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How to Prevent Overbilling: Improve Workplace Accountability

Andjelka Prvulovic
Last update on:
November 10, 2022 10:12 AM
Published on:

When running a business, we assume that our employees will do the right thing and perform their duties legally and ethically. 

But, according to relevant statistics, especially the one claiming that 95% of employers encounter problems with employee theft, the harsh reality is to prove us wrong. Small companies have an exceptionally high risk of employee theft, as 64% of employees steal from them. 

According to the American Payroll Association, companies lose up to 7 percent of their gross annual payroll due to time theft, so it's pretty evident that employee overbilling impacts employers financially. But there are other equally essential but less apparent consequences that we will talk about later on.

Unless you take appropriate measures to prevent overbilling, you are creating the opportunity for meddling, which some of your dishonest employees may use for their own benefit.

We will discuss how to prevent overbilling at the workplace and what to do when you suspect an employee is lying about hours worked.

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What Is Overbilling?

Overbilling is an intentional tactic used to obtain higher payments. When it comes in the form of employee payroll fraud, we know that overbilling occurs when an employee:

  •  inflates the hours worked,
  •  bills for the job they haven't done, or 
  • claims expenses they are not entitled to. 

There are laws and rules to prevent overbilling, but some employees still cheat to get paid more than they deserve.

Although it can have devastating effects, overbilling can be challenging to recognize. Apart from severely impacting a company's bottom line, when an employee commits fraud at their workplace, it can seriously harm the company's reputation.

Moreover, if the business faces charges for negligence or damages resulting from the employee's fraud, it can also create legal liability for the employer.

What Causes Overbilling?

According to the fraud diamond theory, four elements can lead to workplace fraud:

  1. Pressure. Employees can have financial troubles, feel undervalued, or resentful towards the company they are working for.
  2. Opportunity. Employees must be aware of the opportunity to commit fraud and get away with it due to weak internal management and control systems.
  3. Rationalization. An employee rationalizes fraudulent behavior as acceptable to believe it is not criminal. For example, they perceive it as a temporary loan or feel entitled.
  4. Capability. Some personal traits of an employee make them more susceptible to committing fraud.

Employers can’t do much regarding employee pressure, rationalization, and capability. Still, by addressing the opportunity issue,  there is just enough room to prevent overbilling and other fraudulent practices. 

How to Prevent Overbilling?

So, if there is an opportunity, some employees who can rationalize their behavior as acceptable will eventually try to steal from you and overbill you for their work.

You can end up unknowingly paying for the work they never did. In some industries, such as health care, you can also face the risk of severe charges and pay hefty fines. 

However, it is possible to induce your employees to become more ethical just by changing how you ask them to account for their work and minimizing their opportunity to commit fraud. Here are the short guidelines for doing it most efficiently in practice.

1. Gain Control Over Your Employees' Hours

You can most efficiently prevent overbilling at the workplace by reducing the opportunity for unintentional human error or planned fraud. Timeero helps you achieve this in numerous ways.

Using Timeero’s app to track their business time, your employees can hardly inflate their work hours. 

When an employee clocks in, the app will start logging their hours. In addition to punching in, employees can confirm their location.

 a screenshot of Timeero clock in

                       

Timeero employee location screenshot
Timeero Timeclock Screen: Employee Android View

For extra security, you can set Timeero so your employees can check in and out of work only when they are on-site

To minimize the chance of errors, you can set Timeero to clock employees in and out of specific areas automatically or send them reminders of the action they need to take.

Timeero Jobs page screenshot
Timeero Jobs Page - Geofencing: Admin view

This way, you will always be sure that your employees are really on site when punching in and out, to successfully manage the issue of employee attendance.

Let’s take one of our fictitious employees, Robert Smith, as an example. He spends a part of his day working in the office at a particular address. We can set an invisible border around this location, say 100 meters, and let Robert clock in and out of their work only when he is within the boundary.

So, suppose Robert was late for work and tried to clock in his hours out of the geofenced area - the coffee shop nearby or from the car on their way to work. 

His timesheet entries will be flagged  on the time and mileage review page so their supervisor or manager can pay special attention when approving them.

When using geofencing, employees will be notified that they are outside the geofenced area whenever they clock in or out of the bounds of their workplace. Those with credentials, such as supervisors and managers, will be notified immediately.

