What is the Difference Between Time Theft vs. Wage Theft

March 8, 2021 - minute read

Time theft and wage theft are two of the most notorious culprits of theft in the hourly workforce world. Both can happen accidentally or as a result of poor processes , and neither is conducive to a positive, trusting work environment… but that’s where the similarities end.

Time Theft vs. Wage Theft

The critical difference between time theft and wage theft is that time theft is typically when an employee steals time from the employer, while wage theft is when an employer steals wages from an employee.

Based on a 2017 study by the Economic Policy Institute, wage theft exceeds $15 billion each year… and that’s just the minimum wage violations employers have made against employees. The DOL under President Biden has said they will be more rigorous than the Trump Administration in enforcing the FLSA, which means that this number is likely to increase.

Where time theft is concerned, another study estimated employee time theft to cost employers more than $400 billion in lost productivity. To say that these issues are of critical concern for your operation would be an understatement, especially if you oversee an hourly workforce.

With two such pressing issues projected to intensify in 2021, let’s discuss the basics of these costly workforce obstacles, the differences between them, and how to safeguard your business and employees against them for optimal success.

What is Time Theft?

Time theft is when an employee steals time from an employer. It is also commonly defined as the act of taking pay for hours not worked. Time theft is an act, whether knowingly or not, done by employees and can be very difficult to detect. It comes in many forms and levels of severity, but in general, causes inflated payroll and lost productivity.

A 2017 survey found around half of US workers admit to adding between 15 and 60 minutes to their timesheets. With the average employee steals 4.5 hours every week, that is equivalent to an extra six-weeks of paid vacation per year.

Examples of time theft include:

  • Intentionally padding timesheets
  • Late starts/early finishes
  • Long breaks
  • Estimating hours based on schedules instead of actual hours worked/rounding timesheets
  • Unauthorized overtime
  • Buddy punching
  • Proxy attendance
  • Misusing work time ex. fooling around, socializing, personal activities during work hours

For more insight on the top forms of time theft affecting hourly workforces, check out our other blogs on this topic: “Time Theft: Top 7 Ways Employees Steal Time.

Calculator - New Time Theft

What is Wage Theft?

Wage theft, on the other hand, is when an employer steals from an employee. It is when you, as an employer, underpay your workers thereby violating the Fair Labor Standards Act (FLSA) regulations. Most often, wage theft is caused by a lack of understanding of the law and is not intentional.

That said, its occurrence results in the loss of wages to employees and can get you in hot water with both federal and state legislation. Wage theft is more common in certain hourly workforce industries, which is reflected in its primary causes.

Causes of wage theft include:

  • FLSA misclassification (not understanding proper exemptions and classification criteria) ex. mistakenly classifying full-time employees as contractors
  • Shorting employee paychecks in any way
  • Overtime issues (not paying workers for hours worked beyond 40 during a given week) ex. withholding promised overtime hours during scheduling, forgetting to add overtime to pay, miscalculations of blended overtime rates, and more.
  • Minimum wage violations
  • Requiring employees to attend unpaid training
  • Underreporting hours due to poor time tracking and lost employee breaks ex. leaving interrupted meal breaks as unpaid or asking employees to stay after they have already clocked out
  • Rounding hours incorrectly

Solutions for Eliminating Workforce Inconsistencies

Now that you understand the differences between these two workforce problems, let’s talk about solutions. Even though these violations occur through in different ways and can be difficult to catch, it is possible to help prevent wage theft or time theft.

Here are 4 solutions that can help:

  • Eliminating guess work as much as possible. Consider implementing a cloud-based, time and attendance system, one with GPS capabilities which can be customized to match the unique needs of your distributed labor environment.
  • Document your operational data with care. Make sure to document all employee hours meticulously, as well as the correct pay for each of those hours. Some states require a written record be given to your employees, but you should keep complete records regardless of your state to protect against liability.
  • Transparency. Require employees to be issued pay stubs or be given access to their pay records. Create an in-depth employee handbook policy that fortifies your existing payroll processes and holds all parties accountable for preventing theft. This can help enormously with fostering trust and easing tensions if mistakes inevitably arise.
  • Use analytics and real time data Track specific key performance indicators around time theft and wage theft such as:
    • how long it takes for managers to correct punch exceptions
    • how often managers are touching raw time data

Workforce Management That Saves Time and Money

Time theft got you worried? How about accidental wage theft? Don’t sweat it, EPAY Systems’ best of breed time and attendance system and workforce management software can help you crack down on time thieves and streamline your payroll software to keep you compliant.

Our mobile solution with GPS tracking and biometric time clocks make buddy punching and time theft obsolete. Download “How to Prevent Workforce Time Theft” or request a demo today.

Filed Under: Workforce Management Analytics