By Victor Orandi
A leading cause for summary dismissal of employees in Kenya is acts of theft by employees. Employee theft includes larceny, pilfering of cash, assets, expense fraud and reimbursement for unearned time.
According to PWC’s 2018 Global Economic Crime and Fraud Survey: Kenya Report, 75% of business stakeholders indicated that they had experienced a form of economic crime. In the businesses surveyed, there was a 49% incidence level of employment-related economic crime. Businesses surveyed reported losses ranging between KES 10M and KES 500M on account of employee theft over the past two (2) years.
In most instances, an employer’s most immediate and oftentimes only remedy is summary dismissal of the deviant employee. However, this only serves to terminate the employment relationship without remedying the monetary loss suffered by the employer. A report to the police, arrest and subsequent prosecution of the fraudulent employee does little in the way of ensuring recovery of losses incurred, and oftentimes, due to the bureaucracy of a criminal prosecution, employers lose interest in pursuing justice.
On the other hand, civil suits for recovery are long-winded and expensive, with no guarantee that the employer would recover the loss coupled with the legal fees incurred in pursuing the matter. None of these options is particularly compelling for an employer whose primary requirement is to be made financially whole.
Fidelity bonds are recognized under the Insurance Act, Cap 487 Laws of Kenya. Private insurance companies offer fidelity insurance policies to indemnify businesses against employee theft, fraud or disloyalty. Employers would be prudent to consider the protection offered by such policies. Employers can specify a certain category of employees (for example, accountants or cashiers) who portend significant risk. The insurance policy also imposes a duty on the employer to mitigate the loss they seek protection. Some of the precautionary measures employees may consider include carrying out background checks on employees to ascertain they are in good standing. Once employees are on board, appropriate controls to mitigate against economic loss need to be in place to comply with the obligation of reasonable care imposed upon an employer seeking compensation under the insurance policies.
We recommend that in addition to the remedies of termination and filing a police report as an employer, you ought to consider getting in touch with your insurance broker to ascertain what products may be best suited to your business. It would help if you also took careful note of the obligations imposed by the insurer under the policy for you to claim under a fidelity bond successfully.