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A retailer’s success during peak shopping seasons depends on hiring temporary workers. The seasonal work attracts many types, including college students, retirees, individuals who have been out of the workforce, and even full-time workers looking for some extra money. Unfortunately, it may also attract individuals with dishonest motives.

Seasonal employee fraud can rack up a large amount of loss in a short amount of time. Learn more about what seasonal employee fraud looks like, as well what you can do to prevent it from happening to your stores.

How Big Is the Problem?

Hundreds of thousands of retail workers are hired during the winter holidays. According to the National Retail Federation, retailers expected to hire anywhere from 530,000 to 590,000 temporary workers for the US 2019 holiday season alone, with other regions hiring in similar numbers. Amazon is planning to hire an additional 200,000 workers. However, the winter holidays aren’t the only time of the year when seasonal workers are needed. Depending on a retailer’s vertical, busy times may be found in other seasons, such as spring for home improvement centers.

Seasonal employees keep shelves stocked, prevent long lines from forming, shoulder the additional workload of increased BOPIS transactions, and offer an overall level of support needed to keep consumers happy without frustrating delays. However, as new or temporary workers, they have not had time to develop loyalty. The less loyal an employee is, the more inclined they are to steal.

The University of Florida’s Security Research Project (SRP) found that shrink grows alongside short-term and part-time employees – up to 40 percent higher than stores with 75 percent or more full-time, permanent employees. Additionally, shrink reaches a tipping point once seasonal employees reach 50 percent of a store’s workforce, and it begins to erode labor savings.

How Did We Get Here?

To understand why seasonal employee fraud has become an issue, it’s important to identify the root cause: A decreasing percentage of permanent full-time (and thus, emotionally attached) workers. In 2019 alone, a mix of US unemployment being at a 50-year low as well as rising wages, led to a hiring shortage. Millennials currently make up 65 percent of the seasonal workforce, but retailers are finding it hard to attract them.

With this in mind, retailers who are preparing for busy seasons need to act fast, and that often involves taking shortcuts. Normal hiring procedures include background checks, continuous monitoring, in-depth interviews, and verified references. However, these processes may be stunted, or ignored altogether, to meet deadlines.

“Seasonal employees looking to commit fraud often look for loopholes in faster than normal hiring processes to slip through undetected,” said Eric York, client services field consultant at Appriss Retail. “The time saved by quickly hiring seasonal employees may eventually hurt a retailer simply because they unknowingly hired employees with poor track records.”

The hustle and bustle of peak shopping seasons may also limit how frequently loss prevention teams share information among themselves and other retailers. Several retailers located near each other in a suburb, for example, may not know that an employee fired for theft in one store is now job hopping from store to store to avoid detection.

What Does Seasonal Employee Fraud Look Like?

Employee fraud can take many familiar forms during the holidays, including:

  • Employee-assisted return fraud
  • Sweethearting (giving discounts or free items to friends and family)
  • Stealing merchandise
  • Colluding with conspirators inside or outside the company
  • Acting as facilitators by giving access to loading docks and back doors

However, it’s not always fraud that causes seasonal worker-related loss during holiday seasons. Shortened training time for seasonal workers, in addition to a lack of experience in retail, can cause a lot of errors that can end up looking like fraud. This may include what new employees may see as harmless actions, such as frequently voiding items or making stocking errors that cause inventory problems. These sales reducing activities may be unintentional, but can still cause significant losses that grow if they are not recognized and addressed. In these situations, managers shouldn’t rush to dismiss these employees. Instead, they should try to identify the issues, and train again when possible, to avoid frantically searching for replacements.

Seasonal workers can become scapegoats for established employees who have been committing fraudulent acts. Blaming a new employee for a cash register shortage, incorrectly processed returns, or other flagged transactions are common and often not questioned by managers. Additionally, these employees may perform fraudulent acts on a seasonal employee’s register to avoid being caught.

How Can It Be Fixed?

Training, as well as background checks, are essential parts of preventing seasonal employee fraud. If possible, retailers should aim to start the hiring process earlier so that more in-depth background checks and training can be accomplished.

Retailers should ensure seasonal employees are working in areas with high visibility and routine activities. Layaway and service desk areas, by contrast, typically have more exception-based transactions going on, including returns and price corrections, which can provide easy opportunities for fraudulent behavior. Areas that have a reputation for high theft, including alcohol, cigarettes, and electronics, should also be designated for established employees only.

Seasonal employees should also be prevented from accessing personally identifiable information (PII) from consumers and full-time employees. Fraudulent purchases, deliveries, returns, and loyalty redemptions can be harder to discover when PII is stolen.

Lastly, retailers should create, and rely, on analytics. Setting up custom alerts and monitoring employee outlier behavior throughout the busy season can allow managers to quickly identify potential threats and make decisions that may save from catastrophic loss in the long-run. Even during busy hours when in-person or video monitoring may not be an option, instant analytics can be the eyes and ears of loss prevention professionals and alert them of exceptions as they happen.

Plenty of seasonal workers are brought into stores during busy holiday seasons. Instead of rushing through the hiring process, make it a priority to dedicate enough time to background checks, in-depth interview questions, and training. Be mindful of the jobs assigned to seasonal employees and how they may present opportunities for loss and rely on the analytics you must ensure that procedures are being followed and bad actors are quickly caught. By preparing ahead of time, your store has the best opportunity to boost customer service, prevent loss, and hopefully attract several dedicated future full-time employees. Target, for example, plans to leverage their investment in training seasonal workers and retain approximately 40% of their winter holiday workforce heading into 2020.

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Leslie Nienaber, Digital Marketing Manager, Appriss Retail 

Leslie researches business trends and distills the information for a retail audience. Her marketing experience has covered a wide variety of industries, including promotional products, microbiology, print, and mail. She spent five years in the retail industry before graduating with her Bachelors in Business Administration from John Carroll University.

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