Why Do Background Checks
The Pros and Cons
Everyone has their favorite story about falsified credentials and phony work experience. See Classic Employer Nightmares. Stories like these can be avoided by careful applicant background screening.
The Pros of Employee Background Checks
Why do background checks? The benefits of comprehensive employment background screening include: increased applicant and new hire quality, reduced workplace violence, reduced negligent hiring liability, reduced losses from employee dishonesty, making the right hire the first time, and avoiding negative publicity. The bottom line is that pre-employment background checks help an organization be more successful. That means greater profits to for-profit organizations and greater impact for non profits. For more about the benefits of background checks for non profits, see Non Profit Background Checks: Employee & Volunteer Screening.
Increase Applicant and New Hire Quality
The first benefit of background checks that most clients see is an increase in applicant quality. We often hear from our new customers that they saw an almost immediate improvement in the quality of applicants once the word got out that they were conducting thorough background checks. A complete employee screening process:
- Results in fewer applications with serious discrepancies
- Discourages applicants who are trying to hide something
- Increases applications from applicants who want to work in a safe environment
- Increases the quality of new hires due to an improved applicant pool and improved selection process
Reduce Workplace Violence
The Staggering Cost of Violence in the Workplace
According to a survey conducted by the US Dept of Justice, 1.75 million days of work are lost each year by victims of workplace violence. The cost in lost wages account for about $55 million per year. When less direct, but further-reaching costs are considered, such as lost productivity, legal expenses, and diminished public image, the annual cost of workplace violence could measure in the billions.
An Employer's Imperative
Employers have a moral and legal obligation to provide a safe work environment. Therefore, knowing whether a potential employee has been involved in criminal activity (such as drug or other substance abuse, reckless behavior, dishonesty, theft, or dangerous and violent behaviors) allows the employer to determine if an applicant is appropriate for the job and work environment. It also helps the employer determine if the applicant poses a potential threat to other employees.
How Do Background Checks Help?
Prior history is a good predictor of future performance. Background checks are used by employers to identify applicants prone to unacceptable workplace behavior. Background check tools such as Criminal Record Checks, Prior Employment Verifications, Education Verification, License Verifications, and other research tools can reveal potential problem areas.
Protect Against Negligent Hiring Liability
What is Negligent Hiring Liability?
According to an article published by SHRM (Society for Human Resource Management), Negligent Hiring is "the failure of the employer to investigate a job applicant's work experience, character, criminal history and other relevant data prior to the hiring of an employee." See, Workplace Violence: Trend and Strategic Tools for Mitigating Risk.
Negligent hiring liability holds employers responsible both for what they do know and what they should have known about their employees. It can even hold employers responsible for employees’ actions off the job. Courts have repeatedly affirmed that employers have a duty to exercise reasonable care in hiring individuals who, because of the nature of their employment, may pose a threat to the public.
Costs of Negligent Hiring Liability
According to the article, Avoiding Negligent Hiring Lawsuits (HR Management Magazine), "Average settlements in negligent hiring lawsuits are now approaching one million dollars." Our Society today, more than ever, is highly litigious. Your organization can, and will, be held liable for the criminal or violent acts of its employees. The costs are too great to put your organization at risk by hiring employees without performing and documenting proper due diligence in your hiring decisions. "Juries in such cases will assume that if you could have known you were hiring someone dangerous or unfit for a job, you should have known." See Avoiding Negligent Hiring Lawsuits.
How Do Background Checks Help?
Because employers have a moral and legal obligation to provide a safe work environment, knowing whether a potential employee has been involved in criminal or dishonest activity (such as drug or other substance abuse, reckless behavior, theft, or dangerous and violent behaviors) allows the employer to better determine if an applicant is appropriate for the job and work environment. Background Checks allow an employer to better determine if an applicant poses a potential threat to other employees or customers.
Background check tools such as Criminal Record Checks, Prior Employment Verifications, Education Verification, License Verifications, and other research tools can reveal potential problem areas and provide documentation that an employer has taken "reasonable care" in the hiring process. Thorough background check documentation is an important element in reducing negligent hiring liability.
NOTE: If Your Employees:
- Access consumers' financial, medical, or personal information
- Access consumers' living quarters or residences
- Work with the infirm, the elderly, or children
- Work with hazardous materials
- Are responsible for the safety of themselves and others
Reduce Employee Dishonesty Losses
Cost of Employee Dishonesty
The typical organization loses 5% of its annual revenue to occupational fraud. The median loss caused by occupational fraud was $140,000. More than one-fifth of fraud cases caused losses of at least $1 million. Small organizations are disproportionately victimized by occupational fraud. See, ACFE: 2012 Report to the Nations on Occupational Fraud and Abuse. Employee theft and dishonesty can also reduce production, damage public confidence, destroy employer reputation, and negatively affect employee morale.
