Most business owners have heard that employee theft is on the rise, but the actual statistics are far more alarming than most realize. The U.S. Chamber of Commerce says that $50 billion dollars are lost annually due to employee theft and fraud, and that 20% of all businesses fail due to internal theft and fraud. In an Ernst & Young report entitled “White Collar Crime: Loss Prevention through Internal Control,” researchers said that a company could lose 1% to 2% of its sales because of crimes committed in collusion with employees.
Why are employees increasingly biting the hand that feeds them? One reason may be that many employees find themselves overwhelmed with credit card debt with no foreseeable way to pay it. As a result of the recent decision by the Office of the Comptroller of the Currency to get tough on consumer debt, many credit-card issuers have increased required minimum monthly payments. The aim is to help people pay bills faster and decrease the interest on outstanding balances. But the new policy has hit consumers hard, especially because it came on the heels of higher energy prices and rising interest rates. This has made many Americans anxious about their debt and vulnerable to trying any scheme to pay it off, even stealing from their employer.
Some employees also bear grudges against their employers because of increases in premiums they contribute for group health insurance. They may be upset if their company is freezing pension plans for all current employees. Add to this a feeling of not being paid what you are worth, and you have an employee who is all too willing to consider stealing.
You may believe your commercial property policy protects your business from all types of employee theft, but that isn’t the case. In general, commercial property policies that are written on an all-risks basis cover most types of employee theft, including the stealing of inventory and contents. However, cash and securities aren’t considered property in this context, so they’re not covered. That’s why it’s a good idea to purchase an employee theft policy to cover the theft of money and securities inside and outside the physical premises.
Employee benefit plans can also be covered under this type of policy. The Employee Retirement Income Security Act (ERISA) requires employers to carry insurance equal to 10% of the funds administered. The minimum amount of coverage ERISA requires is $1,000 and the maximum is $500,000. An employee theft policy can be written to include 401(K) plans, profit sharing plans, pension plans, and medical, dental, vision, life, and disability insurance plans. ERISA also requires that those who administer employee welfare or benefit plans be bonded. An employee theft policy can be used to satisfy this requirement. Each of the plans must be added to the name insured on the policy in order to activate the coverage.