News & Announcements

Background-Screening Services and Your Bottom Line

During these difficult economic times, every company is looking to save money, be more productive and invest in strategies that protect their bottom line. Unfortunately, many employers overlook the best money savings idea for their company. During the hiring process, employers for whatever reason do not use pre-employment background screening for job candidates. This has traditionally not been in the budget for many companies. Let's look at the many reasons to budget and use background screening and how it can help your bottom line.

The trend today is for a leaner and more productive work force. Excellent skills, proven education and verifiable experience are necessary when hiring in today's current economy. Every Human Resource or Risk Manager knows that "Return on Investment" and "Best Practices" need to be at the heart of their hiring strategy. Using a third party to provide employment background screening is widely recognized as a necessary process in hiring the best employee for the company. With an objective review of each candidate, your company can weed out undesirable candidates and feel confident that you have hired the best candidate for the job.

Risk factors

Background screening is regarded as a significant expense. But is it really? According to a recent HR Management article, titled ROI of Background Screening, explains what the actual dollar value is in using a strategic background-screening program. This program relates to real-world payoff based on common sense and best practices.
The risk in hiring the wrong candidate can put your company into the one out of every six crimes category occurring in the workplace. Companies in this category experience a cost of $36 billion each year. Or your company may be a homicide statistic as to the second leading cause of workplace deaths. With the average award in a workplace violence lawsuit exceeding $1,000,000 per case, having a background screening service just makes sense.
Before you decide if the cost of a background screening really can save your company money, consider the risk factors involved.

Can you put a price on the potential liability of sending a sexual predator to work at a client's home?

Do you know the cost of a repeat drunk driver causing an accident or possible injury while operating one of your vehicles?

What would be the cost of an employee with a record of domestic violence turning on one of your customers or even another employee?

How much damage would be done to your nursing home's reputation if you didn't thoroughly check a potential applicant's criminal history?

Turnover hurts productivity

The average turnover rate for a U.S. company is 38.7% and varies depending upon the industry and employment level. The Aberdeen Group study showed the following annual turnover rates for hourly workers:

Hotel Chains: 51.7%

Specialty stores: 104%

Fast food chains: More than 200%

The Employment Policy Foundation provides a cost of replacing an "average" employee at more than $13,000. The most conservative estimate of the cost for turnover is 25% of salary plus benefits. But turnover can range from 150% of annual compensation for salaried workers up to 2400% for senior executives according to Dr. Bradford Smart, a well-known consultant of Smart & Associations, Inc.
The Employment Policy Foundation estimates that for a firm with 40,000 employees, the difference between a 15% turnover rate and a 25% turnover rate is over $50 million annually. If your company averages between a 15% to 40% turnover rate the cost is estimated at over $130 million annually.

Statistics really don't lie.

In a recent article in Employers Choice online.com reveals statistics from the U.S. Department of Commerce of the result of poor screening of employees.

30% of small business failure is caused by employee theft.

Internal employee related thefts occur 15 times greater than external theft.

Embezzlement losses exceed $4 billion every year.

The NY Times conducted a study of business losses due to poor background screenings and estimated that 72% of shrinkage is due to employee theft that costs $15 to $25 billion in losses each year. In addition, employee fraud costs companies more than $400 billion dollars annually and the average organization loses an estimated 6% of its annual revenue.

Looking at the big picture

When you employ an excellent third-party pre-employment background screening service, make sure that the company checks educational backgrounds. Statistics show that approximately 25% of MBA degrees on resumes are false and 60% of educational backgrounds are falsified.
Ask yourself if your company can afford a $1.5 trillion business loss? Business loss from turnovers, theft/fraud, and catastrophic events that result in legal losses can devastate a company. Simply stated according to the U S Small Business Administration, for every dollar an employer invests in employment screening, the Return on Investment ranges from $5 to $16, resulting from improved productivity, reduced absenteeism, lower turnover and decreased employer liability.

The choice is yours but budgeting and using professional background screening services only makes sense.

Dave Thelen, Vice President Synerfax Inc.
Copyright September 2008



09-09-2008