Insights

How to spot employee discount abuse, discount fraud with ease

February 3, 2023

In this article we will discuss what is known as employee discount abuse and how it involves things such as discount fraud and sweethearting. We will look in-depth into what types of discount abuse exist and how employers can fight against it easily.

Some estimates indicate employee theft represents as much as 90% of all theft. The image that comes to mind for internal theft might be an employee putting merchandise in their bag at the end of a shift. However, most employee theft comes in the form of point of sale (POS) fraud including discount abuse.

See how Solink can help you spot discount abuse and increase your operational efficiency.

Discount abuse can be narrowly defined as employees using different discounts to reduce the price of any item in a way that the company would consider unacceptable. It is one of the most common types of employee theft. This is accomplished by using various different types of discounts and sometimes results in the items being “free.”

Here’s a discount abuse definition:

Discount abuse definition: Discount abuse is when employees purposely misuse discounts to reduce the price of items for themselves or their friends and family.

Sweethearting is another name for discount abuse. It is given this name when the employee is performing discount abuse on behalf of friends or family.

Discount abuse is one of the main types of point of sale (POS) employee theft. In fact, some definitions of discount abuse include using other POS theft tactics such as missing some items or using voids to reduce the total bill.

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What are the types of discounts abused?

Employees abuse many kinds of discounts. When discussing theft with employees, it is important to explain how discounts may and may not be applied. It’s also important to explain that purposely using discounts incorrectly is a form of theft and what the repercussions are for stealing from work.

Here are the three most common discount types abused by employees:

  • Employee discounts
  • Exclusive discounts
  • Promotional discounts

Employee discounts

Many retail locations offer generous discounts to employees. For restaurants, the discounts can even be 100% for meals purchased during shifts. However, in both cases, there are clear limits. Employees are to use their discounts only for their own purchases, and in the case of free meals only during their shifts.

A female barista processing a transaction at a point of sale terminal

Some employees will use their discounts to benefit their friends and families. This is sweethearting. Another way employees discounts are abused is by getting free meals outside of work hours.

Exclusive discounts

Many locations offer discounts to particular segments of the population. Students, seniors, and veterans often receive discounts at restaurants and shops. Service professionals, from nurses and paramedics to teachers, are also increasingly receiving discounts from some businesses.

These discounts are generally non-stackable, meaning that a 65-year-old nurse who previously served in the Navy is not supposed to receive three discounts but just the most generous of the three.

Discount abuse works by incorrectly punching in multiple of these discounts to lower the total price of the bill. In some cases, employees will even provide these discounts to individuals who do not meet the requirements.

By pairing video with data, Solink can help you spot this form of discount abuse. If a student or senior citizen discount is used, then you can quickly watch video footage of the transaction to see whether the employee confirmed the age of the customer.

To see how Solink helps you spot discount abuse, sign up for a demo today.

Promotional discounts

Promotional discounts are another way to describe sales. These are temporary discounts offered to increase sales of particular products.

If a company’s POS system allows promotional discounts to be applied manually, then an employee can abuse the discount by applying it to any product.

promotional-discounts

Five types of discount abuse

Employees abuse different types of discounts. Similarly, there are different forms of discount abuse. Here are five distinct forms of discount abuse:

  • Discount fraud
  • Classic discount abuse
  • Discount training gaps
  • Ex-employee discount abuse
  • Sweethearting

Discount fraud

Discount fraud is a specific form of discount abuse that requires misrepresenting who the purchaser is. For example, a 20-year-old may claim to be a high school student to get 10% off. This type of fraud may or may not involve the employee knowingly accepting the fraudulent claim.

As an extension of discount fraud, some employees may refund the full amount of an invoice in cash and then redo the transaction at the discounted rate to steal a percentage of the total bill.

A close up of a employee swiping a credit card through a payment terminal at the register

Classic discount abuse

The classic form of discount abuse is purposely misusing discounts to benefit the employee or their friends and family. In the restaurant industry, the most common form of classic discount abuse is getting free meals all the time instead of just during shifts. In the retail industry, it would be offering generous employee discounts to friends and family when they are meant to be reserved for personal use only.

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Discount training gaps

Unlike the other forms of discount abuse, training gaps aren’t malicious. An employee isn’t purposely misusing discounts for personal gains. Instead, an employee is misusing or stacking discounts because they are unaware of how to use them properly.

For example, a company offers 10% discounts to veterans, nurses, and senior citizens. The policy states that only one of these may be applied. An employee encounters a 65-year-old nurse who is also a veteran. They apply three 10% discounts for a total discount of 30%.

This is by no means malicious, but the end result is the same: less revenue for the business. These are cases for ongoing training. Employees need to know both how to apply discounts correctly and why it is important to follow discount procedures.

Ex-employee discount abuse

If your company offers discounts to employees, then it is important to make sure that ex-employees no longer receive those discounts. Employee discount cards must be returned when an employee leaves the company.

Note that the risk of ex-employee discount abuse can extend beyond your business. Some companies negotiate discounts for their employees at other businesses. If a former employee continues to use those discounts, then they are costing partner companies money. This could lead to strained relationships, and it might even cause your business to lose major accounts.

A woman and a man toasting at a counter in a coffee shop.

Sweethearting

Sweethearting is a form of discount abuse where employees misuse discounts to benefit their friends and families. The most common scenario is an employee using their employee discount for friends and family.

At restaurants that offer employees a 100% discount during their shift, this could even mean giving away free food.

What is coupon fraud?

Coupon fraud is a specific form of discount abuse found online. When discount abuse includes online discount codes, then it is commonly referred to as coupon fraud. Coupon fraud can cost ecommerce companies a lot of money, especially when codes are shared on third-party websites.

How to spot discount abuse

Solink makes it easy for companies to search through their transaction data and watch accompanying video footage. By scanning all high-risk transactions, including high discount amounts and cash voids, Solink helps you spot discount abuse.

Solink pairs POS transactions with video without the use of a text inserter. This preserves the original video footage in case it needs to be used as evidence.

When you do spot discount abuse, you can find all instances of discounts being used by that employee. This drastically reduces the time it takes to complete an investigation, making Solink powerful case management software.

The Solink dashboard. Solink integrates video feeds with POS data so you can find important transaction events in seconds.

Why do employees steal from work?

The theft triangle is a way of explaining why good people might steal from their employer. It states that three conditions need to be met for an employee to steal from work:

  • Opportunity: A person needs to see the chance to steal something.
  • Motivation: A person needs to have a reason to commit the crime.
  • Rationalization: The would-be thief needs to believe that their actions can be morally defended.

Once you spot discount abuse, it is important to reduce the opportunity for theft in the future.

How to prevent discount abuse

To prevent discount abuse, reduce the opportunity for theft. By pairing video with POS data, Solink allows you to monitor all of your high-risk transactions. When employees know that they will be caught if they abuse their employee discount, they are less likely to steal, thereby safeguarding the integrity of discount programs and protecting the bottom line.

Solink gives your eyes on everything happening in your business. Using the Solink platform, you can scan all of your high-risk transactions and then watch video to see what actually happened.

This is the easiest way to find and eliminate discount abuse in your business.

To see how Solink helps you spot discount abuse, sign up for a demo today.

Find suspicious cash handling in your business

Learn how easy it is to uncover suspicious cash handling in our self-guided tour.

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Timothy Ware |

Timothy Ware is Solink’s Content Manager. He brings over ten years of writing and editing experience to the job. When he isn’t writing about security, loss prevention, and asset protection, he’s enjoying his newest board game. His work has appeared on many B2B SaaS websites including Baremetrics, Security Today, TeamPassword, Cova, and SignTime.