, the value of stolen items, or even additional punitive damages. This legal action underscores the importance of respecting company property and the financial implications of theft.
Criminal charges
Employee theft can lead to criminal charges, depending on the value of stolen goods and the jurisdiction’s laws. For instance, in many U.S. states, theft of property worth over a certain amount (varying by state) is considered a felony. Felony charges can lead to severe penalties, including significant fines and jail time.
Some retailers use Solink for case management when they find an employee repeatedly stealing from the business. They can then build up evidence showing total theft above the threshold for felony charges.
Permanent record
A conviction for theft can result in a permanent criminal record. Such a record can make it challenging for the individual to find future employment, especially in the retail industry. Many employers conduct background checks, and a criminal record can be a significant deterrent for hiring managers.
Incarceration
Severe cases of employee theft can lead to incarceration. The length of jail time varies based on the value of stolen items and jurisdiction-specific laws. For instance, in Canada, theft over CAD 5,000 can lead to a maximum of 10 years in prison.
Actionable steps when dealing with employee theft in the workplace
Handling employee theft requires a structured, legal, and fair approach to protect your business while maintaining professionalism. Here are the key steps to take:
1. Gather strong evidence
Before making any accusations, ensure you have clear, documented proof of theft. Video security footage, POS transaction records, financial audits, and witness statements can all support your case. Maintain a chain of custody for all evidence to prevent tampering. A well-documented investigation helps protect your business in case of legal disputes.
2. Follow company policies and legal guidelines
Check your employee handbook, contracts, and local labor laws before taking action. Some situations may require notifying union representatives or handling termination in a specific way. If applicable, consult HR or legal counsel to ensure compliance with company policies and employment laws.
3. Take appropriate disciplinary action
Decide on the best course of action based on the severity of the theft. Options may include:
- A formal warning for minor infractions.
- Restitution agreements requiring repayment of stolen funds.
- Job role restrictions or suspension to prevent further losses.
- Termination for serious or repeated offenses.
If termination is necessary, document everything carefully and conduct the process professionally to avoid potential legal repercussions.
4. Notify authorities If necessary
For significant theft, filing a police report may be required—especially if you plan to recover losses through insurance claims. Some businesses build case files with video and transaction data before involving law enforcement to ensure charges meet felony thresholds.
5. Maintain confidentiality
Discuss the incident only with those directly involved in the investigation. Publicly shaming an employee or spreading details among staff can create legal risks and harm workplace morale. Keep communication professional and discreet to protect your business’s reputation.
6. Strengthen theft prevention measures
Once the situation is handled, focus on preventing future incidents. Consider:
- Enhanced security with video-integrated security systems like Solink.
- Regular audits of cash handling and inventory.
- Clearer policies on employee theft and consequences.
- Employee training on ethics and fraud prevention.
By acting quickly, following protocols, and improving security, businesses can reduce losses and create a more trustworthy workplace.
Why Solink is your best backup for taking these steps
Handling employee theft requires clear evidence, fast action, and airtight documentation—and that’s exactly what Solink provides.
With Solink’s video-integrated security system, you can:
- Gather undeniable evidence – Link security footage with POS transactions to quickly spot suspicious behavior.
- Streamline investigations – Easily search and retrieve footage to build a strong case.
- Protect your business remotely – Monitor live or recorded video anytime, anywhere.
- Strengthen theft prevention – Get real-time alerts and insights to stop fraud before it escalates.
Many businesses use Solink’s case management tools to track repeat offenses and build evidence for law enforcement, ensuring serious theft cases meet felony thresholds. With secure cloud storage, your footage stays tamper-proof and accessible when you need it most.
Whether you’re investigating an incident or preventing future losses, Solink gives you the visibility and control to protect your business, employees, and bottom line.
