G2 Leader Spring 2026Time theft in the workplace is a common problem that costs employers billions.
The worst part? It's not a one-time financial setback. It may take years to discover that employees are stealing time. Employee time theft can cost businesses $50 billion each year — and cause up to 33% of business bankruptcies.
Time theft costs businesses about $50 billion every year.
Companies often overlook the potentially serious impacts of misreported time. Over months and years of fraudulent time reporting, even small discrepancies can add up to big numbers.
It’s like a small leak in a big boat — it may not flood you all at once, but let it go long enough, and it will still cause you to sink.
In this guide, we’ll talk about why time theft occurs and how business owners can prevent it. But first, let’s make sure we’re clear on the true definition.
Time theft occurs when employees add or alter tracked time for hours they haven't worked. There are many ways employees can steal time, such as:
Time theft can hurt productivity so much that poor performance becomes your new normal. Aside from the obvious cost of paying for work without results, a team member stealing time creates an expensive ripple effect throughout the company.
In addition to the overall financial burden of time theft, you may see productivity slip with other employees when working in an environment where time theft is prevalent. It can be demotivating for a hard-working employee to watch someone else make the same amount of money for less work and worse results.
The longer you go without addressing time theft, the worse it gets. A team member who is hesitant at first may become a bit bolder as they continue without repercussions.
Business owners need to understand how employees steal time so that management can spot this expensive problem.
Even though old-school time clock systems are less popular, manually clocking in and out is still common.
Buddy punching happens when employees help each other fool the time clock. Instead of clocking in at arrival and punching out when they leave, an employee has their coworker start or stop the time clock on their behalf.
There are a few different ways this happens:
No matter how it happens, the bottom line is that buddy punching means you’re paying wages for people who aren’t even physically at a job site.
Timesheet fraud occurs when a worker forges or alters timesheets to get paid for extra hours.
Sometimes, time card inaccuracies are accidental. This happens a lot with manual timesheets.
While it’s not the same as timesheet fraud, it can still be expensive for employers.
Though time tracking software is far more accurate than paper timesheets, companies that use software can still experience timesheet fraud. Watch for employees who frequently alter their records.
Many employees round their time cards to the nearest hour — even if that means they're getting paid for 15 or 30 minutes they haven't worked.
They may not intend to inflate their timesheets unfairly, but that extra time adds up.
Here’s a common example:
Let's assume you have an employee who is supposed to work from 8 AM until 5 PM with a one-hour lunch break. That employee arrives 15 minutes late every morning, takes an extra 10 minutes for lunch every day, and always leaves the office by 4:30. Still, they file their timesheets to reflect that they followed their assigned schedule.
Each week, that employee is paid for 4 hours and 35 minutes that weren’t worked.
This type of employee time theft can also happen when employees add hours to their timesheet to get overtime or to cover up times when they weren’t at work as scheduled. The discrepancies can be huge.
Employees may alter their time clock information or claim they forgot to turn on the app to add hours to their paycheck. Watch for major alterations or employees who frequently "forget" to start their work timer to spot possible timesheet fraud attempts.
Your employees should be encouraged to take a break. It's great for their mental health and productivity. Businesses are legally required to provide paid breaks for hourly employees during their shifts.
It's also okay for employees to occasionally handle personal business from the office. A healthy work environment allows people to balance their life priorities with their work. As long as productivity doesn't suffer, there's no harm in employees taking a break during company time.
Problems only arise when employees abuse their breaks and personal time, taking longer breaks and causing major issues that cost you thousands.
An example might be an employee who frequently:
This is a more difficult time theft method to address, as breaks are crucial for mental health. Fortunately, there are employee monitoring tools that can help you spot team members who abuse breaks.
Overtime is fairly common in hourly work. But, at 1.5x the normal hourly rate, those costs can add up. That’s why most companies require overtime approvals to ensure employees aren’t working unnecessary overtime.
If your strategy is just to audit overtime logs after the fact, here’s some bad news:
If you have an employee who continues to clock unauthorized overtime, you may need to have their manager keep track of their work hours throughout the week. Once they reach 40 hours, the manager must send them home to avoid the extra pay.
For a repeat offender who doesn’t comply with overtime policies, termination of employment might be your only option.
With remote and hybrid work comes a new challenge: Idle time theft.
Idle time is when an employee appears active without actually working. This is often called passive time theft or idle time abuse.
Some employees may leave their desk entirely while their time tracking software continues to log hours. In some cases, remote workers might stretch out tasks to fill time, knowing that they’re being measured by hours instead of output.
Unlike buddy punching or timesheet fraud, this form of time theft is harder to detect because everything looks fine on the surface. Employees seem online, their hours are logged, and their devices are technically active. But if there’s little to no actual work being produced, it leads to inflated labor costs and inaccurate productivity reports.
The best employee monitoring tools have built in idle timeout features that stop the time tracker when users step away from the computer for too long. It’s a simple way to spot patterns and ensure that tracked hours reflect real, focused work.
But even with this technology in place, there are still hacks to trick these tools, like:
Fortunately, the Hubstaff Insights add-on can help teams spot suspicious activity (like unusually consistent activity). Receive alerts for the anomalies and key in on these workarounds to ensure you're not paying for hours that don't reflect real work.
Insights also helps you boost your team’s performance with utilization rates, role and industry-based productivity benchmarks, and the ability to balance meeting and focus time.
When poor performance becomes your new normal, you may not even realize that the overall attendance and productivity of your team is far lower than it could and should be.
As morale is negatively affected, other employees are more likely to adopt similar behaviors. They’ll take extended breaks, show up late and leave early, and use work hours for personal tasks more often.