Prevalence of Employee Dishonesty
Theft and fraud is something of which employers are aware but perhaps a bit complacent. The true prevalence of these crimes is pervasive and not well known. Approximately 30% of employees admit to stealing from their employers. The perpetrators are not those one would expect: 41.2% are managers, 39% are employees, and 19.3% are owners or executives. See, Not Wanted: Thieves.
How Can Background Checks Help?
Prior history is a good predictor of future performance. Background checks are used by employers to verify the freely volunteered information provided by applicants (usually through a resume or job application). Background check tools such as Criminal Record Checks, Prior Employment Verifications, Education Verification, License Verifications, Drug Screening and other research tools can reveal potential problem areas. Through careful and wise use of the information obtained in complete background checks, employers greatly reduce or eliminate the risk of employee dishonesty losses by avoiding individuals who exaggerate or falsify credentials on resumes and job applications and reduce drug-related theft by encouraging a drug-free work environment.
Screen Employees with Access to Living Quarters
Obligation to Ensure a Safe Environment
Employers whose employees have access to residences and living quarters have a moral and legal obligation to ensure a safe environment for consumers. Knowing whether a potential employee has been involved in criminal or other inappropriate activity (such as drug or other substance abuse, reckless behavior, dishonesty, theft, or dangerous and violent behavior) allows the employer to determine if an applicant is suitable for this type of work environment. Apartment owners, property management firms, and maintenance and custodial companies are just a few of the employers that face potentially costly problems caused by dishonest and criminal behavior of employees who have access to residences and living quarters.
How Do Background Checks Help?
All employees (including temps, part-time workers, contractors and volunteers) who have access to consumer residences or living quarters should be backgrounded. A background check, or application verification, verifies the information provided by the candidate using independent sources such as criminal and civil court records, prior employer records, educational institution records, and credit or motor vehicle reports.
While it may seem unfair, the courts have repeatedly found employers responsible for the criminal actions of employees on the job, and, in some cases, off the job. The average award in security (personal safety) negligent hiring cases is more than $1 million. Essentially, the courts see a background check as cheap insurance against repeated criminal actions.
Reduce Employee Turnover: Hire the Right People
Pre-Employment Background Checks help screen in employees who stay longer because employers are able to make the "Right Hire" the first time. Employers are able to hire the right people by increasing the accurate and objective information available to hiring managers. The information provided by a comprehensive background check enables employers to build a competent workforce and reduce the likelihood of hiring dishonest employees and employees with drug and alcohol problems. Gathering information from multiple sources provides a clearer understanding of the applicant's qualifications and reduces an employer's risks.
Bad Hires are Expensive
According to a survey conducted by Right Management Consultants, the replacement cost of a bad hire is 1 to 5 times the salary of the job in question. Consider the direct and indirect cost of recruiting and hiring, the direct and indirect cost of training, and the wasted wages and benefits. Also consider the management, administrative, and legal costs of a bad hire, plus the direct and indirect cost of damaged or stolen funds, materials, equipment, work environment, customer goodwill, and employer reputation. Verifying applicant claims helps the employer make the right hire the first time and is clearly worth the investment in a thorough background check.
A Thorough Background Check Increases the Objective Information Available to a Prospective Employer
Employers have a moral and legal obligation to provide a competent workforce and a safe work environment. An employer can determine if a potential employee is appropriate for the job and work environment by learning whether the applicant has the experience, education, and training required to succeed at the job.
A large number of applicants make false claims (see Fake Resumes, Fake References, Fake Degrees: Employer Beware!). Therefore, Criminal Record Checks, Prior Employment Verifications, Education Verifications, License Verifications and other Research Tools are valuable honesty checks. These employment background check tools help employers develop a more accurate and complete picture of an applicant and can reveal potential discipline problems. For more information about what can be in a thorough background check, see Comprehensive Background Check: The Best Background Check.
Avoid Negative Publicity
Negative Publicity can Destroy an Employer's Reputation
Bad publicity caused by an errant employee or volunteer can severely damage an organization’s reputation with its funding sources, its constituency, and the public. This negative impact on funding and reputation can cripple an organization to the point of closure.
How Do Background Checks Help?
Prior history is a good predictor of future performance. Background checks are used by employers to verify the freely volunteered information provided by applicants (usually through a resume or job application). Because of the large number of applicants who make false claims, Criminal Record Checks, Prior Employment Verifications, Education Verification, License Verifications, and other research tools can reveal potential problem areas. Through careful and wise use of the information obtained in proper background checks, employers greatly reduce the risk of negative publicity.
