downloading

are having this same problem to deal with

personal use of the internet in the workplace
is costing employers billions each year worldwide in lost productivity and other costs. everyone will bear these costs eventually.

perhaps a good starting point would be to write an acceptable use policy that clearly prohibits any use of the internet for personal reasons.

also include penalties to be imposed for violation of the policy

like perhaps first offense verbal warning
second offense 3 day suspension
third offense termination

have all employees sign off it

ask around, ask a lawyer, as i would have no idea if such a policy would be legal in your area.

then look into some type of gateway monitoring, this can be a hardware appliance like a sonic wall ect.

or if your lookin for a cheaper route you might look into this:

http://www.untangle.com/home

i haven't tried this out yet, but it looks very interesting, and can be deployed in a number of ways