Inside Job: The Hidden Ways Employees Steal from Your Business
Employee theft is one of the costliest hidden threats facing small and medium-sized businesses today. While most owners trust their workforce, even the best-intentioned companies can fall victim to fraud, theft, and embezzlement—often happening right under their noses. Below are ten common methods employees use to steal from businesses, along with the industries most vulnerable to each scheme.
1. Payroll Fraud
Some employees manipulate payroll records, inflating hours, adding ghost employees, or issuing unauthorized bonuses. This type of theft often goes unnoticed for months or years before businesses recognize massive losses.
Industries most affected:
Healthcare – Fraudulent overtime claims and inflated staffing hours
Retail – Payroll padding through buddy systems and ghost employees
Construction – False subcontractor payments and excessive overtime fraud
2. Inventory Theft
Employees take company supplies, merchandise, or raw materials for personal use or resale. In warehouse settings, inventory manipulation can be disguised through fake returns or altered records.
Industries most affected:
Manufacturing – Stolen raw materials and tools
Retail – Theft of inventory for personal resale or employee discounts
Warehousing & Logistics – Unauthorized removal of high-value goods
3. Expense Reimbursement Fraud
Employees submit inflated, fake, or duplicate receipts, claiming reimbursement for non-business-related expenses. This theft flies under the radar until audits reveal discrepancies.
Industries most affected:
Corporate Offices – Fake meal and travel claims
Sales & Marketing – Excessive mileage and entertainment expenses
Professional Services – Duplicate invoices for training and equipment
4. Skimming Cash Payments
Employees pocket cash before it enters the accounting system, making it difficult to detect. This type of theft often targets businesses with high cash transactions.
Industries most affected:
Restaurants & Hospitality – Unreported cash sales or altered receipts
Retail – Employees keeping cash from undocumented transactions
Automotive Services – Under-the-table cash repairs that bypass the books
5. Vendor Kickbacks & Fake Invoices
Employees collude with vendors to overcharge for goods or services, splitting the profit through kickbacks. In some cases, fake vendor invoices are created for services never performed.
Industries most affected:
Construction & Contracting – Inflated bids and unnecessary purchases
Healthcare & Medical Equipment – Bogus service contracts and supply fraud
Government & Nonprofits – Fake invoices disguised in large budgets
6. Gift Card & Coupon Fraud
Employees misuse gift cards, loyalty points, or company coupons, converting them into personal profit or distributing them for resale.
Industries most affected:
Retail – Employees issuing fake gift cards or discounts
Hospitality – Unauthorized use of employee perks
E-commerce – Manipulation of digital discount codes
7. Intellectual Property Theft
Employees steal company designs, client lists, trade secrets, or proprietary software, often using confidential data for personal gain or employment elsewhere.
Industries most affected:
Technology & Software Development – Theft of source code or patents
Legal & Consulting – Misuse of client records and sensitive documents
Manufacturing – Employee leaks of proprietary product designs
8. Overcharging Customers & Pocketing the Difference
Employees inflate service costs or add hidden fees, keeping the excess payments for themselves.
Industries most affected:
Auto Repair & Maintenance – Mechanics adding fraudulent repairs
Financial Services – Unauthorized client charges and hidden fees
Retail Sales – Cashiers overcharging customers for discounted items
9. Supply Chain Manipulation
Employees divert shipments or alter supply chain records to steal goods or manipulate pricing, often working with external partners in fraudulent schemes.
Industries most affected:
Warehousing & Distribution – Misrouting inventory for resale
Food & Beverage – Manipulated supplier records for stolen shipments
Manufacturing – Employees redirecting equipment or raw materials
10. Time Theft & Unauthorized Absences
Employees claim to be working while engaging in personal activities, whether leaving early, extending breaks, or logging hours without working.
Industries most affected:
Call Centers & Remote Workforces – Employees misreporting work hours
Retail & Hospitality – Extended lunch breaks or shifts covered dishonestly
Security & Maintenance Services – Guards or staff failing to show up for scheduled shifts
How Paravel Risk Management Uncovers Hidden Theft & Embezzlement
At Paravel Risk Management, our investigators have uncovered hundreds of thousands of dollars in employee theft, fraud, and embezzlement. Using surveillance, forensic accounting, and undercover techniques, we help businesses detect theft before it causes financial devastation.
Protect your company from hidden employee theft today. Contact Nathan Fredrickson at 605-759-8778 or nate@paravelrm.com for expert investigative services.