Fraud and embezzlement in the workplace is a reality. Unfortunately, when it happens, restitution from the employee is usually unlikely because most, if not all, of the money has already been spent. Along with taking preventive actions to discourage dishonest employee acts, Fidelity Bonds may be an important safeguard a small business owner can use to absorb these types of losses.
Three common types of fidelity bonds include standard employee dishonesty bonds, business services bonds, and ERISA bonds.
Standard Employee Dishonesty Bonds
A standard employee dishonesty bond protects the small business owner from financial loss due to the employee fraudulent activities, including acts conducted by a group of employees. Employee thefts of property, money, or security are losses covered under standard employee dishonesty bonds. Professionals such as CPAs, physicians, and dentists are good candidates to choose fidelity bond protection as are non-profit organizations such as condo associations.
Business Services Bonds
Business services bonds, also referred to as janitorial services bonds, is another type of business insurance. It protects the small business owner for loss of a customer’s equipment, supplies, personal belongings, or money as a result of employee dishonest acts occurring while on the customer’s grounds. Business services bonds are helpful in marketing a business by providing a competitive edge against businesses that don’t have fidelity bonds. Businesses services bonds are a good protection solution for businesses such as contractors, janitorial services, maid services, house sitters, and dog sitters.
If your small business offers employee benefits, pension plans, or 401(K) plans, then ERISA bonds provide program participants (and their beneficiaries) protection from dishonest acts of the fiduciary who works with the plan. Pension plan trustees must have fidelity bond protection of 10% or greater of the plan’s total assets, according to The Employee Retirement Income Security Act of 1974.
A fidelity bond creates advantages for both the employer and worker, and is supported by the United States Department of Labor Federal Bonding Program. Fidelity Bonds serve as an incentive for employees to hire workers who might be denied employment due to being high risk. Examples of high risk workers include individuals with poor credit history, substance abuse, or previous criminal record. Fidelity bonds enable these individuals to essentially start over and obtain a second chance of employment.