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Timesheet Fraud: How to Prevent It? + Sample Termination Letter

Vesna Mihajlovic
Last update on:
October 14, 2022 3:02 PM
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Nowadays, many companies have to deal with timesheet fraud. But why is timesheet accuracy important?


Employees may put in hours they didn't work for, get away with it, and get paid for it at your expense. Regardless of your industry, you can come across timecard fraud, which can negatively affect all aspects of the workplace besides finances, including resource planning and project management.


Timecard fraud results in inaccurate billable hours and payable amounts, wrong estimates for future workloads, and poor discipline and employee morale, sabotaging teamwork, cooperation, and trust.


While timesheet fraud can be challenging to handle, it's not impossible. Here, we explore timecard fraud, the most common timesheet fraud cases, and how to prevent them. As a bonus, we will also provide a sample termination letter for employees who commit this crime.

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The Basics: What Is Timesheet Fraud?

Most companies allow their employees to put information into their timesheets, and the manager's responsibility is to confirm this information is accurate. However, some employees try to take advantage of this by giving false information to get paid more than they worked.


Note that even the mere rounding up of the time falls under time fraud. 


While a couple of minutes may not seem like much, they gradually add up, turning into hours or even days. For example, let's say your employee adds ten minutes to their timesheet every day. Now imagine all your employees do that - minutes would definitely amount to something, and you'd be the one to pay for it.

Is Timecard Fraud Illegal?

Employee falsifying time cards is a criminal act punishable by law and can lead to timesheet fraud consequences, such as job loss, civil liability, and criminal charges. An employee getting money for time not worked for can also be guilty of theft, which the employer defines as defrauding.

This means an employer can press charges against employees who commit timesheet fraud, but this isn't the optimal solution. In most cases, the best way to deal with timesheet fraud is to terminate the contract. We've provided a sample termination letter  to help you do this.

DOWNLOAD A SAMPLE TERMINATION LETTER

How prevalent Is Time Clock Fraud?

According to the American Payroll Association, time theft affects 75% of businesses, costing up to 7% of their gross annual payroll. The same survey found that 43% of workers admit they do personal business while clocked in, and 42% say they take frequent breaks. That said, the average employee steals around 4.5 hours weekly, which adds up to six weeks per year.

The Most Common Timesheet Fraud Types

Time fraud occurs when a worker gets paid for work they didn't do or time they spent on activities that aren't work-related. The type of timesheet fraud mostly depends on strategies employees use to track their time, overtime, and absences. That said, here are some of the most common types of timesheet fraud:

Work Hours Inflation

Inflation of work hours is most prevalent in companies that use hard copy timesheets, making it easy for employees to put in the wrong arrival and leave times.

Fraudulent Entry of Data

Sometimes, the original timesheets have a problem and need to be rewritten. In that case, it's easy for workers to exploit the numbers during the second entry. And the more times you need to re-enter the data, the higher the possibility of the timecard becoming incorrect.

Errors Because of Delays

Sometimes timesheet systems experience issues, prompting employees to wait until the system is repaired. In such cases, they may take their chances to key in more hours than they have worked.

Long Break Time

Some workers take longer break times than they should or unauthorized breaks when they should be working.

Buddy Punching

Buddy punching is a term that describes situations where one employee puts in false arrival or leave time for another employee who hasn't arrived on time or left earlier.

Favoritism

Some managers or supervisors commit favoritism, meaning they favor a particular coworker, friend, or relative and schedule them for a task that would have had a cheaper and better result if another employee had done it. In some cases, they may also ignore the lateness of certain employees.

Logging Regular Time as Overtime

Some employees tend to record their regular time as overtime when overtime is included in the payroll calculator and paid more than standard working hours.

Ghost Employee

A ghost employee means that an actual employee is paid for hours worked by someone who doesn't exist. This can be done by using the hours of an actual employee who is no longer in the company or by creating a fake employee.

The average employee steals around 4.5 hours weekly, which adds up to six weeks per year.

How Does an Employer Pay When Timesheets Are Incomplete or Inaccurate?

Although many employers find it challenging to get their employees to turn in their time cards on time and without errors, wage-payment laws still require employers to pay their workers for the hours worked on scheduled paydays. Even though employers may argue that they can't pay the worker without the timesheet because they don't know what hours they worked, failure to turn in a timecard doesn't merit an exception to these laws.


Under the Fair Labor Standards Act (FLSA), the employer's responsibility is to track the hours worked by their employees. 


While many employers rely on employees' help through a timesheet, the employer is still responsible. That said, the employer must pay employees for all hours worked, no matter if they handed illegible and inaccurate timesheets.

How to Prevent Timesheet Fraud

Ways to prevent timesheet fraud will vary depending on the issue. Here are some of the ways to discourage timesheet fraud.

