Discovering or even just suspecting employee theft can send a jolt through any business owner. It’s not just about a missing item or a few dollars; it strikes at the heart of trust, impacts your bottom line, and can even damage your company’s reputation.

The immediate reaction might be to confront the situation head-on, but a misstep here can quickly escalate into costly legal battles or a fractured team. We understand that for small business owners, dealing with sensitive situations like this often feels overwhelming, pulling you away from the strategic work that grows your business.

This is where HR support can be invaluable. Approaching suspected theft with a calm, evidence-based, and fair process is crucial. It’s about protecting your business, your profits, and your peace of mind.

The hidden costs of getting it wrong

Suspected theft, if not handled correctly, can lead to far more than just the value of the missing goods or cash. We’ve seen firsthand how a poor response can:

• Harm your profits: Beyond the direct loss, there are investigation costs, potential legal fees, and the impact on employee morale and productivity.
• Damage trust and reputation: Internally, a mishandled situation can breed suspicion and resentment among your team. Externally, word can spread, affecting your standing with customers and partners.
• Increase legal risk: Terminating an employee without a thorough and fair investigation can open the door to wrongful termination lawsuits, resulting in significant time, money, and hassle. It’s crucial to get this right from the start.

Starting with facts: Gather your evidence

Before taking any action, focus on gathering objective, verifiable information. Remember that accusations of theft can be deeply upsetting and damaging if unfounded, so approach the situation with care and fairness. The goal isn’t to catch someone; it’s to understand what truly happened based on facts. Here’s where to start:

• Review records: Compare inventory levels against sales and purchase data. Look for discrepancies in the cash register or point-of-sale (POS) reports.
• Collect statements: Secure written witness statements from any employees who observed suspicious activity. Save relevant emails or messages.
• Document incidents: Keep detailed, objective notes of specific incidents, including the date, time, and names of those present. The more concrete evidence you have, the stronger your position.

Conducting a fair and confidential investigation

Once you have initial evidence, it’s time to act carefully and professionally. This protects your business and ensures you’re following due process:

• No public confrontations: Absolutely do not discuss allegations or confront the employee in front of others. This can be humiliating and legally risky.
• Consider administrative leave: If the allegations are serious and pose a risk to the business or other employees, consider placing the employee on paid administrative leave while you conduct an investigation.
• Formal meeting: Invite the employee to a formal investigation meeting. Allow them to bring a witness (if your policy permits) and respond to the allegations.
• Follow your policies: Always adhere to your employee handbook, internal procedures, and applicable laws. Conduct a prompt, thorough, and impartial investigation.
• Detailed notes: Keep objective and detailed notes of all conversations and findings. Maintain strict confidentiality throughout the process.

When law enforcement needs to be involved

Deciding whether to involve the police is a serious step. We recommend considering it in these situations:

• Significant value: If the value of the stolen items or money is substantial.
• Credible evidence: When you have strong, credible evidence of deliberate theft.
• Ongoing risk: If there’s an ongoing risk to your business or other employees.

Always remember that police involvement doesn’t replace your duty to follow a fair internal process. It’s often wise to consult with legal counsel before reporting to the police.

Mistakes to avoid that can cost you dearly

In the heat of the moment, it’s easy to make missteps that can quickly unravel your case and lead to bigger problems. Handle concerns thoughtfully to protect both your team and your business. Avoid these common pitfalls:

• Reacting in anger: Strong emotions can cloud judgment, escalate tensions, and compromise fairness.
• Discussing allegations publicly: Sharing details before the facts are verified can harm reputations, lead to defamation claims, and destroy trust.
• Letting workplace gossip spread: Control the narrative to maintain a professional environment.
• Terminating employment without investigation: Skipping a fair, documented review exposes your business to serious legal and ethical risks.
• Ignoring the issue: This sends the wrong signal to your team and can encourage further misconduct.

Approach every step with composure, respect, and objectivity. Doing so protects your integrity, your employees’ dignity, and your organization’s credibility. Beyond that, each of these mistakes can damage your case, erode morale, and significantly increase your risk of a lawsuit.

Proactive steps for a stronger business

The best defense against employee theft is a good offense. Taking proactive measures can reduce your risk and strengthen your business culture:

• Review and update policies: Ensure your theft, conduct, and investigation policies are clear, current, and legally compliant.
• Train your managers: Equip your leaders with the knowledge and tools to handle investigations, document findings, and ensure due process is fairly and effectively handled.
• Create resources: Develop a simple investigation checklist and template letters for common scenarios.
• Strengthen controls: Implement basic financial and operational controls, such as regular inventory counts, restricted POS permissions, and secure access controls. Getting these foundations right helps prevent problems before they start.

Ready to ensure your business is protected?

Dealing with suspected employee theft is complex and fraught with potential pitfalls. It requires a calm, strategic approach that balances protecting your business with treating employees fairly and lawfully. If you’re facing a situation like this, or if you want to ensure your business has the right policies and training in place to prevent future issues, we can help.

As an HR consultancy, Montani Consulting provides proactive support, helping small business owners navigate challenging people issues with confidence. If you’re looking for HR support, we can review your situation confidentially, help you map out next steps, and ensure your policies and processes are solid.

Book a confidential call today, and let’s discuss how we can help you safeguard your business and focus on what you do best.