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Will Seasonal Workers Cause Your Shrink Rates to Rise this Holiday Season?

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Amazon, 50,000. Kohl’s, 69,000. Target, 70,000. Macy’s, 83,000. Retailers have announced some impressive seasonal hiring numbers for the 2016 Christmas and holiday season. Totaled, US retailers will hire approximately 738,800 extra part-time workers from October through New Year’s, according to a forecast by outplacement firm Challenger, Gray & Christmas. Unfortunately, these temporary sales associates and stock workers will also cause shrink numbers to rise.

Seasonal workers are, by definition, less attached to their employer. And workplace research shows that the less loyalty an employee feels, the less likely they are to go out of their way to protect a company’s property—and the more likely they are to steal themselves. The University of Florida’s Security Research Project (SRP), an academic research institute focused on retail loss prevention, has found that loss due to shrink grows right alongside the use of short-time and part-time employees—up to 40 percent higher compared to stores with 75 percent or more permanent, full-time employees. Indeed, according to the SRP, once temporary workers comprise more than 50 percent of a retail store’s workforce, shrink enters into “an unacceptable range”—a tipping point at which shrink actually eats away labor savings.

Theft of merchandise by these less-loyal workers is the principal concern. To combat it, retailers should develop a set of standards for conducting background investiga¬tions of temporary hires.

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Studies show that the “extended workforce,” which includes temporary personnel, are screened one-third as often as permanent, full-time workers. But the extent of a retailer’s background screening should be tailored to the sensitivity of the position, not how long they will be employed. (A dangerous or dishonest associate can cause harm on day one.)

Time-to-hire is a significant pressure, but retailers can’t allow it to come at the expense of accuracy and completeness in background screening. Policies for hiring seasonal staff should identify the standards that investigations should follow and provide clear guidelines for resolving questionable findings. If using a temporary agency to hire seasonal workers, a retailer should conduct random spot checks of new hires to ensure that the background check was done in accordance with established protocols.

Limiting the opportunity for seasonal hires to steal is the next step. Restricting access to stockrooms, alarm codes, cash, business checks, computerized records, and keys to company vehicles can help with this. Video audit systems can help identify possible problems by tracking whether stores are following practices that reduce loss, such as breaking down trash cartons to prevent the hiding of stolen merchandise in store trash.

A retailer’s control policies and procedures—which reduce the opportunity for employee dishonesty—are critical to limiting theft by seasonal workers. Such controls can include securing the damaged-merchandise case, inspecting trash, checking for propped-open doors, and conducting bag checks.

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Naturally, there is a limit to the amount of training that it makes sense to provide to seasonal workers, but all new hires should be made aware of policies that outline employee responsibilities, standards of honesty, and general security procedures and the consequences for not following them. Make sure all new employees read the security policy, understand it, and sign it as a condition of employment.

The problem of sweethearting is particularly affected by low organizational commitment, according to a 2012 study by researchers at Michigan State University and Florida State University entitled Service Sweethearting: Its Antecedents and Customer Consequences. Thus, there is a high risk that seasonal hires will commit it. Technology solutions can help to mitigate the risk. For example, the use of camera surveillance system analytics at the point of sale can help retailers spot cashiers who bypass barcode scanners.

Strong personnel strategies can also help discourage sweethearting and should start at the time of hire, concluded researchers. “Firms that use pre-employment screening tests can head off sweethearting if they include measures of personal ethics and need for social approval and then focus on applicants who are high and low on these scales, respectively.” It may also be wise to avoid job applicants who score at the very high end of the risk-seeking scale, researchers added. Finally, the researchers said training is important, and advised retail managers to include discussions on personal integrity and the consequences of deviant behaviors, like sweethearting, during new-hire orientations.

Merchandise theft is not a retailer’s only worry. According to the Center for Identity Management and Information Protection (CIMIP) at Utica College, in Utica, NY, 20.3 percent of all identity theft results from thieves accessing records at their place of employment. The retail industry is uniquely susceptible to identity theft by their employees. Nearly 60 percent of workers who steal personal information at work to commit identity theft work in retail. Financial services ranked second, far behind at 22.2 percent. Problematically, although a criminal history check is valuable, the CIMIP found that 71 percent of identity thieves did not have any prior arrest history, indicating that an employee background check alone is insufficient to guard against an employee identity thief.

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According to a study of identity theft conducted by law firm Waller Lansden Dortch & Davis, “employer records are among the top sources of identity theft.” The study, The Threat of Identity Theft, indicates that high-profile cases from retail, including employees skimming customers’ credit card numbers, “demonstrate the vulnerability of the personal information that businesses maintain about their employees and customers.”

Access to personally identifiable information (PII) should be limited to employees with a legitimate business need, which often excludes seasonal workers. But stores still need to employ strategies to prevent sensitive information from falling into their hands. Following is a list of sample strategies:

  • Enforce a comprehensive information security policy that includes responsible information-handling practices for employee, customer, and other sensitive business records.
  • Train employees with access to sensitive information on how to keep it secure.
  • Store paper documents (and files, zip drives, etc.) in a locked room or file cabinet.
  • During security rounds, confirm hard-copy personnel and customer files are under lock and key.
  • Enforce key controls and implement appropriate building access control.
  • Enforce information disposal practices that are reasonable and appropriate to prevent unauthorized access to PII.

Finally, there is little time to give loss prevention training to seasonal staff, but it’s still smart to provide them with simple instructions that can assist shoplifting prevention, such as to “provide helpful customer engagement.” Just getting them to say hello can both improve the experience of honest shoppers and discourage shoplifting.

The holiday season is drawing closer and, as always, retailers and LP teams will need to keep an eye on shoplifters. Don’t forget the potential risk associated with hiring thousands of short-term workers. Maintain your hiring standards and enforce your controls to keep less-loyal staff from taking a bite out of this season’s profits.

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