As businesses and government agencies are streamlining their budgets, more and more emphasis is being placed on Return-On-Investment or ROI. The burden of ROI proof initially fell to the operations side, but now even hard-to-quantify business areas like Human Resources are asked to prove the value of their stated best practices.

Employment background screening is widely recognized as a necessary process designed to help find the applicants who fit your employment criteria, but it also represents an expense. The question is, what dollar value does a background screening program deliver?

Here are some basic statistics:

1 out of 3 applicants provide false, inaccurate, misleading or incomplete information on their resume or application.

1 in 20 job applicants falsify their name, Social Security Number or Driver’s License Number to hide a conviction or other problem.

The average fraud scheme in a small to mid-sized business will result in $105,000 in losses.

The United States Department of Commerce reports that 30% of all business failures result from theft or embezzlement.

So, the primary areas in which companies are adversely affected by hiring the wrong employee can be prevented by reducing these areas of concern by implementing a quality employment background screening program.

The three primary areas are:

Turnover

Occupational Fraud

Catastrophic Events

TURNOVER – is defined as the ratio of the number of workers that have to be replaced in a given time period divided by the average total number of workers employed during the same period.  Turnover ranges vary widely depending upon the industry and employment level. For example, the Aberdeen Group states the following annual turnover rates for hourly workers:

Hotel Chains: 51.7%

Specialty stores: 104%

Fast food chains: More than 200%

In addition, a study done in 2004 by The Employment Policy Foundation estimated that the average cost of turnover for businesses is 25% of the replacement salary.

OCCUPATIONAL FRAUD – consists of asset misappropriations, corruption schemes, theft of property and fraudulent statements.  According to the Association of Certified Fraud Examiners’ 2010 Report to the Nations on Occupational Fraud and Abuse, the median fraud loss over 1,021 cases studied was $105,000.

CATASTROPHIC EVENTS - include workplace violence, sexual harassment, and accidents that occur due to falsified qualifications or alcohol/drug use. Compounding these events are the resultant law suits and negligent hiring litigation that tend to follow.  The Workplace Violence Research Institute estimates the annual cost of workplace violence at $36 billion, while the Substance Abuse and Mental Health Services Administration (SAMHSA) says that alcohol and drug abuse costs U.S. businesses about $81 billion each year; totaling $117 billion/year.

What is the Final ROI?
The US Small Business Administration states for every dollar an employer invests in employment screening, the return on investment ranges from $5-16.  The savings are a result of improved productivity, reduced absenteeism, lower turnover, and decreased employer liability.

Visit the PCS website for more information on background checks.

Contributed by:

Tony Lipinski
Trusted Employees
952.259.3019
tlipinski@trustedemployees.com
Trusted Employees Website

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.

Tags: Background Checks, background screening, hiring employees, hiring process, Payroll Control Systems, screening employees

This entry was posted on Tuesday, June 29th, 2010 at 4:08 am and is filed under Business Advice, PCS Newsletter Articles, PCS Product News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.