Your new hire screening process is one of the best guardians of your brand. Hire the wrong person who ends up causing harm to one of your clients or employees, and your brand will suffer. On the other hand, use a background check improperly and it will damage your reputation just as much. Conducting a criminal background check does not completely eliminate the risk of a bad hire, but it will reduce the chance of hiring someone with a violent or criminal past. No organization covets the label of "the company that hired a sex offender at their children's bookstore." In today's world, background checks are an essential and meaningful step in the hiring process.
What are the Implications and Costs of a Bad Hire?
According to a study by the Society for Human Resources Management (SHRM), the cost of hiring and later terminating an employee is estimated to be five times the bad hire's annual salary. In support of this, Harvard Business Review points out that as much as 80% of employee turnover is due to bad hiring decisions. With these statistics in mind, it's easy to see the ROI in your screening program. Not having a screening program in place can have many negative implications, including;
- Increased turnover and poor employee retention
- Possible embarrassment or harm to your corporate brand
- Civil and/or criminal liability
- Higher hiring and onboarding costs
The most basic elements of pre-employment background checks are criminal records and sexual offender searches. Company drivers and employees who work with finances may need a more diligent check. A quality background check protects your company from the risk of litigation from a negligent hiring lawsuit, reduces bad hires, and decreases turnover.
Risks of Improper Screening
Sufficient thought and research must be put into the legal aspects of your program. Failure to do this will prove to be just as devastating.
The Pepsi Challenge (and Example): In 2012, Pepsi agreed to pay $3.13 million and provide job offers and training to resolve a discrimination case filed by the EEOC. They were found by the EEOC to be applying a criminal background check policy that disproportionately excluded minority applicants from permanent employment. Under Pepsi's former policy, job applicants who had been arrested and still pending prosecution were not hired for a permanent job even when they had never been convicted of any offense.
Employers face many layers of regulation in the employment screening process. A best practice is to utilize a provider that has expertise in this industry or an in-house legal team with the appropriate knowledge of the process. The Equal Employment Opportunity Commission, Fair Trade Commission and individual state legislation govern the employment screening process so it's best to know your stuff or hire someone that does. The EEOC recently released new guidance on the use of criminal records for pre-employment screening that has caused organizations to revise corporate policies. Important factors that now must be taken into consideration are recidivism rates, the time elapsed since the crime and relativity to the job position.
Resume Fraud -- Who Knew?
Incidents of resume fraud are rising, especially with the recent economic downturn. Employers should verify employment and educational credentials as well as conduct criminal background checks. Would your HR department be able to spot a fake diploma? If not, make sure to call the school directly or use a reputable verification service. Candidates are frequently caught with fraudulent degree credentials, misrepresented work histories and outright lies. Here are some stats to keep in mind:
- 40% of resumes contain material lies or omissions about past jobs, education or qualifications and 25% misrepresent educational attainment
- It is estimated that resume fraud costs employers approximately $600 billion annually (Association of Certified Fraud Examiners) (Tweet this stat!)
- Most employers initiate criminal background checks after a contingent job offer (62%) or after the job interview (32%)
A recent example of C-level resume fraud is Yahoo's chief executive Scott Thompson. Thompson, formerly of PayPal, misrepresented his education credentials by claiming a degree in computer science, which he never earned. This is information that could have easily been vetted during a basic background check. It's surprising that a large company like Yahoo would bypass this simple credential check.
Related: Get quotes from pre-employment screening vendors.
The screening process is complicated and riddled with rules and legislation. It is an essential process that will protect your company in the case of litigation, as well as help you to hire the right people if done properly. Done wrong, it may actually do more harm than good. Utilize a competent screening provider who offers guidance on best practices or hire a legal firm with knowledge of employment practices to guide you in the right direction.
About the Author: This post was written by Jeri Johansen, PHR --Human Resources Manager at Crimcheck.com. Crimcheck.com specializes in employment screening and background checks. You can find Crimcheck.com on Facebook and Twitter.