background checks: understanding who you are hiring

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Who Are You Really Hiring? In this whitepaper, you’ll find out why it pays to always run a

background check in cases such as occupational or résumé fraud.


The Bottom Line of Background Checks

Approximately 69% of organizations,

reported that they conduct criminal background

checks on all of their job candidates1. There’s a

lot of great talent out there, but how can you

make sure these applicants are who they say

are and have the experience they indicate they

do. It’s now more important than ever to make

sure the people you hire are capable, qualified

and trustworthy. There are a number of

reasons for running background checks, such

as:

• Reducing legal liability for negligent

hiring.

• Ensuring a safe work environment for

employees.

• Reducing and preventing theft,

embezzlement and other criminal

activity

When a candidate is applying for a position

where he/she would be working with sensitive

financial information, confidential employee

information or other people’s property, it’s likely

a business is looking to pre-employment

screening or background checks to ensure that

the candidate is trustworthy. Background

checks can rule out candidates with negative

incidents in the past and protect your business

and employees.

Background checks can reduce your

business’s risk of falling victim to résumé fraud,

occupational fraud and the big costs associated

with bad hires.

If you’ve noticed some discrepancies in your

payroll or feel an employee embellished their

work experience, consider your options when it

comes to background checks and what these

types of screenings can do for your business.

1. “Background Checking – The Use of Criminal Background

Checks in Hiring Decisions,” SHRM, July 2012.


Recovering from Résumé Fraud

Background checks can help you combat

résumé fraud and avoid bad hiring mistakes.

Think back to 2012 when Yahoo! CEO Scott

Thompson was accused of inflating his college

credentials at multiple companies. When his

claim of innocence was contradicted with

evidence, he agreed to resign. Think of the

costs and headaches that could have been

saved had a simple background check on his

work experience been run.

46% of employment, education and/or

credential reference checks conducted

revealed discrepancies between what the

applicant provided and what the source

reported2.

While Thompson may not have been the only

person to inflate their credentials, businesses

hiring for executive level positions or in

specialized fields would be smart to consider

running background checks on applicants and

employees.

Another recent study found that two out of

three employers have encountered an

applicant lying on their résumé3. Résumé fraud

can cost your business employees, time and

money. If you invest in hiring and training a

new team member, only to find out they

embellished their résumé, you’re investing a lot

of unreturned resources. To combat résumé

fraud, consider taking the following steps:

• Use background checks

A background check into the experience your

applicant claims can quickly identify

discrepancies.

• Use backchannel references

When possible, contact your applicant’s former

co-workers to confirm specific experience

details.

• Cross-check their public profiles, e.g.

LinkedIn, for inconsistencies

With a semi-public profile, candidates may be

less likely for fear of being called out by peers.

Résumé fraud is a commonly encountered issue

by hiring managers and recruiters. It can waste

resources and deny jobs to applicants that are

actually qualified. Background checks and

employment verification services can confirm, or

find errors, with an applicant’s education and

work history. While these can be expensive

when conducted for an entire pool of applicants,

using these types of services for near-offer

candidates is a good idea.

2. “Screening and Selection Index,” ADP, 2010.

3. “Employment Screening Benchmarking Report,” HireRight, 2013.


Fending Off Occupational Fraud

You might feel confident in your new

hire, but occupational fraud, also referred to

as employment fraud, is very real and

employees often pose the greatest fraud

threat. Employees who are attempting to

commit occupational fraud may not think you’re

paying close attention to operations. Payroll

fraud is one common type, but occupational

fraud can take place throughout a company,

including accounting departments, at the

managerial level and by long-term employees.

The typical business loses at least 5% of its

annual revenue to occupational fraud and

the average loss caused by occupational

fraud is $140,0004.

Occupational fraud can take place when an

employee pads their time sheet, steals product

from a warehouse, alters financial statements,

or even takes money directly from a cash

register. Background checks can help prevent

occupational fraud.

By running a background check on those who

self-report their hours or interact with your

business finances, you can take the first step

in preventing and reducing your risk of falling

victim to employment fraud.

40-50% of employment fraud victims don’t

recover any of their losses4. Larger companies

may have higher value thefts, but even the

smaller thefts to small businesses can cause a

lot of damage.

While having a system of checks and balances

within your organization can help prevent

employment fraud once an employee is brought

on, a pre-employment screening can help you

defend yourself and your business against hiring

previous offenders.

4. “2012 Report to the Nations on Occupational Fraud and Abuse,” ACFE,

2012.


Bad Hires Cost Businesses Big

Screening employees provides businesses

with the opportunity to ensure that the claims a

candidate makes are truthful. A sufficient

screening process can uncover

misrepresentations made by applicants during

the hiring process. A bad hire can cost your

business BIG.

Hiring someone without first running a

background check can damage your business

brand and cripple your financials. Throughout

this whitepaper has been the discussion about

what types of fraud can be prevented with pre-

employment screening. While your hiring

process may include reference checks and pre-

employment assessments, a background check

can assist in your efforts to find top talent by

ruling out unqualified or untrustworthy

candidates.

Approximately 6% of criminal background

checks revealed a criminal record within the

last seven years – with 24% of those having

two or more adverse records2.

When you hire someone who isn’t as

experienced as they claim or has a history of

employment fraud without running a background

check, you’re risking losing hiring budget,

employee compensation budget, productivity,

and even new business opportunities.

Whether you outsource recruiting or keep it in-

house, running pre-employment checks on

candidates that are about to be offered a job can

aid you in making better hiring decisions.

55%

40%

35% 29%

20%

61%

Benefits of Conducting Employment Screening3

Improved quality of hire

Improve safety and security

Improved regulatory compliance

Reduced negligent hiring risks

Reduced employee turnover

(6) Other Benefits

• Replacement of an employee ranges

from 2-7 times his/her salary5

• Hiring and training costs can very to

25-200% of annual compensation

5. “Top 5 Hiring Mistakes & How to Fix Them” Synergy Solutions, 2009.

6. “Six Truths about Employee Turnover, “ American Management Association, 2009.


Summary Screening employees provides businesses with the opportunity to

ensure that the claims a candidate makes are truthful. Background

checks can help you avoid occupational and résumé fraud, as well

as the costs associated with bad hires.

For more information about background checks, visit

Business.com.

http://www.business.com/human-resources/background-checks/

background checks: understanding who you are hiring

Education