Guide to Employee Theft Bonds
Are all of your employees ethical and trustworthy? Do they have access to valuable and expensive company assets? Do your employees work directly with customer property? Although we don’t live in Utopia, we do want to think the best of our employees. However, there are some bad apples who might take advantage of your business or customers when no one is looking. To help protect yourself from employee theft followed by possible bankruptcy, you should bond your employees. Here is a short guide that explains how employee theft bonds work and the various types of these bonds that exist.
What are High-Risk Job Positions?
Any employee who has access to valuable company assets could be a potential theft risk. This includes access to automobiles, expensive equipment and of course, cash.
- Accounting: The new Sarbanes-Oxley legislation helps protect corporate accounting in publicly traded businesses, but it doesn’t keep them totally free from the risk of theft through accounting departments. Even the most experienced accounting workers in small to medium-sized business have been known to “work the system” and embezzle funds through skimming, larceny or even fraud.
- R & D: Do your employees have access to highly valuable intellectual property? There are many cases of corporate theft in the research and development department where unscrupulous employees have taken secrets to a competitor and made a hefty profit.
- Door-to-Door: Do your employees work directly in the homes or offices of clients? Plumbers, electricians and even general contractors who work directly at a client’s residence should be bonded to protect from theft and provide clients with peace of mind.
Benefits to Businesses
Employee theft bonds are an expense for businesses, but the benefits outweigh the costs. They are a great marketing tool for attracting customers, especially if the business works in customers’ homes. Customers feel more comfortable hiring a business that guarantees to protect their money and property while on the job.
There is also a significant benefit for recent start-ups. A newly founded business generally does not have a lot of time to accumulate wealth, so it would be likely to fail if an employee steals a significant amount of money. An employee theft bond can reduce the risk of a business failing due to employee theft, because the business would be reimbursed for their loss.
Bond from the Beginning
Employees should be bonded from the moment they are hired. If an employee cannot be bonded due to past theft or other fraudulent activities, it is a good way to sift through candidates to find trustworthy workers.
Employees do not have to know they are bonded, but it’s a good idea to let potential candidates know they might be. Depending on the type of employee theft bond, your company will be protected from loss due to any specific employee theft or collusion among many employees.
How to Bond Against Employees
Many insurance companies provide employee theft bonds that can be purchased through an insurance broker. Brokers have a list of products from several insurance companies that they use to determine which company can provide the best coverage for the best price.
There are three primary types of employee theft bonds:
Name Schedule Fidelity Bond
This bond covers a designated list of employees you provide to the insurance company. Whenever you add or change employees, you simply update the insurance company with the new names. Collecting from a claim on this type of employee theft bond requires absolute proof that a specific employee on the schedule actually stole from you.
Blanket Position Bond
This type of employee theft bond provides blanket protection over a certain position rather than a list of employees. All employees who work in the designated position(s) are covered, and new employees are added automatically. Claims do not require absolute proof that a specific individual committed the stealing.
Primary Commercial Blanket Bond
This type of employee theft bond is much like the blanket position bond except that it covers each employee in your company. And whether one or more employees committed the stealing, you are able to claim a loss for the same amount.
Employee theft bonds are important for businesses to protect themselves against financial loss. Though there are ways you can prevent loss, such as setting up strict job guidelines, checklists and cross verification, an employee theft bond is added security for times when employees find a way to beat the system.