In many cases there is little difference in the eyes of the public or the law between employees and volunteers who perform essential functions of an organization. Volunteers should be screened just as carefully as employees who would be performing similar roles. The public, courts, and regulatory agencies expect extra vigilance during the selection process of those who will be dealing with the infirm, the elderly, and children, as well as those who will have access to living quarters or residences. Such staff should be carefully screened. Proper background checks greatly reduce the likelihood of hiring a bad employee or volunteer, and thus they reduce the likelihood of negative publicity.
Meet Regulatory, Insurance, and Customer Requirements
Many employers are required by government regulation, their insurance carriers, and/or their customers to conduct background checks. To receive all the benefits discussed above, employers should meet any external requirements and then seriously consider obtaining more complete background checks where appropriate. For more information about what should be included in a complete background check, see Comprehensive Background Check: The Best Background Check.
The Bottom Line: Success
Why do background checks? The bottom line is that pre-employment background checks help an organization be more successful. That means greater profits to for-profit organizations and greater impact for non profits. Thorough background checks help employers:
- Reduce the high cost of turnover by screening in employees who stay longer.
- Reduce losses from employee theft, employee fraud, drug and alcohol abuse, absenteeism, workplace violence, and litigation.
- Avoid wasted benefits.
- Reduce training and employee development costs.
- Increase productivity through hiring employees with better work habits, attitudes, policies, and practices.
- Enhance professionalism by "screening in" appropriate workplace attitudes.
- Decrease insurance costs. Some insurance companies will give background check or drug-screening discounts to firms who take such precautions.
- Meet regulatory, insurance, and customer requirements.
Background Check Pros for Employees
An applicant applying to an employer who conducts thorough background checks will not be competing against applicants who lied about their experience or falsified their credentials.
Employers who conduct careful background checks are usually better organizations to work for. They
- Are better managed
- Place greater value on employees
- Provide a safe workplace
- Are willing to invest in quality employees
The Cons of Employee Background Checks
Background Check Cons for Employers
The cons of thorough employment background checks for employers are primarily costs in time and money.
Cheap and/or poorly done background checks are a waste of money and may be worse than no background check at all because they may give a false sense of security and may not follow federal and state legal requirements. Quality background checks easily pay for themselves (see Improve Profitability: Dividends from Employment Background Checks). We strongly recommend that employers conduct comprehensive background checks (see Comprehensive Background Check: The Best Background Check).
There are numerous federal, state, and local laws and regulations that apply to employee background checks that must be carefully followed. Generally these laws and regulations specify:
- How notice is to be given to the applicant
- How written permission is to be obtained from the applicant
- How any information obtained and used must be relevant to the job both as to how old the information is and how the specifics relate to job performance
- How the confidential information is to be handled and disposed of
Background Check Cons for Employees
The cons of employment background checks for employees are primarily:
- Possible mistakes in the background check
- Exposure of lies and forged documents
- Old mistakes and problems being uncovered
- Concerns about privacy
Mistakes can and do occur in background checks. After all, the information in a background check was created, compiled, maintained, searched, and reported by fallible individuals. This is why it is important that employers give applicants the opportunity to review negative information before any adverse action is taken. If an applicant finds information in a background check report that is incomplete or inaccurate, the employer should be promptly informed. If errors are found on a background check, it is likely that the applicant will need to contact the original source of the information (employer, school, court clerk, etc.) and request the information be corrected. A background check vendor should be willing to re-investigate and reissue the report at no further charge.
False and misleading information and forged documents are likely to be exposed by a thorough background check. Most employers have a "No Tolerance" policy about false claims on a resume or job application. This policy applies whether the falsehood is found before or after the applicant is hired. Do not lie. Honesty is the best policy.
Past mistakes and problems may well be uncovered by a thorough background check. During the job interview, a frank explanation of any past problems provides the applicant the opportunity to explain what happened and get any potential issues out on the table. Few jobs and employers require an absolutely clean record to be hired. Most employers can and do consider how long ago a problem occurred and whether the problem has any bearing on the position being considered.
Some feel that background checks are an invasion of privacy. Most background checks simply verify information provided by the applicant on the resume and/or job application. Unfortunately many lie about their experience and credentials. Employers have the right and the responsibility to verify applicant-provided information and they have the legal requirement to provide a safe workplace for employees, customers, and members of the public.
For more information about these issues, applicants may want to review How to Pass a Background Check and Applicant Background Check Resources.
- Employment Background Check Products and Services
- Comprehensive Background Check: The Best Background Check
- The Best Background Check Service: The Inside Story
- Fake Resumes, Fake References, Fake Degrees: Employer Beware!
- Background Check Resources (Government & Industry)
- Background Check Laws
- Knowledge Index: Pros & Cons of Background Checks
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