We are having a problem with people leaving company premises for personal purposes and not clocking out. Have you encountered any similar situations? How were they dealt with?

 

Technically, it's stealing from the company.

If it's wide spread, you have a cultural problem and it's best dealt with it immediately with a large scale meeting, addressing the problem in general terms and follow up with enforcement.  Typically, you enforce the same way as if someone was taking office supplies or cash from the register.  If it's not wide spread, I'd treat it the same as catching someone taking cash out of the register or stealing office supplies.  It's helpful if you have rules about using the time clock correctly and/or policies against stealing (unauthorized possession) and/or policies about absences from one's workstation or the taking of breaks.

The last company I worked for was rather large (1200 employees) so I don't know how this will apply to you. We liked to use a "double whammy" approach. First, we sent out a massive email to all employees. This email covered the policy and our concerns that it is being violated and what the consequences are. Then, all managers were instructed to discuss this in their team meetings. If the violation occurred after this, then we let the flogging commence in the town square.

The other posters have talked about what I have done in the past - reviewed the policy and consequences with all employees. When someone still didn't listen they were terminated.