The key to combating workplace theft, which costs businesses a fortune, is vigilance and a clear code to distinguish a perk of the job from stealing, writes Áine Flynn

Employees in general are honest but those who are not can greatly affect earnings in any business through widespread theft and pilferage. In the Republic, it is estimated that more than 60 per cent of all theft is employee-related.

In the US, the American Chamber of Commerce reported last year that an employee is 15 times more likely to steal from their employer than a non-employee and that 75 per cent of this type of crime goes undetected and, therefore, unreported.

Although workplace theft in the Republic has not reached the heights of some of the high-profile corporate scandals in the US, it is nonetheless a risk that should not be ignored. Employee theft can occur at all levels of the organisation - from large financial transactions to routine day-to-day commercial activities, time-wasting or even stealing.

Insp Joe McHugh from the Garda Bureau of Fraud Investigation says work-based theft can manifest itself in different ways from "misappropriation of funds, misuse of credit and laser cards, internet fraud, time wasting and many others".

The Garda believes many cases do not reach it, as firms often hastily dismiss the employee to get rid of the "headache" if they have enough evidence against them, or solve the issue internally in other ways.

Putting things into perspective, if someone steals €40 worth of goods per week, they would have stolen €1,000 in 25 weeks. If a business achieves a net profit margin of 3 per cent, the business will need to sell €33,333 or more of goods to replace the €1,000 that has been stolen.

Insp McHugh says the fraud bureau deals with cases "involving very large sums of money, involving employees, partners or directors of the business".

A number of financial institutions, which seem particularly prone to internal fraud, are currently undergoing investigations by the bureau. Along with PricewaterhouseCoopers, the bureau designed a policing plan called Fraud Alert that provides useful advice to organisations about identifying instances where theft is occurring.

Employees who commit fraud often believe they are underpaid or that their work is undervalued. They rationalise theft by believing they are entitled to a slice of the profits. Situations where one staff member has control of a budget with little or no oversight also present a higher risk of theft. Fraudsters in these circumstances believe discrepancies will go undetected because they see a lack of control in the business.

Underlying social or personal problems in employees' lives can cause certain people in privileged positions, like those in a directorship or partnership, to misappropriate money or instruct misappropriation for their own benefit.

But where does the employer draw a line between a perk of the job and stealing? No hard and fast rules apply. Giving incoming workers written or oral rules of conduct, describing the risks and consequences involved in dishonesty or corruption within the business is a key management function.

As Mr John Barry, legal adviser to the Irish Business and Employers Confederation (IBEC), says, theft "is a very serious allegation to make against an employee" and "satisfactory evidence must be provided".

"Employers can pay dearly if allegations prove unfounded," Mr Barry adds.

They could be sued for defamation or slander, which could result in large legal bills and compensation to the injured party of anywhere between €40 and €50,000.

Mr John Deane, of Observer Check Systems, uses a standard set of guidelines when dealing with the problem.

"Dismissal is the last resort," he says. "The employee must first be suspended for a reasonable length of time, for example 48 hours, with full pay. Then they should be asked back onto the premises after a full investigation has taken place."

Employees must be given every opportunity to explain themselves, and are also entitled to representation and must be told so by the employer.

"The Labour Court can throw out the case if proper procedures are not followed," Mr Deane points out.

"When people are suspended or dismissed, they tend to come to the union," says SIPTU's Ms Barbara Kelly. "It is our duty then to defend them whether an offence has been committed or not.

"We try to negotiate with the employer over dismissal or suspension and look at any previous offences," she says. There is a standard disciplinary procedure, which is there to encourage people who fail to reach the acceptable levels of conduct to find a better level of commitment to the job.

Studies in Britain have pointed out that people begin thieving on the job after the first couple of weeks in employment. The Garda Fraud Bureau stresses that the recruitment process provides the first and easiest opportunity to prevent internal theft. All references should be checked and details of CVs questioned at interview to highlight any inadequacies or discrepancies.

Vigilance is a crucial element in preventing staff theft or any form of shrinkage, and stores, accounts and systems should be checked regularly. Closed-circuit television can be an effective deterrent but a poor-quality picture caused by lack of focus or bad lighting can prevent the gathering of important details. If you are going to instal security features, businesses should ensure they are regularly monitored and serviced.

Some firms also use covert surveillance to monitor staff behaviour, without the employee's knowledge. As current legislation stands, it is not illegal to film people in public or at work covertly, except in places where personal privacy would be grossly invaded. However, it remains unlawful to tape their voice without their prior knowledge.

A growing issue for business is the abuse of internet and e-mail facilities for private use at work. The main concerns are time wasting and the legal implications of inappropriate material being downloaded from the internet and stored on work computers, for which the company is responsible.

The director of the Telecoms and Internet Federation in IBEC, Mr Tommy McCabe, says every company should have a clear policy on internet usage. "The absence of a policy may lead to time wasting, which, if excessive, is a form of theft," he said. Mr McCabe likens it to making private telephone calls from work. "Like telephone calls, the use of the internet and e-mail facilities should be carefully monitored."

The bottom line for management is that prevention is the most effective counter to workplace theft. Favourable working conditions, which encourage a good work ethic and discourage adverse behaviour, are pivotal in allowing owners and managers to identify, regulate and indeed eliminate losses.

In the meantime, if a business is leaking cash and there seems no legitimate explanation for it, perhaps the answer lies right under the nose of the employer. Most workers, like most of society, are honest but, in a competitive world, even the most trusting business owner cannot ignore the possibility of internal theft.