Timeero Time And Mileage Review Page
Timeero Time And Mileage Review Page: Admin View

Timeero also comes with capabilities  to help put a stop to buddy punching, one of the most common time theft schemes at the workplace.

 Using the face recognition feature, your employees can clock in only using their biometric data, so there is no more punching in for a colleague or even an entire team. And with the option to define unpaid and paid breaks during working hours, you will improve your employees’ accountability regarding the frequency and duration of their breaks.

You can also use Timeero to set overtime rules and prevent overbilling for overtime hours

Timeero Payroll And Overtime Settings Page
Timeero Payroll And Overtime Settings Page: Admin View

As both those with credentials and your employee will receive notifications when entering the overtime hours, they can be held accountable for logging in any unnecessary or unapproved overtime.

prevent overbilling with Timeero overtime email notification
Timeero Overtime Email Notification

For more information on time fraud, you can read our Guide On Preventing Employee Time Theft.

2. Overbilling for Mileage

If you are wondering how to prevent overbilling related to mileage reimbursement, you can set up Timeero to track employees’ mileage when using their private vehicles for business purposes. 

Timeero will start tracking your employee’s mileage once they punch in and stop the moment they’ve punched out.

During their working hours, Timeero can track all their business miles automatically, keeping accurate and precise data of their route. 

prevent overbilling with Timeero route review
Timeero Route Review Page: Admin View

Using Timeero’s Reports Page, you can review their path. This way, you can be sure you’re not paying for scenic routes or your employees’ private rides..

Timeero works offline so that it will keep logging miles in distant areas without internet connectivity.

It’s also important to know that Timeero won’t track the activities and miles outside of working hours, so your employees don’t need to worry that you will compromise their privacy.

3. Set Clear Guidelines In Your Policies

Besides using a reliable tool to track your employees' hours and mileage, to prevent overbilling, you need to develop written policies and procedures and establish the responsibilities of employees, managers, and supervisors involved in the process.

With these policies, your employees must clearly understand that wrong time, expense reporting, and overbilling can be considered fraud and the possible consequences of such practices.

Crucial guidelines for you to establish are:

You can check out the articles on drafting these policies and download free templates that you can tailor to fit your business’s needs.

Before implementing the procedures, let your legal advisors check all the relevant local, state, and federal reimbursement laws. 

After creating the guidelines, immediately include them in your employee handbook and have all your employees read and sign the document stating they have read and understood them.

Chances are fraudulent practices will decrease once you’ve introduced the policies and provided an adequate tool for tracking the hours and mileage accurately. 

Keep in mind that the primary goal of your efforts is not micromanaging or disciplining your employees but establishing a culture of accountability at the workplace.

And if fraud happens despite all your efforts, you will have the means to take necessary action.

What Do I Do When I Find Out an Employee Has Been Overbilling the Hours?

If you suspect or discover any evidence of employee overbilling and fraud, you must show that you are decisive and persistent about your procedures. 

First, you need to perform a fair investigation. The person investigating the theft should be impartial and confidental, ideally, someone from outside the company. After all the evidence has been collected, the investigator must interview the employee in the presence of witnesses.

However, under the Fair Labor Standards Act (FLSA), you must pay employees for all the hours on their timesheets. Even if you suspect an employee has overbilled you for hours, withholding their salaries over a time theft claim is very risky. In this case, a worker can sue the company for double the missing wages, legal costs, and fees, and you can lose even more.

Even though you could sue an employee for fraud, terminating the employee and moving on is often much easier and less expensive.

Is Overbilling a Crime?

Employee fraud can fall under criminal code law. You may consider a lawsuit to recover substantial funds if the fraud is severe. 

However, there must be ample evidence proving that your employee overbilled you for hours or fraudulently claimed the expenses. 

Also, before taking any legal action, make sure to consult your lawyer to advise you on the best course of action.

To Wrap Up: Reduce the Odds of Fraud with Timeero

The most efficient way to prevent overbilling at the workplace is by establishing a culture of accountability and reducing your employees' opportunity to commit fraud.

You can achieve this by setting clear attendance, mileage, and time theft policies and using a reliable and accurate method of tracking hours and mileage to support them in everyday operations.

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AUTHOR
Andjelka Prvulovic

Andjelka is a sociologist turned digital marketer. She specializes in creating content for SaaS and software companies. When she’s not researching the most effective employee management techniques, Andjelka loves cooking, reading, and fighting for human rights.

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