June 14, 2006

Companies lose millions of dollars every year because they hire the wrong person for the job. While many employers are already familiar with the high cost of employee theft, they may be less aware of other, equally destructive employee behavior, such as filing false disability claims.

Bad apples can do more than eat into your company’s budget. According to the U.S. Department of Commerce, 30 percent of businesses go under mainly because of poor hiring practices. Clearly, performing background checks on job candidates should be an essential part of your hiring process.

Cost of Crooked Employees

Background checks can reveal many things – résumé inaccuracies, a history of job hopping, litigious behavior and even criminal charges – all of which could eventually affect your business.

A sample study of 300,000 background checks conducted by background screening company USA-FACT found that 5 percent of applicants had criminal records, 36 percent had motor vehicle violations, 18 percent had prior employment that could not be verified and 11 percent had education credentials that were not legitimate.

Given these numbers, you’d be remiss not to perform at least a basic screening. Employers must, at the very least, verify employees’ work eligibility status, in compliance with immigration laws. And if you’re hiring in certain fields, such as law enforcement, security, trucking, child care and elder care, you must perform criminal background checks on all potential hires.

Optional Yet Valuable

While optional, you should always verify an applicant’s previous employment – including contacting all references – to ensure the person actually held the positions he claims or that his former managers were satisfied with his job performance. And, confirm that applicants have the academic credentials, military service record and professional licenses stated on their résumés.

Many employers also run credit report checks on potential employees. Credit reports can reveal whether the candidate is consistently late in paying bills, swimming in debt or has filed for bankruptcy – important information to have if you’re hiring someone to work with money or for another position of fiscal responsibility. And, if you’ll be providing your new hire with a company car, be sure to check that individual’s driving record.

While you certainly have the right to know if a new hire is going to harm your business, keep in mind that employees’ privacy and other rights are protected by federal law.

The Fair Credit Reporting Act (FCRA) requires that employers obtain signed employee agreements before they request any type of “consumer report” – background checks and many other types of information gathering. For a full list of the rules, visit the Federal Trade Commission’s Web site at www.ftc.gov.

Getting Outside Help

It’s not always easy or time-efficient to collect background information yourself, so background screening services, with their teams of researchers and instant access to public databases, are a potential solution.

If you type “background checks” into any Internet search engine, dozens of screening agency sites pop up. But knowing which firm boasts a good reputation and reasonable fees isn’t as simple as choosing the first name on Google’s search result list. In fact, the best way to find a screening firm is through word-of-mouth – from other business owners or human resources managers.

The agency you choose should demonstrate compliance with FCRA regulations and any applicable state laws. It also should inform you of your obligations and your employees’ rights and provide you with all the necessary consent forms.

The cost of screening services varies, depending on the scope of the job. Services beyond a basic screening – such as searching public records in several different counties or states – will cost extra.

Most online services can verify an applicant’s identity within minutes and other background information within 48 to 72 hours.

Better Safe Than Sorry

While background checks require a little time and money, most employers find they’re worth their weight in gold. Simply knowing that you perform background checks will discourage most dishonest job applicants and promote a more ethical work environment for all of your employees.