Dishonesty in the Workplace
Allegations of Dishonesty Can Be High-Risk for SMEs
Dishonesty in the workplace can arise in many different situations. It can be a very obvious, immediate occurrence, or it can be longer-term, involving a less obvious series of events. Every business is a potential target, whether it is from an employee fiddling with their expenses or a customer slipping goods into their bag. As the dishonest person’s confidence grows, their level of activity will similarly grow until they are leading a full-blown operation that will destroy productivity and morale within your business. Therefore, dishonest behaviour of any nature should not be ignored.
There have been cases where long-serving and trusted employees have committed significant financial misconduct over extended periods before concerns were identified. In one widely reported case, a part-time accounts employee stole substantial sums from her employer over a prolonged period before the matter eventually came to light.
Workplace dishonesty can take many forms, including:
- Falsified expenses,
- Misuse of company cards,
- Unauthorised overtime claims,
- Theft of stock or cash,
- Manipulation of records, or
- Dishonest sickness absence claims.
What To Do If You Suspect Dishonesty
Whether you suspect dishonesty or another employer brings their suspicions to your attention, never jump to conclusions about who may or may not be guilty. Your initial reaction may be one of shock and anger that you are harbouring, let alone paying, a dishonest employee. However, a knee jerk reaction to dismiss the employee in question prior to carrying out a full investigation and a fair disciplinary hearing will find you facing a claim for unfair dismissal.
Depending on the circumstances and the seriousness of the situation, you may need to report the incident to the police. If you notify the police you must continue to deal with the employee according to your own internal disciplinary procedure, regardless of what action the police choose to take.
Top Tip
Where an employee draws you attention to a situation and a particular employee, you should thank your informant for bringing the matter to your attention and advise them that you will conduct an investigation. Don’t jump to any conclusions. The information may be inaccurate, wrongly interpreted a situation or even malicious!
Investigate The Allegation
Get your investigation underway immediately, before the rumour mill goes into overdrive or the vital evidence is lost.
When you have collected all the evidence together do not rush into a decision. Decide whether you believe the allegations and be clear of your reasons for deciding either way. If the allegations don’t stand up, inform the employee that their name has been cleared and if they were suspended agree a date for them to return to work. If the allegations appear well founded you are dealing with a disciplinary matter and should notify the employee that you are invoking the company’s formal disciplinary procedure.
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Suspension Should Not Be Automatic
It may be necessary to suspend the employee while the investigation takes place. This is a serious step and should be considered very carefully as even if the employee is later exonerated, the suspension will have been obvious to other employees and there may be a feeling of ‘no smoke without fire’.
If you consider suspension you must explain to the employee your reasons for taking that step, how long the suspension is likely to last and that they will remain on full pay throughout.
Suspension of an Employee for Alleged Misconduct
Dishonesty Cases Often Escalate Quickly
Allegations involving dishonesty can quickly become emotional and difficult to manage, particularly within SMEs where trust and working relationships are closely connected. Employers may feel pressure to act quickly once concerns arise, especially where finances, customers or confidential information are involved.
However, rushed decisions, incomplete investigations or inconsistent treatment can significantly increase the risk of unfair dismissal claims and employee disputes. Even where serious concerns exist, employers should still ensure allegations are investigated fairly and supported by appropriate evidence.
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A Breakdown in Trust Alone May Not Be Enough
In cases involving suspected dishonesty, employers will often say that the employment relationship has broken down and that trust and confidence no longer exist. While this may genuinely reflect how the employer feels, a breakdown in trust alone will not automatically make a dismissal fair.
Employment Tribunals will usually still consider whether the employer:
- Carried out a reasonable investigation,
- Gathered appropriate evidence,
- Acted consistently,
- Followed a fair disciplinary process, and
- Reached a reasonable decision based on the information available at the time.
This can be particularly important within SMEs where business owners and managers often work closely with employees and allegations of dishonesty can feel highly personal. In these situations there can sometimes be pressure to act quickly once concerns arise, especially where finances, customers or confidential information are involved.
However, decisions based primarily on suspicion, assumptions or emotional reactions rather than evidence and process can significantly increase the risk of unfair dismissal claims. Employers are therefore often best protected by ensuring concerns are investigated carefully, documented properly and managed through a fair and proportionate disciplinary procedure.
Context and Proportionality Still Matter
Not all allegations involving dishonesty are identical and employers should be careful not to treat every situation in the same way automatically. The surrounding circumstances, the seriousness of the allegation and the available evidence will often be important when deciding how to respond appropriately.
For example, there can be a significant difference between:
- Deliberate falsification of records,
- Intentional theft or fraud,
- Misunderstandings or administrative errors,
- Isolated poor judgement, or
- Conduct where there may be mitigating circumstances.
Employers should therefore avoid reaching conclusions too quickly before the facts have been properly established. In some situations, what initially appears to be deliberate dishonesty may later involve confusion, poor communication or failures in process rather than intentional misconduct.
