Battling Employee Dishonesty

Battling Employee Dishonesty

by Randy J. Tipton

Tanning salon owners rely on employees to be loyal, trustworthy, honest and dedicated; however, temptation, greed, social and financial pressure can drive some to dishonesty.

Forging and hiding receipts, pocketing loose change and stealing merchandise are common occurrences. There even have been reports of managers creating bogus payrolls, over-billing expenses and committing purchase fraud.

Salon owners need to recognize the risks of theft, prevent dishonest employees from working at their businesses, and understand the benefits of appropriate insurance coverage.

What can a salon owner do to protect against employee dishonesty? In-house theft can be hard to detect, especially if the criminal is good. However, there are several ways salon owners can minimize risk. Start by watching for unusual occurrences such as discrepancies in cash amounts and missing supplies and merchandise. Take notice of your employees, watch for unusual work hours, poor work performance, constant complaining and defensive behavior.

Implementing an anti-theft regime also can reduce risk because employees will be less likely to steal if they think there is good chance of being caught. Therefore, perform regular surprise visits and audits to keep track of merchandise and receipts. When employees take time off, use their replacements to double-check payroll and accounting. Organize an awareness program to educate workers about crime and keep them on the lookout for theft.

Finally, know who you are hiring. Some people have theft in mind from the start. Avoid hiring these candidates by conducting thorough background checks and verifying previous job references.

In addition to deterring crime, secure an adequate amount of employee dishonesty insurance. Losses due to employee duplicity are excluded under most commercial policies, and many owners don’t realize the value of this coverage.

In most cases, your business property and liability insurance package can be endorsed to provide coverage against employee dishonesty, loss of money and securities from your premises, as well as loss of other covered business property such as computers.

An important point to know about employee-dishonesty claims is the act must be committed with “manifest intent” to receive personal gain. In other words, the loss must be the result of an unethical act such as lying, through which the employee sought personal gain. Without manifest intent, these claims generally are disallowed.

Inventory shortage claims also are excluded from employee-dishonesty policies because losses can occur from a variety of reasons besides theft. Also consider that money and security claims and business-personal claims are not the only losses that can be covered under employee dishonesty.

Endorsements might be available at extra cost to protect against damages from check forgery, credit-card misuse and computer fraud to supplement your existing protection.

This article is a guideline to aid in minimizing risk to tanning salons. The information it contains is intended to be of general interest and does not address the circumstances of any particular individual or entity. Nothing in this article constitutes legal advice nor does any information constitute a comprehensive or complete statement of the issues discussed or the laws relating thereto.