The Importance of Conducting Background Checks for Employment
The Importance of Conducting Background Checks for Employment

The Importance of Conducting Background Checks for Employment

Making a bad hire can cost you big time. The Department of Labor (DOL) says a bad hire can set you back by 30% of that employee’s first-year salary. That kind of money can add up quickly, so you can’t afford to let poor background checks get in the way of your company’s profitability.

We’ve all seen it: Sometimes an applicant presents really well at the initial stage and you’re eager to get them into the hiring funnel ASAP. But do you really ever know what’s lurking behind that interview persona? No. You’ve got to probe deeper than what’s presented at face value and not let a great first impression cloud your judgment.

The Whole Truth and Nothing but the Truth

In our current highly competitive job market, applicants are more likely to either exaggerate or over up certain aspects of their histories so they can improve their chances of moving up to the top of your list. A well-trained recruiter can typically sniff out when an applicant is embellishing the truth, but a lot of potential pitfalls aren’t always easy to spot. That’s why conducting an employee background check during the hiring process is so important.

Your pre-employment screening process should meet all of the following criteria prior:

  • Employment history and education verification
  • Drug testing
  • Criminal background check
  • Credit check (if required for the position) Note that California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington prohibit conducting a credit check unless it’s relevant to the role (e.g., having access to money)
  • Driving record (if required for the position)
  • Business references

Why You Should ALWAYS Conduct Background Checks

A background check should be thought of as a preventive measure that helps to safeguard the integrity of your company as well as the safety of your current employees. Some applicants might not be appropriate for certain positions due to something that’s revealed in their personal history. For example, a person who’s found to have an assault conviction is probably not going to be the most appropriate candidate for a security officer position. Or, an applicant who has been arrested for a recent, serious drug violation might not be the best person to work in a hospital or other medical facility with accessibility to controlled substances. This type of information can only be found with a background check and reinforces the need to investigate prior to an offer being made.

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Following are just a few reasons why it’s important to screen candidates to help identify potentially problematic and costly situations:

  • Prevent Negligent Hiring Lawsuits.. Unfortunately, negligent hiring lawsuits are on a big upswing.. When you don’t conduct background checks, there’s no way to know if a candidate has been arrested for or convicted of assault. If you hire someone who has been and that employee harms someone else, your company can be held responsible for the bad hire.
  • Sometimes, it’s the Law. Most states require a criminal background check for anyone who works with children, the elderly, or the disabled. Failing to conduct a check on these employees could not only result in trouble at your business, but also fines or penalties, and damage to your company brand.
  • Mitigate Fraud or Theft. Stealing money or merchandise are the two most typical forms of company theft. According to the National Federation of Independent Business (NFIB), a company’s employees are 15 times more likely to steal from them than some stranger off the street. Employees also make up 44% of theft losses at stores. Skimming (diverting business funds); fraudulent disbursements (billing schemes, inflated expense reports, check tampering); and embezzlement are just a few methods of theft and fraud that can be perpetrated by a dishonest employee. A thorough criminal background check will determine those applicants who have theft convictions, helping protect your business.

It’s important to note that while criminal background checks are important, employers must be careful to ensure these checks are not discrimantory. The Equal Employment Opportunity Commission (EEOC) has issued guidance to help employers ensure their background check process does not discriminate on applicants because of race, national origin, or another protected class. There are two ways this might happen:

  1. The employer treats employees with the same criminal record differently because of their race, national origin, or another protected characteristic (disparate treatment discrimination) or
  2. If the criminal background check exclusions operate to disproportionately exclude people of a particular race or national origin, the employer must be able to show the exclusions are “job related and with business necessity.” Employers should show that the hiring decision is based on how a crime relates to the position you’re hiring for. For example, a conviction for possession of marijuana when the applicant was 18 likely wouldn’t have an impact on a receptionist role a candidate is applying for at the age of 35.

When assessing a candidate who has a criminal record, you have to consider:

  • The nature and gravity of the offense
  • The amount of time that has passed since the conviction or completion of a sentence
  • The nature of the job

The EEOC also recommends allowing the candidate who is excluded the opportunity to show why he should not be excluded.

Background Checks and the Law

Your applicants have legal rights that need to be adhered to. For example, federal and some state laws mandate that you can’t run a background check without the applicant’s permission. While they’re done to protect the company, a proper background check also has to be measured with respect for the privacy of each applicant and stay within the parameters of compliance laws.

Any time you use an applicant’s background information to make an employment decision, you have to comply with federal laws that protect them from discrimination, including discrimination based on age, race, color, national origin, sex, religion, disability or genetic information. But you’ve got to make sure that you treat everyone equally.

Ways Recruiters Can Conduct Pre Employment Screening

Using a third-party service or background screening software built into an applicant tracking system are the most typical and easiest ways to conduct background checks. In most instances the talent management software you use will include the appropriate legalese to get background check permission from each candidate, as well as track reasons for non-selection, which is important to help ensure compliance with EEOC regulations.

To be sure, hiring new employees can be sort of like walking a tightrope. You’ve got to find the right candidates with the best qualifications for the job, but at the same time stay away from accepting at face value the information a candidate has on their resume. To help ensure you make good hires, you have to dig deep into your applicants’ backgrounds so you can get a better idea of existing abilities and predicted on-the-job performance.

Doing your due diligence and performing a background check is simply no longer an option; it’s a necessity to business success.

Paycor’s ATS integrates with leading background screening experts to ensure sensitive data is handled properly. To learn more, contact one of our expert consultants today.


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