Employment Tribunals will often consider whether an employer acted reasonably in the circumstances and whether the response was proportionate to the concerns identified. Factors such as the employee’s role, level of responsibility, previous conduct, length of service and the impact on the business may all become relevant.
A fair and proportionate approach can help SMEs make more balanced decisions while reducing the risk of rushed disciplinary outcomes, inconsistent treatment or unnecessary legal disputes.
Documentation and Evidence Are Critical
Where allegations of dishonesty arise, employers should ensure decisions are based on evidence rather than assumptions or workplace rumours. In many cases, the quality of the investigation and the supporting documentation will be just as important as the allegation itself.
Depending on the circumstances, relevant evidence may include:
- Investigation notes,
- Witness statements,
- Financial records,
- Timesheets,
- Emails and messaging records,
- Audit trails,
- Access logs,
- CCTV footage,
- Stock records, or
- Other digital records.
Employers should ensure evidence is gathered fairly, reviewed objectively and retained securely throughout the investigation process. It is also important that investigation findings, meetings and decisions are documented clearly so that the employer can later demonstrate how conclusions were reached.
In practice, poorly documented investigations can significantly weaken an employer’s position, particularly where dismissal is later challenged through a grievance or Employment Tribunal claim. Missing notes, inconsistent records or unclear reasoning can make it difficult to show that concerns were investigated properly or that decisions were reasonable in the circumstances.
Businesses should also remain aware of GDPR and confidentiality obligations when handling investigation materials. Access to sensitive information should usually be restricted to those directly involved in the investigation and records should be stored securely and retained appropriately.
Clear documentation, evidence-led investigations and consistent record keeping can help SMEs manage workplace dishonesty concerns more fairly while reducing legal and employee relations risks.
GDPR, Privacy and Confidentiality Considerations
Employers should also consider data protection and privacy obligations when investigating allegations of dishonesty. Workplace investigations can involve reviewing sensitive employee information and businesses should ensure any monitoring or evidence gathering is proportionate, justified and handled carefully.
Depending on the circumstances, investigations may involve reviewing:
- CCTV footage,
- Emails and messaging records,
- Computer or device access logs,
- Audit trails,
- Swipe card records,
- Telephone records, or
- Other electronic data.
Before accessing or reviewing employee data, employers should consider whether the investigation is necessary, proportionate and supported by legitimate business reasons. Access to information should usually be restricted to individuals directly involved in the investigation process and confidential information should not be shared more widely than necessary.
Care should also be taken to protect confidentiality during investigations, particularly where allegations have not yet been established. Poor handling of confidential information, workplace gossip or unnecessary disclosure of allegations can create additional employee relations, reputational and GDPR risks for SMEs.
Clear policies covering IT usage, monitoring, confidentiality and workplace investigations can help businesses manage concerns more consistently while demonstrating a fair and responsible approach to employee data and privacy.
Rebuilding trust
Where trust has been broken through high profile executive wrongdoing the senior management team must quickly regain credibility amongst the workforce. This can be achieved if you are seen to be handling the issue with fairness and objectivity and through an extensive communication effort:-
- Avoid spin
- Pass on all the news, even the bad
- Communicate verbally
- Offer the opportunity for dialogue
- Listen
- Don’t disappear
- Remind your staff what the business needs to achieve to be successful and how they contribute to that success
- Ask people to move on and begin to focus on the future again
Preventative measures
Effective internal controls can drastically reduce the risk of dishonesty within your business.
- Define and set up a policy for the handling of all goods in and out of the business.
- Set up a clear procedure for dealing with any damaged or out of date products.
- Ensure that you have adequate security measures in place for handling payments via the internet or over the telephone.
- Decide on appropriate purchase or payment authorisation levels and ensure that single transactions above that amount require a second signatory.
- Ensure that signatories never sign a cheque that does not have relevant supporting documents.
- Separate key duties – having the same person in charge of more than one procedure, for instance placing orders and preparing invoices would allow the individual to prepare fictitious invoices for dummy orders and pocket the cash. Wherever possible separate or rotate these duties amongst several employees.
- Ensure that all staff take their holidays – dishonest staff will be worried that their deceit will be found out if they are absent.
‘TOP TIPS’
A sound and well understood disciplinary policy is essential. Dishonest staff must be aware of the consequences that will follow if they are caught stealing.
The essential measure in protecting your business from staff theft comes not in setting rules but at the pre-employment stage. I continually stress the importance of following up on references yet surprisingly find employers displaying a naïve willingness to take CVs at face value.
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Need Support Managing a Workplace Investigation?
Allegations of dishonesty can be difficult and high-risk for SMEs to manage, particularly where trust has broken down or dismissal is being considered. Early HR advice can help businesses investigate concerns fairly, improve documentation and reduce the risk of procedural mistakes.
KEA HR supports SMEs with workplace investigations, disciplinary processes and practical HR guidance for complex employee relations issues.
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