Keep Accurate Records of Who Worked on What and When

Keeping accurate records of which employee worked on what and when will help you catch any timesheet discrepancies in case an employee attempts to hand over a fraudulent timesheet.

Be Harder on Submission

Getting tougher on submission can be an excellent way to prevent timesheet fraud as a result of manual submission. For instance, you can enforce stringent policies that dictate when the workers hand over the timesheets, encouraging them to record the correct time and submit the timesheets to you on time. 


This will leave them no room to guess the time after working for several days. Additionally, you can review the work shift plans and workloads to prevent buddy punching because, with reviews, employees tend to work according to the time given.

Invest in Time-Tracking Software

Replacing manual timesheets with time tracking software will make it hard for your employees to lie about their arrival and departure times. For instance, you can invest in a system, such as Timeero, that automatically clocks the employees in once they arrive at work and out once they leave. Doing so will save time and give you more accurate data.

Don't Ignore Minor Cases of Fraud

Ignoring minor fraud cases will show your employees that they can get away with such behavior and even encourage some to create bigger issues. Of course, it's always better to prevent than cure, so talk to your employees as soon as you notice minor timesheet discrepancies. Doing so will help avoid bigger problems in the future.

Educate Your Employees on the Importance of Accurate Timesheets

Teach your workers the harmful effects of timesheet fraud and ensure they know the importance of accurate timesheets. Tell them that timesheet fraud is a severe problem and that it can negatively affect business and all the people involved, including employees. Also, train them on how to fill out their timesheets accurately and what information to include.

Let your Workers Take Breaks

Allow your employees to take regular breaks because if they are overworked and stressed, they are more likely to attempt to clock in more hours than they worked. By enabling them to take regular breaks and days off, you can prevent timesheet fraud and ensure they stay healthy and satisfied.

Consider Face Recognition Attendance Systems

Face recognition attendance systems prevent buddy punching, as employees must use face recognition when they clock in. With such systems, you also eliminate the need to manually track time, meaning your workers will save time and reduce overhead by delivering accurate information to the payroll department.

Come up with a Clear Time Theft Policy

Formulate a clear time theft policy and explain it to your workers. Include the behaviors considered as time theft and the consequences they will face if they break the rules.

​​Things to Consider

Employee fraud is a sensitive issue, so consider the implication before taking action to solve it. Too much effort toward eliminating time fraud can damage the work environment, undermine employee loyalty, and consume too many resources. So, consider the following things before taking any decisive steps.

Express your Trust

Trust your employees and express it. Otherwise, you may damage their discipline and motivation. It's hard to perform well in an unhealthy work environment. On top of that, if you express your trust, your employees are less likely to cheat on their timesheets because they will feel bad about lying to someone who shows faith in them.

Avoid Micromanagement

Think about which measures are needed and stick to them. Otherwise, you risk wasting time and resources that can be used for more productive means.

Protect Your Company from Timesheet Fraud With Timeero

Although timesheet fraud is a common issue businesses face, protecting your company from it is still possible. And one of the best ways to do that is by using Timeero.

 Our solutions can help prevent and end the expensive problem of time fraud. Here's how:


  • ​​Timeero tracks time and mileage: With Timeero, you will get accurate information on your employees' time at work and their mileage without the messy paperwork. You can completely automate timesheets and mileage reports, ensuring your team members are reimbursed fairly and preventing disputes. Timeero's time and mileage tracking features can save you both time and money.


  • Real-time scheduling and shift management: Timeero will always keep you in the loop on who is working, when, and where. The app will give you a clear overview of your employees in the field while enabling scheduling options. In addition, you can edit your workers' schedules whenever you need to, and they will automatically be notified on their phones.


  • Clocking in and outYou can ensure your employees' time cards are 100% accurate and automated with a location-based clock-in. Timeero can also help prevent buddy-punching thanks to the facial recognition clock-in feature.

A screenshot of Timeero's feature that helps prevent timesheet fraud


The Bottom Line

As a business owner, you must prevent timesheet fraud before negatively affects your business. Fortunately, with the right tools, such as Timeero, you can end the existing time fraud and make sure it doesn't happen in the future.

Sample Termination Letter for Falsifying Timesheets

Dealing with employees' fraudulent activities can be tough. Even more so when you have to let them go. To help you during this challenging process, we've created a sample of the termination letter for timecard fraud. Be free to download it, print it, or just use it as a guide and alter it according to your own needs. 

DOWNLOAD YOUR SAMPLE TERMINATION LETTER FOR FALSIFYING TIMESHEETS

Say goodbye to time fraud...

...and hello to accurate time, location and mileage tracking!
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AUTHOR
Vesna Mihajlovic

Vesna is a psychologist, researcher, and writer with a wide range of interests focused on one goal: utilizing digital solutions to take businesses to the next level. Her expertise in human resources and workforce trends combined with her understanding of software’s role in business optimization is invaluable in helping them stay on top of the curve.

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