How to Prevent Employees From Timesheet Fraud

4 min readFeb 6, 2018

No matter what industry you’re in, you can come across timesheet fraud. Apart from the obvious financial losses, it negatively impacts nearly all aspects of the workplace: from project management and resource planning to the work environment.

Timesheet fraud results in wrong billable and payable amounts, inaccurate estimates for future workloads, as well as weak discipline and employees’ morale.

For example, a recent fraud case in Port Elizabeth, New Jersey involved more than one person. The main accused illegally acquired an amount worth of $500,000 annually, while showing up at work just 8 hours per week. To make this happen, his coworkers submitted false timesheets for him.

More than anything else, this behavior was undermining teamwork, trust, and cooperation.

As hard as it is, this problem can and should be handled. In this article, we’ll look into the most common timesheet fraud schemes and ways to prevent them.

Timesheet fraud types

So what exactly is time fraud?

It takes place when an employee gets paid for work they never did or for time spent on activities not related to work. Time fraud schemes mostly depend on the method employees used to track their time, absences, and overtime.

These are the most common fraud types:

  1. Inflating time logged in the timesheet. Practice shows that recording more hours than actually worked is really hard to detect and handle.
  2. Editing time-track retrospectively to cover the deficiency of working hours.
  3. Punching in for a coworker. In the companies where clock-in / clock-out systems are used, it is not uncommon that some employees punch in for their colleagues when they’re running late.
  4. Logging regular time as overtime. When overtime is included in the payroll calculation and paid for more than the regular working hours, sometimes people tend to record their regular hours as overtime.

One big question is, can goofing off during the workday be considered as a time fraud too?

It largely depends on the employee’s area of activity and responsibilities. In customer service, it is usually not okay for an employee to play with their smartphone even when no customer is directly addressing them.

However, in many cases the employer pays their employees for being ready and willing to work. So even if they’re doing nothing for a while and the employer doesn’t want them to go home, it shouldn’t qualify as time theft.

While there is no surefire remedy against employee fraud, employers can take certain steps to reduce and prevent false salary claims.

Here’s what you can do:

  1. Make sure to inform your employees about payroll and overtime policies in advance. Sometimes time fraud is not really intended. Things start going wrong, when an employee doesn’t clearly understand their duties or how they should account for their work. They tend to waste time and track it poorly. Later, this results in timesheet edits and non-relevant or inflated time entries.
  2. Clearly explain your employees the rules. This is particularly essential for punching in for a colleague. Obviously, clocking in for a coworker is not appropriate (because both of them commit time fraud), but not everyone might realize the consequences. If it implies any penalties, including termination, the employees should be made aware of that.
  3. If you’ve noticed any minor cases of fraud, don’t ignore them until they turn into a serious issue. Remember the old saying: “It’s better to prevent than to cure”? Talking to the employee as soon as possible is your chance to prevent major problems in the future.
  4. Have your managers check and approve their employees’ time-track. Once it is approved, it cannot be corrected.
  5. Use electronic time-tracking systems that have time-track approval and lock functionality. Once time-track is approved and locked from any modifications, no edits are technically possible. This solution is one of the most efficient ways to prevent timesheet fraud.

The key rule here is “Don’t overdo it”.

Employee fraud, even if only alleged, is a sensitive issue.

Before taking any decisive steps, always consider the implications. Too great eagerness to eradicate the fraud can consume all resources, damage work environment, or undermine employee loyalty. So…

  1. Treat your employees like adults. Trust in them and express your trust openly. You don’t want to impair motivation and discipline of your team. And if the environment is unhealthy, it’s hard to perform well.
  2. Avoid micromanagement. Consider which measures are really necessary and stick to them. Otherwise, this can easily turn into a waste of time and effort and block available resources from being used in current or future projects.
  3. Think twice before docking employee pay or applying other financial penalties. Make sure that contract terms and legal regulations explicitly allow that in your particular case — and in case of doubt remember that it’s always better to err on the side of caution.

There’s no doubt that timesheet fraud is harmful for the company’s work process and climate.

At the same time, make sure not to cross the line when preventing it or handling its consequences.

There are ways to minimize the problem without micromanaging or threatening healthy work environment. One of the most efficient ways to prevent fraud issues is implementing an electronic timesheet system that physically prevents any inappropriate time-track modifications.

And no matter which technology you apply, building trust in your team lies at the core of a healthy workplace.

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