Most business owners picture fraud as something that happens to other companies — a headline about a rogue accountant or a scandal at a big retailer. In reality, fraud committed by employees is one of the most common and most costly threats facing UK businesses of every size, and it's rarely as dramatic as the headlines suggest. It's more often quiet, gradual, and hidden in plain sight: a false expense claim here, a 'sick day' spent working a second job there, stock that slowly disappears from a warehouse.

The scale of the problem is significant. Independent research from Crowe, Peters & Peters, and the University of Portsmouth puts UK private sector fraud losses at close to £158 billion a year, and internationally, fraud investigators estimate that the typical organisation loses around 5% of its annual revenue to occupational fraud — much of it committed by trusted staff rather than outside criminals. For a mid-sized business, that's not a rounding error. It's a material hit to the bottom line, often absorbed quietly because it's easier to write off a loss than confront the possibility that it was an inside job.

This blog looks at the most common forms of employee fraud, the warning signs business owners often miss, and how covert surveillance — used lawfully and professionally — can provide the clear, court-admissible evidence a business needs to act.

The Most Common Types of Employee Fraud

Employee fraud takes many forms, and it isn't always about large sums of money. Some of the most frequent examples we encounter include:

False sickness and 'working while signed off'. An employee claims to be too unwell to work, while in fact undertaking paid work elsewhere, running a side business, or simply enjoying time off at the company's expense.

Moonlighting during contracted hours. Staff — particularly those working from home or on flexible contracts — taking on other paid work during hours they're being paid to work for you.

Expense and mileage fraud. Inflated or entirely fabricated expense claims, false mileage logs, or claiming for personal spending as business costs.

Stock and inventory theft. Goods, materials, or equipment going missing gradually enough that it's dismissed as 'shrinkage' rather than recognised as theft.

Time theft. Falsified timesheets, buddy clocking-in schemes, or simply not doing the hours a business is paying for.

Conflicts of interest. Employees secretly running a competing business, steering contracts to friends or family, or taking kickbacks from suppliers.

Individually, some of these might seem minor. Collectively, and left unchecked, they erode profitability, damage trust within a team, and can create serious legal exposure if a business fails to act once it has grounds for suspicion.

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Why Employee Fraud Is So Hard to Spot

Employee fraud is difficult to detect for a simple reason: it's committed by people the business trusts, who understand its systems, and who know exactly how to stay under the radar. Unlike external theft or cybercrime, there's rarely an obvious break-in or alarm bell. Instead, there are usually small inconsistencies that build up over time — figures that don't quite add up, patterns in absence or availability that feel a little too convenient, or a gut feeling among managers that something isn't right.

Occupational fraud research consistently shows that these schemes often run for many months before they're identified, and that tip-offs from colleagues — not audits or accounting checks — are the single most common way fraud comes to light. That's a difficult position for any employer to be in: acting on a hunch or a colleague's concern, without solid evidence, risks a grievance, a difficult HR process, or even a claim for unfair treatment if it turns out to be unfounded.

This is exactly the gap covert surveillance is designed to close.

How Covert Surveillance Helps

When a business has reasonable grounds to suspect fraud but lacks concrete proof, professionally conducted surveillance can establish the facts before any formal action is taken. This typically involves:

•      Discreet observation of an employee during working hours or periods of certified sickness absence

•      Documenting evidence of a second job, competing business activity, or work being carried out while signed off sick

•      Verifying whether time and location claims — such as mileage logs or reported site visits — match reality

•      Establishing whether stock, equipment, or company property is being removed or misused

Crucially, this evidence is gathered in a way that's designed to hold up. A professional investigator will document dates, times, locations, and observations methodically, often supported by photographic or video evidence, so that what's presented to HR, a tribunal, or a court is factual and defensible — not just an employer's suspicion.

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Getting It Right Legally: Why Professional Surveillance Matters

It's worth being clear about something important here: employers cannot simply do whatever they like in the name of investigating suspected fraud. UK data protection law and the Human Rights Act both place limits on how surveillance can be conducted, and getting this wrong can undermine an otherwise legitimate case — or expose the business to legal risk of its own.

This is why covert workplace investigations should always be:

•      Proportionate to the suspected fraud — surveillance should be a considered response to a genuine, reasonable suspicion, not a blanket monitoring exercise

•      Properly authorised internally, with a clear business rationale documented before surveillance begins

•      Conducted by a licensed, insured, ICO-registered investigator who understands data protection obligations

•      Limited to what's necessary to establish the facts, rather than intrusive for its own sake

Handled this way, surveillance evidence is far more likely to be accepted in a disciplinary hearing, an employment tribunal, or civil proceedings — and far less likely to be successfully challenged on the grounds that it was obtained unfairly or excessively.

What Happens Once You Have the Evidence

Surveillance is rarely the end of the process — it's the evidence base that allows a business to act with confidence. Once findings are documented, they typically feed into:

Disciplinary proceedings. Clear, dated evidence gives HR a solid foundation for a fair and defensible disciplinary process, reducing the risk of a successful unfair dismissal claim.

Recovery of losses. In cases involving theft or financial fraud, documented evidence supports civil recovery action or, where appropriate, a police referral.

Insurance claims. Where a business holds fidelity or crime insurance, insurers will typically require solid evidence before processing a claim relating to employee dishonesty.

Policy and process improvements. Understanding exactly how the fraud occurred often reveals gaps in internal controls that can be closed to prevent repeat cases.

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Warning Signs Worth Taking Seriously

While every case is different, certain patterns tend to recur across employee fraud cases. None of these prove wrongdoing on their own, but taken together they may justify a closer look:

•      An employee living noticeably beyond their apparent means

•      Reluctance to take holiday, or to hand over tasks to colleagues

•      Sickness absence that doesn't quite fit the picture — frequent, conveniently timed, or hard to verify

•      Discrepancies between reported activity (mileage, site visits, hours) and other evidence

•      Unusually close, undisclosed relationships with suppliers or contractors

•      Stock or cash discrepancies that keep being explained away as 'admin errors'

If several of these signs are present, it's usually far safer — for the business and for the employee, if the suspicion turns out to be wrong — to gather clear evidence before taking any formal action, rather than relying on assumptions.

Why Businesses Choose to Work With a Professional Investigator

It can be tempting for a manager or business owner to try to investigate suspicions themselves — checking social media, driving past an employee's house, or asking colleagues to keep an eye out. In practice, this rarely ends well. It's time-consuming, it risks tipping off the employee, it can breach data protection obligations without the business realising, and any evidence gathered this way is far more easily dismissed as unreliable or unfair if the matter ever reaches a tribunal.

A professional investigator brings experience, discretion, and — critically — a working knowledge of what evidence needs to look like to actually be useful. They know how to conduct surveillance lawfully, how to document findings properly, and how to advise on next steps once the facts are established, all while keeping the process as discreet and low-risk as possible for the business.

Final Thoughts

Employee fraud is uncomfortable to think about, particularly when it involves someone a business has trusted for years. But ignoring the signs, or acting on suspicion alone, tends to make the situation worse rather than better — either allowing losses to continue, or exposing the business to risk if action is taken without proper evidence.

Covert surveillance, carried out professionally and lawfully, gives businesses a reliable way to establish the truth before making difficult decisions. It protects the business's finances, supports a fair and defensible process for everyone involved, and, in many cases, brings a quiet, ongoing problem to a clear and manageable resolution.

If you suspect fraud within your business and want to discuss your situation in confidence, don't hesitate to get in touch with us here at Anderson & Co, for a free, no-obligation consultation.

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