The stories of trusted, long-term employees charged with embezzling money from their employers just keep coming:

• There’s the case of the bookkeeper who was charged with stealing over $100,000 from a concrete company. In a plea deal, she pleaded guilty to embezzling $5,000, got a 45-day sentence and was ordered to pay $50,000 in restitution. Then she went to work for a department store and stole $17,000 worth of merchandise and gift cards. Maybe that’s how she planned to pay the restitution.
• Another bookkeeper took trips, bought expensive cars and had plastic surgery – while making about $20,000 in salary. Still another worked for a couple for 30 years, taking money all the while. His $1 million theft was only found out when the business owners wanted to sell the company and retire.

Unfortunately, these types of fraudulent activities by employees are not unusual. We just don’t hear about the thousands of incidents that go away quietly. Many stories are never reported to the press, because they are not reported to the police. Whether out of embarrassment or fear of harming their business, many companies deal with these crimes on their own.

But the publicity can be helpful to other small businesses, since they are the most likely to be victimized. With one person responsible for writing checks, making bank deposits and reconciling statements, fraud is much more likely. Splitting these duties reduces the risk, but small companies often cannot afford the extra personnel. Hiring an outside bookkeeper is one way to alleviate the problem.

Why do employees steal? They usually have three traits: opportunity, need and rationalization. It could look like this: Your cashier figures out a way to take money that you’ll never notice. He’s behind on his rent and needs cash. And besides, he works really hard and you don’t pay him enough. He gets away with it, so he does it again. And again. And before you know it, you’ve lost $20,000. You never imagined this person would do anything like this. Chances are, he never has before.

If your company is victimized by an employee, reporting the crime can protect other businesses. When employees are properly screened prior to being hired, a criminal background check will reveal any previous convictions. And when you’re ready to hire, make sure to run pre-employment background checks and credit checks—especially when you’re hiring a bookkeeper, cashier or any other position that has access to cash or bank information.

Unemployment is still stubbornly clinging close to the 10% mark. Talented people have been out of work for 12, 18, even 24 months or more. Many are getting desperate; some might consider “desperate” an optimistic view of their situation.

If your company is hiring, plenty of highly-experienced workers might be willing to do almost anything to land a position—any position. We’re hearing reports of job candidates agreeing to more employer-friendly hiring conditions, such as working for greatly-reduced salaries, accepting limited benefits packages, trying out performance-based pay and taking temporary positions.

Some employers see offering temp-to-hire jobs as a win/win way to add needed staff without maximum risk. Others are using contract freelancers in the same way, with even less risk, since they do not come onto the payroll until a hiring decision is made. Several innovative companies are offering an ownership stake in lieu of higher salaries and benefits—which works well for risk-taking, entrepreneurial types of employees.

These new-reality ways to add staff without increasing expenses or risk are worth considering if your company is teetering on the edge or rebounding from the recession. But remember—whether you offer lower salary, part-time work, temporary positions, or a stake in your company, don’t make the mistake of skipping the pre-employment screening process.

Reducing risk by hiring temporary or part-time employees is a wash if you increase the risk to your company by leaving out background checks. All contract, temporary and part-time workers should be properly pre-screened. And before you offer a stake in your company to a new employee, don’t you want the peace of mind that comes with knowing you’ve conducted all the criminal and credit checks you can?

Who knows how long unemployment will remain at this rate, or how much longer employers will be able to hire such high levels of talented employees under favorable conditions?

Employers have weathered the economic storm in a variety of ways. Some have replaced laid-off workers with independent contractors, usually known as “consultants,” or “freelancers.” The advantages to employers are many: no payroll taxes, social security or benefits to pay. And, no guilt when it’s time to end the contract—freelancers are used to short-term employment! Independent contractors can be the answer to one of an employer’s biggest headache—payroll.

The downside is when that invisible line is crossed and an employer misclassifies an employee as an independent contractor. Whether it is done intentionally or not, the IRS does not like missing out on revenue it is owed.

And since deficits are so high, those misclassifying employees will be a target of the additional 100 agents the IRS is hiring for fiscal year 2011. Random audits of 6,000 businesses over the next three years is planned.

How to Determine Whether a Worker is an Employee or Independent Contractor
According to the IRS, it’s a matter of degrees of control and independence in the following three categories:

• Behavior: Do you control what the worker does and how they do their job?
• Financial: Do you control the financial aspects of the worker’s job, such as when they are paid and who provides and pays for tools, supplies, etc.?
• Type of Relationship: Is there a written contract? Are there benefits provided to the worker? Is the work performed a key aspect of the business?

There are no real guidelines to help employers determine whether a worker is an employee or independent contractor. The IRS recommends businesses weigh all these factors and acknowledges that factors that are relevant in one situation may not be relevant in others. The keys, the IRS says, are to “look at the entire relationship, consider the degree or extent of the right to control, and document each of the factors used” in making the determination.

If the determination cannot be made, either party may file a Form SS-8 and the IRS will review the form and officially determine the worker’s status.

I was once presented a job offer that included the usual items: salary, health benefits and number of paid vacation days. But the smart businesswoman I would come to work for included a few extras. She itemized the yearly value of my health insurance package, the amount of Social Security Taxes the company would pay on my behalf and the contributions the company would make to the state worker’s compensation fund.

The salary number was great—but seeing the real numbers behind the perks (mandated or not) really opened my eyes to the value of this company bringing me into their employ. Value to me; cost to them.

Years later, when I had my own company and was hiring my own employees, I used this same tactic. Whether it impressed my staff as much as it did me, I don’t know. But I, too, wanted my employees to how hiring them would put more money in their pocket than their net paycheck might indicate.

If your employees are unaware of the real cost of their employment—and the real contribution you as an employer are providing to their well-being and their future—remember, there’s no law against telling them.

6 Benefits Your Employees May not See

1. Vacation: How much is their paid time off worth? Two weeks and a half-dozen or so paid holidays can add up to thousands of dollars. Your staff might think they’re owed paid vacation (and of course everyone deserves time off), but it is still a hit to the company’s bottom line.
2. Social Security and Medicare: This is a big one. Do your employees realize that you contribute up to $6,621 per year to their future Social Security earnings? And 1.45% of their earnings to Medicare, with no cap? Chances are they do not. Informing them of this fact might just make them appreciate you someday!
3. Unemployment: When an employee is laid off, the first thing they usually do (after sleeping in) is file a claim for unemployment benefits. Do they realize that you, the employer, is obligated to pay into this fund? Probably not.
4. Worker’s Compensation: Just as your company makes unemployment contributions on its employees’ behalf, they might not know that worker’s comp is also available to them because of employer-paid premiums. All they know is that they can file a claim when they’re injured and collect the payments.
5. Retirement plans: Whether it’s through profit sharing or contributions to a 401K, a company-paid retirement plan is free money in your employees’ pockets. They should understand that it’s optional and generous.
6. Health Insurance: It might seem obvious, but seeing the dollar value of a year’s worth of paid health insurance premiums can really open an employee’s eyes to the sacrifice employers make to do the right thing.

Disclosing to your employees the true cost of bringing them into your company can be a good thing, when handled correctly. In my case, my employer made me feel very fortunate to be hired, and communicated a real commitment to her employees. Making an employee feel like a burden is the wrong approach.