July 14th, 2015 | Sterling

3 Ways Background Checks Save Employers Money

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Background checks may show up as an expense on financial statements, but they actually save employers money in the long run. The savings are somewhat intangible which is why they are often overlooked, but the numerous benefits of background checks add up to an investment in human capital that employers simply cannot afford to pass up.

  1. Background checks improve the quality of hires which leads to a more engaged workforce, lower turnover, and increased retention.
    Conducting background checks helps provide valuable information about candidates to aid employers in making hiring decisions. A thorough background check can be the difference between hiring a model employee and an HR headache. The cost of turning over an employee includes off-boarding, recruiting, training and loss of productivity. Depending on the type of position and industry, various studies estimate that cost could total between 100% and 250% of the employee’s annual salary plus benefits.
  2. Background checks reduce occupational fraud and theft.
    Organizations lose an estimated £2.37 trillion to occupational fraud and theft globally (Association of Certified Fraud Examiners, 2014). Background checks identify candidates with a history of sticky fingers or those who are financially irresponsible. Criminal record checks and credit bureau inquiries are useful in reducing employee theft; however, reference interviews with former supervisors can also uncover past problems. A study by KPMG in2011 revealed that only 63% of employers took enforcement action following an occupational fraud or theft case, which means that the remaining 37% walk away with a clean record that may not be discovered with a singular criminal record check.
  3. Background checks prevent lawsuits arising from negligent hiring claims or workplace violence.
    In a recent survey conducted by SterlingBackcheck, negligent hiring was among the top two compliance concerns for employers. In the same survey, employers also reported that enhancing safety and security in the workplace was one of the biggest reasons for conducting background checks. Negligent hiring lawsuits can be costly and one of the common claims revolves around failure to adequately screen for past indiscretions. Furthermore, negligent hiring claims or violence in the workplace can result in negative publicity, which can cause irreparable damage to an employer’s brand.

In addition to the return on investment from criminal record checks and credit checks, contracting a background screening company to carry out consistent reference interviews, employment verifications, and education verifications can also reduce the workload on the HR team. When factoring in the typical hourly rate for an HR professional to make reference calls, wait for returned messages, and take the time to have a candid conversation with a candidate’s former supervisors, it can actually be less expensive to pay a third-party provider. For all of these reasons and more, investing in a comprehensive background check is worth every penny.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.