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Top Tips For Investigating Employee Fraud

If you suspect an employee of fraud there are some key points you should know for the investigation you will need to carry out. Learn more by watching the video below.


The first consideration for many employers is whether or not to suspend. We would normally recommend that someone is suspended if under an investigation for fraud. The reason to suspend an employee under investigation for fraud is to get them away from the evidence to stop them from tampering with evidence.

Don’t underestimate the significance of suspending someone, particularly a senior employee. It is sometimes said that ‘suspension is a neutral step’, however, it tends not to be. People who are suspended very rarely return.

You need to consider whether you have the evidence to back up the allegations that you are making. So before you suspend you should be reasonably sure that there is something very serious which has gone on.

Don’t speak to the individual suspected of fraud until you have sufficient information and evidence.

One of the questions employers often ask is ‘should I contact the police?’ and generally speaking there is no obligation to contact the police about your suspicions of fraud.

In fact, there is a significant downside to going to the police first. The downside is that the police are likely to want to investigate and will ask you to stop your investigation until theirs is complete. The problem with this is that the police investigation could take weeks, or perhaps even months. During this time you will be paying that individual and it could cost your business a lot of money. Meanwhile, you are prevented from carrying out your own investigation.

My advice to employers considering whether or not to contact the police about their suspicions of employee fraud is to think twice. Sometimes the best option is to deal with it internally, through your own disciplinary process and then, if you feel the need, inform the police at that later stage.

One of the biggest mistakes we see our clients make when investigation potential fraud is over computer equipment. Very often managers and business owners do not realise the significance of securing computer equipment. Too many people try to find out evidence themselves from laptops, computers and mobile phones and in doing so they destroy the evidence.

Searching through computer equipment for fraud and render that evidence unreliable so if you suspect fraud that might be evidenced by computer equipment, whether it is a smartphone, desktop computer, tablet or laptop, secure the equipment and do not touch it.

Keep it locked away in a room where you won’t be tempted to turn it on until a forensic computer expert with the necessary software can attend to extract the evidence. This way the evidence is sure to be presented to the court in an acceptable form that will not be open to challenges, or claims that the evidence has been prejudiced by inexpert, amateur attempts to extract it.

Another important thing to bear in mind is that when you speak to the employee you suspect of fraud for the first time you should do so under circumstances where they have all of their computer equipment on them. This way you can confiscate it from them at once and they do not have any opportunity to change, modify or destroy that evidence.

If you suspect an employee of defrauding your business the process you need to follow to actually dismiss them is relatively well known. You should have a disciplinary meeting and then, if you feel there is evidence come the end of that disciplinary meeting then there is no doubt that fraud would always justify dismissal.

One thing I would always advise in the situation where you are considering dismissing an employee for committing fraud against your business is to hold an investigation meeting with them before the disciplinary meeting.

The key meeting is often the investigation meeting before the disciplinary meeting. This is because the law requires that as well as investigating the fraudulent act you investigate the potential explanations, justifications and excuses.

In order to investigate your employee’s explanation behind the suspected fraud you must find out what they are at an investigation meeting. Too many employers find out these explanations for the first time at the dismissal meeting itself.

In the Employment Tribunal to show you acted fairly as an employer it is often not the investigation into the offence of fraud that is the most important thing but showing that you investigated the explanation and the excuses just as much as you investigated the actual fraud.

Slater and Gordon Lawyers act for SMEs who have been victims of fraud. Contact our business employment solicitors for business on 0800 916 9052 or contact us online.

Jim Lister is a business adviser and employment lawyer with Over 25 years’ experience. He works from our Manchester office on Mosley Street.

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