Special ESR Report on Background Screening for
Start-ups and VC backed Firms

Hiring a person with a criminal record or falsified credentials can be a never-ending nightmare. Industry statistics suggest that the cost of a bad hiring decision can exceed $100,000, but for a hard-working startup trying to develop a new technology, build a brand, or be the first to market, one bad hire can mean even more than the loss of money. It can mean the end of a dream.

It’s no surprise that employers of all sizes are turning to pre-employment background screening as a way of minimizing hiring risks. Even though the original team may know each other well, every start-up eventually has to hire a stranger. That is the point often where start-ups have the need to know whom they are hiring.

Pre-employment background screening works in four critical ways:

Just having background screening can discourage applicants with something to hide. A person with a criminal record or false resume will simply apply to a company that does not pre-screen.

It limits uncertainty in the hiring process. Although using instinct in the hiring process can be important, basing a decision on hard information is even better.

A screening program demonstrates that an employer has exercised due diligence, providing a great deal of legal protection in the event of a lawsuit.

Having a screening program encourages applicants to be especially forthcoming in their interviews.

The criminal record check is a primary example of a pre-screening process that helps promote safe hiring practices. Approximately 10% of job applicants have criminal conviction records relevant to the hiring process; without a screening program, it is a near-statistical certainty that a company is going to hire someone with a criminal record. Contrary to popular perception, there is no national database available to private employers. Criminal records are normally checked by having qualified researchers visit courthouses in counties where an applicant has lived or worked. Since there are over 10,000 courthouses in America where records are kept, most employers outsource this task to qualified firms that specialize in pre-employment screening.

Another important tool is resume verification. Job applicants often use their resumes as a marketing tool, but the hiring company can find itself in trouble when resumes exceed the bounds of honesty. It is estimated that up to 30% of resumes contain material falsehoods that pertain to previous employment, education, and professional licenses. A professional screening firm can easily verify whether an applicant has the degrees or licenses claimed. Even verifying the job dates and job title is crucially important! Other tools can include credit reports (when relevant to the job), social security number traces, driving records, civil and federal court records, as well as judgments, liens and bankruptcies.

Given the advantages of screening, employers often ask if there are legal, financial, or practical drawbacks to starting a screening program. The answer is a resounding "no."

Legal. Employers have an absolute right to conduct lawful pre-employment screening in order to hire the best-qualified candidates. A federal law called the Fair Credit Reporting Act (FCRA) balances the right of employers to know whom they hire, with an applicant’s right of disclosure and privacy. Under that law, the hiring company first obtains the applicant’s consent to be screened. Then, in the event that negative information is found, the applicant must be given the opportunity to correct the record. A qualified screening company will handle all the legal compliance issues for the employer.

Financial. A pre-employment screening will typically cost less than the cost of a new employee on his or her first day on the job. That’s pocket change compared to the damage one bad hire can cause.

Practical. Screening is normally conducted by an outside agency working with a company’s human resources department, and results are usually returned within three to four business days. A qualified pre-employment screening firm can set up the entire program and provide all the necessary forms.

Furthermore, companies that engage in screening find it does not hinder their ability to attract and recruit top talent. Most job applicants understand that it is a business necessity in today’s environment. In fact, good job applicants are also concerned about working in a safe and profitable environment with qualified co-workers.

Both employers and applicants have learned that pre-employment screening is an absolute necessity in today’s business world. More importantly, they’ve learned that due diligence in hiring is a way to keep the venture dream alive.

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