November 6th, 2017 | Sterling

Why Should Credit Enquiries Be a Part of Your Background Screening Programme?

Companies invest time, training, money and resources into each new hire in the hope that the employee will thrive and ultimately help the company succeed. Each organisation is unique and requires unique solutions for the hiring process to allow companies to hire with confidence. Background screening helps businesses make better, more consistent and more informed hiring decisions. From employment verifications to credit enquiries, it’s a proactive way to add another layer of risk mitigation into the hiring process.

Employment background screening is complicated. Deciding which type of background screening check an employer needs to run to find the best candidate can often seem like a daunting task. At a very basic level, background screening helps companies ensure that the right people are in the right role. There are many types of background screening checks from criminal record checks to education and employment verifications to social media screening. Each type of check has specific practical considerations and compliance matters that must be followed. Background screening protects an organisation’s property, reputation, brand and ultimately its biggest asset, the people.

What is a Credit Enquiry?

Credit enquiries are usually run for applying for credit or payment accounts, tenant or rental agreements or employment purposes. From the employment perspective, credit and financial health reports continue to be a controversial topic for human resource professionals, but they can be a valuable part of your screening program. In fact, they are often mandated for companies where candidates will have managerial, accounting, financial record or cheque-writing responsibilities.

Implementing credit enquiries as part of a screening process can provide employers with a valuable indication of a candidate’s sense of financial responsibility and track record. In addition to providing proof of identity (matching against multiple sources), a credit enquiry can disclose any county court judgments, bankruptcies, administration orders and insolvencies present on an individual’s credit file.

Why Should Credit Enquiries be Conducted?

An employment credit report is designed to give business’s pertinent information that is needed to make a hiring decision. The report will show a comprehensive credit history and provides public record information, plus other items that are not typically included on job applications. Employment credit checks can provide employers with an insight into a candidate’s sense of financial responsibility and stability. Credit checks are a useful tool for limiting the potential liability of fraud, theft and various white-collar crimes. As with all other pre-employment background checks, informed consent is essential in advance of any credit enquiry.

An employment background check provides a detailed look at a new hire, giving organisations the insight they need to make an informed hiring decision. Sterling just published “Background Screening in the UK-Best Practices to Make Informed Hiring Decisions.” The report looks at nine of the most common pre-employment checks in the UK, including credit enquiries The eBook details what each check entails, explain why employers conduct each check and provide some practical considerations that may improve a company’s background screening programme.

The report also shares some examples of the discrepancies we’ve found in our data. Discrepancies are red flags that come up when the information provided by the candidate does not match what is found by the screening provider. “Not clear” results may be as innocent as an accidental employment date error, or as significant as a fabricated qualification or undisclosed criminal record. The research findings for discrepancies for credit enquires show insight into both industry and job titles. Employees in healthcare appear more likely to have a red flag in their credit enquiry:

  • Not Clear-7%
  • Business Services-7%
  • Financial Services-6%
  • Healthcare-10%
  • Staffing and Employment Services-6%

Similarly, account managers and sales people seem almost twice as likely to have issues with their financial history compared to other employees.

  • Not Clear-7%
  • Account Manager-122%
  • Consultant-5%
  • Director-2 %
  • Sales Person 12%

If a prospective candidate is experiencing financial challenges, there may be an increased risk of internal theft. In a recent study, the CIPD found that around 40% of workers have concerns about making ends meet or having enough money for day-to-day spending Financial background checks have long been used by employers within the financial marketplace and are required to meet the BS7858:2012 standard, which is audited by the National Security Inspectorate. Moreover, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are strengthening accountability across the UK financial sector to ensure employees are ‘fit and proper.’

Speedy and Reliable Verification of Financial Responsibility

There are practical considerations that must be taken into account when considering conducting credit enquiries as part of a background screening programme:

  • As with all other pre-employment background checks, there must be a legitimate ground to process any credit check.
  • Where relevant, be sure to use ‘Senior Manager Function’ guidelines to identify roles that fall in-scope of the new regime.
  • Some employers may be obliged to maintain ongoing checks of employees’ credit history and other checks to remain compliant with regulatory requirements.

It is critical to consult your legal team to better understand what existing, or emerging limitations may be placed on your organisation regarding running credit checks. A third-party provider, such as Sterling, can help mitigate some of the risks involved in conducting employment credit enquiries.

Companies need to determine which type of background screening check is the most important to protect their employees and businesses. Download a complimentary copy of our “Background Screening in the UK-Best Practices to Make Informed Hiring Decisions” eBook to find out more about our report today to find out more about the types of background screening in the UK.

Explore Best Practices of Background Screening in the UK

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.