Statistically Speaking, Background Checks Are Essential
We’ll start with the most significant statistic, which is the cost of employee turnover. According to the Society of Human Resource Management (SHRM), each resignation can cost a company up to a third of the worker’s annual salary, 67% of which comes from soft costs like reduced productivity. In contrast 33% come from hard costs like recruiting, hiring temp workers, and the like.
A report by TrainingMag.com found that in 2020, across all industries, organizations with 100-999 employees spent about $1,678 per employee, organizations with 1,000-9,999 employees spent about $581 per employee, and companies with 10,000 employees or more spent $924 per employee on training.
So many factors go into figuring how much money is lost when you have high employee turnover. Training costs and hiring bonuses are only the beginning. Employee theft, drug use, motor vehicle accidents, and injuries can all be factors that contribute to the overall money lost on a bad hire. So, while the actual cost of not doing your due diligence in hiring is challenging to calculate, it’s safe to say that performing a thorough background check is an essential step in ensuring that you are starting with a quality candidate.
One of the first components we’ll discuss is employment and education verifications. The information in these reports helps ensure that your candidate will meet all the position’s requirements. In addition, a character reference can help uncover issues your applicant may have had in working with others and excessive tardiness.
One might think that most applicants would be honest on their resumes since embellishing things like experience would eventually be discovered. However, a 2021 study by ResumeBuilder.com found that 32% of Americans admitted to lying on their resume. Of those, 46% lied about their years of experience, 44% lied about their educational background, 43% lied about how long they held a previous position, and 40% embellished their skills or abilities.
So why would a candidate take such risks? Aside from wanting to improve their chances of getting hired, 44% who have lied did so because they lacked the necessary qualifications for the job they wanted. At the same time, 41% did it to cover up being fired or parting on bad terms with a previous employer.
If that many applicants are willing to lie about education and employment, what else could they be hiding?
Criminal background checks are the next step in uncovering potential issues with your candidates. Some of the most obvious red flags on a criminal report would be violent crimes, DUI issues for company drivers, and theft or fraud charges for those who will handle money or transactions.
Association of Certified Fraud Examiners (ACFE) found that from January 2018 to September 2019, embezzlement caused more than $3.6 Billion in losses globally. The median loss in the U.S. and Canada was $120,000. Out of the 2,504 cases, 4% of the perpetrators had been previously convicted of a fraud-related offense, and 7% were charged but not convicted. The more staggering figure is that 41% of the occupational frauds in the study were never reported to law enforcement, indicating that the actual number of offenders is probably higher. This exemplifies the need for a well-rounded background check with employment verifications and character references.
Employee retail theft is another significant cause of employer monetary loss that criminal background checks can in some way mitigate. For example, in the 2021 Hays International Retail Theft Survey, out of 22 large retail companies and 18,594 stores, 26,463 employees were apprehended in 2020. $32 million was recovered from these employees.
Criminal background checks are crucial to determining if your applicant has a checkered past. Though we should note that according to the EEOC, when making a hiring decision on this information, it should be in keeping with the duties of the job position and individualized. Some factors to consider should include but not be limited to, how long ago it occurred, the relationship of the crime to the job held or sought, whether the person is a repeat offender, and other factors.
Along with FCRA regulations and local “Ban The Box” initiatives, regulations can seem daunting at first. But, once you have a straightforward, proper hiring practice in place, you can avoid litigation down the line and still gain insight into your candidate’s past.
Drug and alcohol abuse have an even more dramatic effect on workplace safety & productivity.
According to Recovered.org, 1 in every 11 workers in the US (9% of the workforce) struggled with substance or alcohol use in 2021. It is estimated that the cost of drug and alcohol misuse totals 70-80 billion dollars each year. Substance abuse leads to 4 to 8 times higher rates of absenteeism. It accounts for 65% of workplace accidents, and 38% to 50% of all workers’ compensation claims are related to drug or alcohol abuse.
With numbers like that, employers across all industries would be well served by implementing pre-employment and random post-hire drug testing programs to discover drug and alcohol abuse issues before it’s too late.
Combine drug and alcohol abuse with motor vehicles, and you have a deadly combination.
According to the CDC, the transportation industry lost 8 billion in 2021 in motor vehicle crashes due to driver alcohol abuse. In 2019 alone, 1,270 U.S. workers driving or riding in a motor vehicle on a public road died in a work-related crash. That’s 24% of all work-related deaths. Among these 1,270 deaths, the transportation and warehousing industry had the highest share at 41%, followed closely by construction at 12%. Wholesale and retail trade came in at 9%, and administrative support, waste management, and remediation services totaled 7%. Work-related motor vehicle crashes are not just an issue for truck, bus, or taxi drivers. 56% of workers who died in 2019 were not employed in motor vehicle operator jobs.
Motor vehicle reports can also be an excellent indicator of drug and alcohol abuse. That’s in addition to the benefit of providing insight into your applicant’s ability to safely navigate public roads and/or transport goods.
So, what is the cost of motor vehicle crashes on an employer? The Motus 2021 Driver Safety Report states that both on-the-job and off-the-job driving accidents impact employers on a range of costs. These include property damage, workplace disruption, liability, healthcare, and wage replacement. On-the-job highway crashes cost employers $66,119 per million vehicle miles of travel.
Hiring practices are constantly evolving, but in the 30+ years SELECTiON.COM® has been in business, background check usage by companies has been and continues to be on the rise. Background checks are still the most effective way of taking reasonable precautions to create a safe work environment for your employees and minimize costly turnovers. In addition, new reporting methods continue to make background checks more effective and reliable year after year.
Contact us today to see how SELECTiON.COM® can improve your background check process.
This page gives a general overview of legal matters. However, it is your responsibility to ensure compliance with all the relevant federal, state, and local laws governing this area. SELECTiON.COM® does not provide legal advice, and we always suggest consulting your legal counsel for all applicant approval matters.
This page is provided for information purposes only, and the contents hereof are subject to change without notice. This page is not warranted to be error-free nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose.
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