Research Shows Background Screening Reduces Risk and Potential Costs

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Employment background check savings

If you’re like most HR professionals, the decision to background screen applicants for your company is a given. But sooner or later, the value of your screening program will be questioned. Although it’s fairly straight forward to quantify the cost savings of streamlining your screening processes, let’s look at some of the soft costs that can be incurred by forgoing an employment screening program.

One of the most significant soft costs that can be reduced thru screening is the cost of hiring and replacing a salaried employee. No matter their salary, the cost of a bad hire ranges from one to five times the applicant’s annual salary, including recruitment, training, severance costs, and lost productivity, based on research conducted by HireRight in 2005.

And on average, at least half of all new hires by U.S. businesses “don’t work out.” A background check costs a small fraction of replacing your lowest salaried employee.

According to the American Management Association and the U.S. Chamber of Commerce, 30 percent of all business failures are caused by employee theft, and nearly 15 percent of all applicants admit to theft of merchandise from an employer.1 Reducing the risk of employee theft with screening is another important cost/benefit to consider.

A Right Management Survey shows that there are significant consequences to a bad hire, including lowering employee morale by 68 percent or decreasing employee productivity by 66 percent. With this in mind, a simple background check can decrease an organization’s risks for lost customers, market share and reputation.

Despite the many well-publicized revelations of high-level executives who lied on their resumes and damaged their organizations as a result, many companies mistakenly think that this can’t happen to them. But without conducting effective and comprehensive background screens on each candidate, organizations are not making fully-informed hiring decisions.

Research based on background checks conducted by HireRight in 2008 shows that seven percent of applicants had a criminal history within the last 7-10 years, and roughly 32 percent of employment and 39 percent of education verifications reveal a discrepancy in the information provided by the candidate.

In addition to helping to ensure a well qualified and honest hire, background screening is a critical step to maintaining workplace safety and security. The cost of a safety incident can be immeasurable and leaves the employer open to liabilities for negligent hiring and retention. Employers have lost more than 79 percent of the negligent hiring cases with an average settlement reaching more than $1.6 million.2

When evaluating the cost/benefit of a background screening program, consider the substantial savings employment screening provides by significantly reducing risks and costs ranging from the lowered productivity and performance of an unqualified hire to the costs of employee theft. These factors alone demonstrate the value of screening.

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 1Reid Psychological Systems (Don’t Hire a Crook, Dennis DeMay; James R. Flowers, Jr., 1999 Facts on Demand Press, pg. 88)
2USA Today, Nov. 21, 2003


HireRight is a leading provider of on-demand employment background checks, drug and health screening, and electronic Form I-9 and E-Verify solutions that help employers automate, manage and control background screening and related programs.

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The HireRight Blog is provided for informational purposes only. It is not intended to be comprehensive, and is not a substitute for and should not be construed as legal advice. HireRight does not warrant any statements in the HireRight Blog. Any statutes or laws cited herein should be read in their entirety. You should direct to your own experienced legal counsel questions involving your organization’s compliance with or interpretation or application of laws or regulations and any additional legal requirements that may apply.