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The Wage Theft Epidemic

Payroll concept image of a pen, calculator and reading glasses on financial documents. In a perfect world, nobody would steal from anybody, and we’d all get exactly what we deserve all the time. Unfortunately, we instead live in a world where companies steal approximately $15 billion from their employees every year. This flies in the face of what we typically think about when we consider theft in the workplace. The stereotype is that disgruntled employees take from their employers—and that happens too. But while property crime by employees is a problem, wage theft by employers who neglect to invest in time management solutions is one that goes both under-reported and under-addressed. How does wage theft happen? According to the Economic Policy Institute, in the 10 most populous states in the country alone, 2.4 million workers report being paid less than their state’s minimum wage, resulting in underpayment of wages totaling $8 billion annually. [Tweet "How does wage theft happen?"] Though the amounts that people are cheated out of vary, it’s an issue that stretches across almost all demographics, and in some states is particularly bad: In Texas, average minimum wage violation victims receive less than 70 percent of their earned pay. Clearly, this is not a victimless crime. But the victims aren’t just those whose wages are illegally withheld: According to the report, “this form of wage theft causes many families to fall below the poverty line, and it increases workers’ reliance on public assistance, costing taxpayers money… and it hurts other workers in affected industries by putting downward pressure on wages.” call-to-action-810x75-c And this is just one form of wage theft. Other forms include not paying overtime when employees work more than 40 hours a week, making illegal deductions from paychecks, denying meal breaks, and more. Quantifying all the ways wage theft take from those who have earned their pay is “exceedingly difficult” and likely impossible to properly compute. But put it this way: It happens, and it happens a lot. Yet another victim here are businesses themselves. Many of the business owners who withhold minimum wages do so knowingly and willfully, and these people are criminals. But some business owners commit wage theft without meaning to—failing to honor the proper number of vacation days, asking employees to work through meal breaks to meet a deadline, and so on. These small forms of wage theft can add up until employees have enough to file a Fair Labor Standards Act Lawsuit—the number of which hit a record high in 2016.   


So let’s see: Companies are taking billions from their employees, who then need extra money from public assistance to survive, and some businesses are unknowingly setting themselves up for expensive lawsuits. Everyone is losing money here. The solution to this issue may lie in the same arena that many of today’s solutions do: technology and automation. Close-up picture of a personal check and American Dollars with selective focus. Great use for financial concepts.

Why You Need An Automated Time Clock System

If you don’t know about automated time clock systems, such as those powered by biometric technology (using fingerprints to clock in and out), you’re not alone: A substantial number of businesses still do their payroll by hand. That’s a problem for a lot of reasons, namely those listed above. Manual payroll systems make it easier for businesses, knowingly or not, to steal from their employees. They also make it more difficult for businesses to mount a sustainable defense against an employee who feels they have evidence for a FLSA lawsuit. Automated payroll systems keep everyone on the same page, by doing the following:
  • Eliminates human error: Human error is a part of life, and filling out timesheets or completing payroll is no exception. Asking employees to fill out a timesheet at the end of the week is a guaranteed way for the wrong hours to be input, and for either the employee or employer to get stiffed.
  • Creates a digital record of all decisions: Did you and your employee agree that they’d have a week off? Did you agree to not hold an employee being an hour late because their car broke down against them? Any decisions, any hours clocked, any vacations taken will have a digital record associated with them that you can refer back to anytime.
  • Makes it easy to request (and accept or deny) vacation or days off: Speaking of which, many systems will allow employees to request time off via the system, perhaps through their mobile device. It makes requesting and allowing time off a smooth process with no confusion.
There are other perks to automated time clock systems than keeping people and businesses honest. Here are a few more:
  • It doesn’t take forever to calculate payroll: Calculating payroll can take dozens of hours a week if you ask HR to calculate timesheets by hand. Why put your employees through that—especially since stress can lead to extra sick days that only adds to the bottom line—when you could have everything go through an automated system?  
  • It saves resources in the long run: Worried about investing in an expensive system? How much do offices spend on time clock resources like pens, paper, and the hours needed to pay HR reps to do busy work when a manual system is in place? Save the earth and a few bucks in the long run by going digital.
  • It prevents buddy punching: As mentioned above, employees also steal from employers. One of the seemingly more innocuous ways of doing so involves “buddy punching,” where another co-worker clocks in for someone not yet back from their lunch break or in for the day. Unless your employees have extra thumbs to spare, this practice will be a thing of the past with a biometric system.
Though some employees may have concerns about sharing their fingerprints for a biometric system, as long as there’s full disclosure by your part and you explain the myriad benefits involved in going automated, it shouldn’t be a problem. For more information, read up on the legal issues behind biometric clock systems. Manually calculating employee time sheets and wages simply doesn’t work. It takes too long, it’s stressful, and it’s contributing to an incredible amount of money being stolen from workers and the American people at large. Even if you’re a conscientious business owner who feels they always pay people fairly, you can never be too careful—and if you’re not automating your time clocks, you’re not being nearly careful enough.