While gut instinct is a vital part of the process, the cost - both tangible and intangible - of extending an employment offer to the wrong person more than offsets the comparably insignificant cost of a background check.
Tangible Costs of Background Checks
The financial, tangible cost of conducting a background check varies with the extent of the information requested. A simple social security number trace and identity verification can range from $2 to $4 while a complete criminal background check including the national criminal database, national sex offender search, county, state, and federal criminal search costs between $25 and $75 dollars.
Some aspects of a background check are also subject to access fees that are charged by certain local courts and data providers. In many cases, these access fees are wrapped up in a background screening company's price.
In total, a complete background check costs between $100 and $200 per candidate, not including pre-employment drug screening.
Such costs may seem significant, especially for small organizations, but consider the potentially higher costs a hiring manager incurs when forgoing a background check.
Cost of Not Performing Background Checks
Like anything in business, it is important to look at the return on investment.
- According to the US Department of Labor, a bad hire generally costs at least 30 percent of that employee's first year salary. Such a cost is potentially devastating to a small business.
- According to the Society for Human Resource Management, half of all senior outside hires fail within 18 months in a new position and half of all hourly workers leave their new job within the first 120 days.
- One study reported that 39 percent of CFO's say that bad hires cost the company in productivity while managers spent 17 percent of their time (about one day per week) managing poorly performing employees. Many of these performance issues could be mitigated by simply verifying a potential employee's employment and education history.
- A recent survey of more than 2,500 hiring managers revealed that more than half have caught a job candidate lying on their resume with the most common fib being embellishing their skills, responsibilities, or capabilities. A full 25 percent of hiring managers have found out a candidate has claimed to work for a company they were never employed by.
- The US Retail Fraud Survey recently reported that employee theft was the single biggest cause of loss to retailers, stealing more than six times the amount stolen by shoplifters.
- One 2007 study revealed that 75.3 percent of current illicit drug users were employed.
While a complete background check will not mitigate all of these risks, it can certainly paint a more accurate picture of the potential hire than a simple resume or interview can. Combine these costs - both the tangible losses that are incurred when hiring the wrong employee and the intangible costs of loss of productivity, drop in employee morale, and overall disengagement - and you can begin to see why the cost of a background check is a necessary and seemingly insignificant expense.