In some cases, an employee who regularly gets away with timesheet fraud might encourage their coworkers to do the same. This type of theft can cause major profitability problems:
Those hours add up quickly. That’s almost 6 weeks of wages over a year of misreported timesheets. For example, your $20 per hour employee may engage in the average amount of time theft; you lose $4,680 in stolen wages to that employee every year!
Employees who add hours to their timesheets add an average of 4.5 hours of wages every week. That adds up to 6 weeks of stolen pay per year!
Time theft is not necessarily classified as a specific federal crime, but it can become a felony under certain state laws. In many US states, it's prosecuted under a broader theft category, which could include anything from wage fraud to theft of services statutes. Whether it's a felony depends on the monetary value involved and the intent behind it.
Here are some time theft legalities to keep in mind:
Felony charges may apply to intentional, repeated, or high-value cases (i.e., like logging fake hours for months or influencing payroll systems).
Less severe cases (like forgetting to clock out or occasional rounding) are more likely to be treated as misdemeanors or result in internal disciplinary actions.
While time theft isn't always a felony, it can be — especially when the financial impact is significant and there's evidence of fraud.
That’s a lot of information to digest, but the main question is this: How can you prevent time theft?
You might be tempted to carefully monitor your employees to ensure they work all the hours they bill, but be aware. Micromanagement hurts performance and can make time and attendance worse.
One of the most common reasons employees commit time theft is that they feel the business is trying to take advantage of them. They feel that they're underpaid and undervalued for the work that they do. Employees who feel this way may start clocking extra time to even the score.
Micromanagement seems like a solution, but it actually makes time theft worse.
There's a feeling of "us versus them" in these situations. Taking extended breaks or turning to buddy punching is a small retaliation for those who feel they're in an unfair arrangement.
Of course, disliking your work doesn’t mean it’s okay to commit time theft.
You can stop time theft and create a better working environment with these strategies.
The first step to prevent employee time theft at work is to define your organization's time theft policy.
Once you’ve created your policy, make sure to clearly communicate it to your team. Discuss why you created this new policy and make sure everyone understands what it means. Try to:
A good time theft policy is fair. It protects your workers and ensures they're paid fairly, as much as it protects you from overpaying.
Could you afford more perks if you weren’t dealing with time theft? Show your team what they’re missing out on because of all those wasted dollars.
At first, your team might feel like this new set of rules is a way for you to make more money out of their work. If employee time theft is already a problem, that’s a sign that your people don’t trust the company.
Focus on how this policy helps individuals have a better work experience. That will also help as you tackle this next step:
One of the best ways to prevent employee time theft is to ditch manual timesheets and use time and attendance software. While it’s not impossible to fool time tracking software, it takes more effort to do so.
Even if you have employees who try to beat the system, the best time tracking software gives you accurate data that you can use to track and address time theft.
Hubstaff's time tracking app is a great choice for companies concerned about time theft. Its GPS location-based time tracking and detailed reporting make it easy for teams to track hours and employers to get labor data.
Employees can use their own mobile devices to download the lightweight Hubstaff app. Whenever they enter or exit a Job site, Hubstaff automatically starts or stops the timer accordingly.
Here’s what you should look for in good time card software:
As an employer, it's important to ensure that work is going smoothly and time tracking is accurate. While it's a necessary evil, checking on your team's progress could easily start to feel invasive, and teams that feel micromanaged rarely perform at their best.
Your time clock software of choice should help with this. Instead of interrupting work to ask someone how their to-do list is coming along, you can check detailed labor reports to spot potential issues.
On the mobile app, GPS location tracking allows you to see where your crews are on a live map. You can see if workers start late or leave early can see it on the web dashboard. This saves you time driving from site to site just to check in.
Instead of approaching these checks to see who isn't doing their job well, change your perspective. You should seek problems to solve so your team can get their work done more easily.
When you’re genuinely looking out for your employees, they notice.
Good communication is at the heart of every successful team.
Start by being more transparent. Explain why you make decisions and consider making information readily available for your team. Prove that you value open communication by practicing what you preach.
You can do this with a stack of communication tools that support easy asynchronous communication for globally spread teams. You’ll know you’re on the right track when your employees are comfortable telling you what you’re doing wrong.
If your “communication” only goes one way, you’re not actually communicating.
Hearing criticism from your team is far better than not hearing criticism from your team. Your employees will only tell you what’s wrong if they believe there’s a chance you’ll fix it.
If you need some time to process what’s been said, say something like this:
“I appreciate you telling me about your concerns. I’m going to consider this more thoroughly, and I’ll get back to you with an action plan by the end of the week.”
Then do it. Show that you listen and act when people tell you things. Communication at your company will improve drastically when everyone sees that it makes a positive difference.
Recognizing and rewarding good performance is one of the most effective ways to drive employee motivation and productivity.
According to a study on positive psychology in the workplace, employees who receive regular positive reinforcement are significantly more likely to repeat those behaviors and contribute more to organizational success.
At Hubstaff, we use #hubstar, a Slack channel, to praise team members for their good work. This not only boosts employee morale but also motivates our teams to go the extra mile to do their best work.
Creating a work culture where employees feel genuinely valued is essential. When people know their efforts are seen and rewarded, they’re more likely to remain true to their employers and less likely to engage in time theft. Leading by example and fostering this supportive environment naturally leads to better results.
Time theft is a widespread but often overlooked issue that can quietly erode your company’s productivity, profits, and team morale. Whether it’s buddy punching, excessive breaks, falsified time cards, or idle time in remote setups, even small daily mishaps add up to thousands over time.
Left unchecked, it can lead to legal risks, broken trust, and a culture of disengagement. You can prevent it with a clear time theft policy, honest communication, and the right time tracking solution. Taking action now helps protect your team, your workflow, and your bottom line. Plus, with a tool like Hubstaff, accurate time tracking becomes second nature. Try Hubstaff free for 14 days.