How Fraudulent Time Management Practices are Costing You

Although many people may immediately think of felled corporate giant Enron when the word “fraud” is uttered, fraud on a much smaller scale occurs at most businesses on a regular basis.

Whether it’s pushing 45 minutes to an hour or adding hours outright, time management fraud by employers and contractors is costly. Taking someone’s word about the hours spent on a specific project can be a gamble.

Managing human capital is likely one of the most time-consuming tasks you face as a business owner. But allowing employees or contractors to cheat when submitting hours can drain the bottom line. Do the math – what is it costing you if 10 percent of your employees are inflating their hours by 10 percent? What about 20 percent?

Payroll fraud has quadrupled since 1998, according to a survey conducted by KPMG. “Business anomalies may not show up immediately. Do you have to walk the floor to know who is working?” asks Insperity Time and Attendance sales director Carlos Gonzalez.

The KPMG study found the most common method (77 percent) for discovering corporate fraud was internal investigation. There are several measures that can help business owners decrease or eliminate fraudulent time management practices.

  • Automate your processes

Automation is an obvious solution. It’s tough for an employee or contractor to cheat when their hours are tracked by a machine. Though they may write on a timesheet that they arrived promptly at 8 a.m. each day, the reality may be that 8:30 a.m. is more accurate.
  • Don’t get complacent with time management

Complacency is common amid managers and hinders the reduction of timecard fraud. “People have the view that it’s not broken. They’ve been keeping track of time manually for years and see no reason to change, Gonzalez says. “But inaccuracies and not knowing true costs are a tremendous problem.”
  • Create a code of conduct


Employers should also develop a written code of conduct that is signed by all employees and contractors. Though the code alone will obviously not force employees and contractors to adhere to accurately report time worked, it does provide a springboard for repercussions.

Surprisingly, the recession may boost workplace ethics.“We are experiencing an ethics bubble. The positive results of this study are likely to be temporary. We are beginning to see an important connection between workplace ethics and the larger economic and business cycle. When times are tough, ethics improve,” says Ethics Resource Center President Patricia J. Harned about data from the 2009 study.


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