What Does it Mean to Have an Employee Bonded?

Bonding your employees can keep internal loss costs from adding up.

Employee fraud costs businesses $3 billion in profits every year. Embezzlement, forgery and outright theft can disastrously affect a company's bottom line. For this reason, many companies insure their employees through a process called bonding.

Description

When a company bonds an employee it is protecting its financial standing with an insurance policy that protects it from loss due to employee theft or negligence. This policy, or surety bond, covers the business in case of lost assets resulting from larceny, theft, forgery, misappropriation and fraud. Company loss due to negligence or employee incompetence is not usually covered, nor are on-the-job accidents. In the event of employee theft or dishonesty, the payout that the employer receives can be used to recoup some of the loss and to take legal action against the guilty party.

Types of Bonding

Individual bonds cover one employee only; these are useful in small businesses or in specific situations. Blanket bond policies cover all employees, regardless of position or duties. Name or position bonds cover employees in certain positions only, such as those with access to financial assets, or they cover specific employees, regardless of position.

Considerations

Most companies should consider bonding their employees, particularly the individuals who manage the organization's finances and handle the assets. Any employee with access to currency, deeds, checks, drafts and securities is an excellent candidate for bonding.

References

• State Farm Insurance: Who Needs Employee Dishonesty/Fidelity Bond Coverage?
• Employee Dishonesty Bonds
• Maine Risk Management Division: Employee Bonding
• Business Owner's Toolkit: Bonding Employees
• Wisconsin Department of Workforce Development: Fidelity Bonding Program