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Managing employee theft

Learn strategies and tips for handling theft in your pizzeria.



Employee theft is a common problem that plagues employers large and small and costs U.S. businesses tens of billions of dollars each year. Employee theft is not limited to taking money from the register; employees may also steal supplies and inventory, including food, paper products, alcoholic beverages, and office and kitchen equipment. They may even cut into the bottom line by granting discounts, refunds or free food to customers who are not entitled to them; by overcharging customers and pocketing the difference; or by claiming to have worked time they did not work. 

According to a Reuters survey conducted in October 2010, 54% of executives at small companies expected to face employee theft of funds, equipment, inventory or merchandise in the coming year. This survey also reports that employee theft is viewed as the second most fi nancially damaging event a company can face (behind employment practices lawsuits). Hence, all employers, regardless of the size of their businesses, need to take steps to prevent employee theft. Here, we answer some common questions about why theft happens and how to deal with it at your business.

Why Do Employees Steal?

Many employees steal simply because the opportunity presents itself: Inventory is left unchecked and unlocked; managers are nowhere to be seen; the business is a high-volume cash business, making it easy to skim a few dollars off the top during a shift. Some employees steal because they feel  undercompensated and view walking away with “extras” (such as foodstuffs, paper goods, glassware and other inexpensive items) as a deserved “perk” of the job. Finally, a few employees will steal for the challenge of doing so. These employees may take big-ticket items, such as full kegs of beer, cases of wine, laptop computers, kitchen equipment or cash.

What Can Be Done to Prevent Employee Theft?

It can seem an overwhelming task to try to prevent employee theft. Some employers jump to the conclusion that the only method that works is to install security cameras throughout the restaurant and constantly monitor employees. While this is helpful in some cases, there are other, less intrusive ways to build an environment in which employees work together to prevent theft.

Here are some simple changes employers can make to cut down on the opportunity for employees to steal items or cash:

1  Check references when hiring. Many employers skip checking references and believe that an employee would not have provided a name unless the person would give a good reference. That’s not true. Checking references can lead to important information, including how an employee behaved in a past job. Ask questions such as, “Would you trust this person to close the restaurant?” and “Do you consider the applicant to be honest and trustworthy?” Hire only those applicants who provide solid references. Ask the applicant to sign a release and waiver, authorizing prior employers to talk freely about or provide personnel records for the potential hire.

2  Keep morale high. Often, employees will steal because they feel entitled to more than they are getting paid. Consider offering free or discounted food to employees during their shifts. After all, an employee who loves your food will probably sell more of it! Enact a profit-based bonus program that rewards employees for a good month or a good quarter or for keeping to a certain level of cash register accuracy. Some employers offer noncash prizes, such as movie tickets or gift certificates to local stores. Perhaps you could get creative and team up with another local business to swap reward items. Let your employees know their hard work is appreciated by hosting an employee appreciation night or giving out Employee of the Month certificates or prizes.

3  Implement and follow clear policies. Provide all employees with an updated and accurate employee handbook. Make sure employees know whom to turn to if there is a problem, and have an open-door policy for raising issues to management. If you offer discounts to employees or allow employees to
have free meals, maintain written policies outlining the terms, and make sure all employees know them.

4  Talk to employees about theft and the cost to the business. In some cases, employees (especially younger employees, who may not have experience purchasing these items themselves) may not realize that taking “just a little bit” of food, a roll of paper towels or a case of soda is truly stealing. They may not understand that all of those items need to be bought and paid for, and that every dollar’s worth of supplies that is stolen is a dollar of profit that is lost.

5  Ensure that there is a manager that you trust present for every shift. And, on occasion, have that manager take some time off so that you can spot any irregularities in inventory or cash flow. 

6  Enact safeguards. Safeguards can require only a few simple changes in procedure. For instance, have a second employee sign off on all refunds or POS changes. Have two employees take out trash and perform inventory checks, or alternate these duties. Provide each employee with dedicated sign-in info for cash registers, and have a manager ensure that registers balance at the beginning and end of each shift.

7  Audit time cards. Ensure that employees are punching in and out only for themselves and at the times indicated. This is especially important if you rely on employees’ written time sheets rather than a time clock to keep track of hours worked.

What Can I Do if I Catch an Employee Stealing? 

What if the worst happens and you catch an employee stealing? Your first instinct may be to fire the employee on the spot. You should stop and think, however, before doing this. Analyze each situation individually. Was the employee stealing cash or goods or offering improper discounts? Is the person an otherwise good employee that you would rather rehabilitate than fire? Are you planning to report the matter to the police? 

Investigate suspected theft as you would any potential workplace misconduct, such as harassment, retaliation or other breach of policy. Be objective, fair and reasonable. Ask questions of the person suspected of wrongdoing; review available documents, emails or videotapes; and reach a fact-based conclusion. Talk to employees who may have witnessed what you suspect may have occurred. Don’t make assumptions about what took place before finding out the facts. Document the entire process from start to finish. 

Consider the impact on the workplace prior to taking action. If you opt to discipline or fire an employee, it should be done privately and out of earshot of other employees. It may be tempting to “make an example” of someone but, most of the time, doing that serves mainly to anger the person you’re making an example of and make other employees feel threatened. Whatever disciplinary steps are taken should be documented in the employee’s personnel file. Whether to report the matter to the police is discretionary. 

Finally, you might assume that you can deduct the cost of the stolen goods from the employee’s final paycheck but, in many states, this would be a violation of wage and hour laws. Before making any deduction in an employee’s pay (whether you are keeping him employed or not), be sure to consult with your local employment law attorney. Even if the employee agrees to pay back the amount stolen, there are limits on how much pay can be garnished each week. Generally speaking, though, the employer is obligated to pay all wages earned and due to the employee, even if the employee has been caught stealing. If the employee is going to pay back the employer, this should be done in a transaction that is separate from payroll. 

Employee theft has been a problem as long as there have been employers and employees. By taking steps to improve the work environment and employee morale and by safeguarding cash, inventory and equipment, employers can reduce the impact of employee theft on their bottom line.

Molly McKean and Julie A. Moore are part of Employment Practices Group, a legal and human resources consulting fi rm in Massachusetts and New Hampshire.
Visit employmentpg.com for more information

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