Investigation of Employee Fraud and Theft in The Service Business

Published on February 21, 2017 under General

Investigation by a Licensed Private Investigator into possible employee fraud and theft by may prove to be beneficial in prevention of  unnecessary profit loss within the service business.  Employee theft and business fraud are on the rise and reportedly cost United States Employers 50 billion dollars annually, and accounted for a loss of 7% of annual revenues in 2015 according to Static Brain. Studies have shown that 75% of employees have admitted to stealing from their employer at least once, and the average time in which fraud occurs before detection is two years. Prevention and early detection of employee theft, fraud, and substandard work practice through investigation is beneficial in the detection of unnecessary loss of revenue and may protect the reputation of the service business.

Theft, fraud, or employee deception to a service business can be in the form of product, time (extended lunch breaks, using the company vehicle for personal endeavors, not working the scheduled day, calling in sick when they are not sick, abusing disability or workers compensation benefits), or even stealing clients from a business to perform their own side jobs.  The employee may commit fraud by misrepresentation on their job application in attempt to cover up an undesirable criminal history, or may  behave in an unprofessional or unethical manner during work hours or perform illegal activities on the job such as drug use.

In the small service business, owners place  a great deal of trust in their employees who work in the field unsupervised or without close supervision on a daily basis; they are in contact with clients and are representative of the company and its reputation.  Private investigation can be useful in screening potential employees, and determining the daily activities of employees during the normal course of a workday.

Service businesses (and all businesses) should perform full comprehensive background investigations on all employment candidates through a private investigation agency inclusive of criminal offenses, civil offenses, and driving violations (especially for a service route where they will be using the company vehicle).  Application employment references should be checked thoroughly to determine their reason for leaving, performance issues, and work ethic. Upon hire, policies in place regarding theft and fraud should be made very clear as to what constitutes employee theft and fraud and the ramifications; make the employee aware that the company has a 0% tolerance policy for theft of any sort.  Studies show that if the  employee believes in increased likelihood that they may me caught, the less likely they are to steal.

Employee theft generally occurs due to an employee’s financial stress, opportunity (he or she feels that they will get away with it), or rationalization (an employee feels that they can justify the behavior based on their work performance or how they are treated at work). An employer may circumvent the behavior of the “disgruntled” employee by offering employee recognition and performance incentives.  The employer should be alert to employees who appear disgruntled or stressed and should keep the lines of communication open to all employees; theft prevention is less complicated than occurrences.  26.3% of theft occurrences in 2015 were discovered as a “tip” from another employee.  Develop an anonymous  system for other employees to report observations made.

Keep an eye on your inventory; is your product declining more than anticipated?  Are you losing clients on one employee’s particular route?  Is a particular employee continually taking an unusual amount of time to complete his/her assignments? While a GPS system may be useful to determine a company vehicle’s whereabouts, it cannot monitor an employee’s activities.  Are they following safety measures/protocol? Has another employee or client reported poor work practices or behavior of another individual on the job? Surveillance by a Licensed Private Investigator may be indicated.

For all types of business owners ACFE (Association of Certified Fraud Examiners) offers a  Small Business Fraud Prevention Manual which provides information on the most common types of internal and external fraud schemes and tips on prevention.

If you have a possible theft or fraud situation within a service industry in Southwest Florida and would like to retain the services of a licensed private investigator, or are in need of a new employee background screening, contact W&W Solutions Inc. at (239)822-0001 or on the web at





Tagged: , , , , , , , , , , , , , , , , , , , , , , ,


Leave a Reply

Your email address will not be published. Required fields are marked *