Employment Background Screening: Necessity in Todays Environment

1
Employment Background ScreeningNecessity in
Todays Environment

• Presented by
• Jeff Wizceb Vice President Business Development
• HR Plus, A Division of AlliedBarton Security
  Services

2
Overview

• Industry Background and History
• Need for Background Screening
• Current Environment and Challenges

3
Industry Background History
4
Industry Growth

• High Growth since mid-1980s
• Stimulated by
• Increase in employment litigation lawsuits
• Growing awareness of need
• Find the best candidate
• Reduce employee turn-over
• Concerns of workplace violence
• Increase in transient workforce (temps,
  contractors)
• Increase in employee fraud, identity and
  information theft

5
Industry Growth

• Concerns of global terrorism
• September 11, 2001 attacks on World Trade Center
  and Pentagon
• October 12, 2002 and October 1, 2005 bombings in
  Bali, Indonesia
• March 11, 2004 train bombings in Madrid, Spain
• July 7, 2005 public transportation system
  bombings in London, UK
• Better Technology leading to greater
  affordability

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Industry Progression
FCRA becomes main law governing the industry 1997
Workplace violence dominates the headlines 1999
NAPBS founded with 200 members 2003
9/11 increases public awareness CA-1786
enacted 2001
Public Record Retriever Network organized 1995
1998 The Internet begins to impact the industry
2002 NAPBS proposed by leaders at industry
conference
1996 Half of all HR professionals use screening
to some extent
2000 Resume fraud becomes a major news story
1994 Driver's Privacy Protection Act becomes law

• More and more employers concerned with the high
  cost of not screening applicants
• Dedicated Pre-employment screening agencies
  replace traditional Private Investigators as the
  main supplier
• NAPBS emerges based on desire to address common
  needs within the industry

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Fair Credit Reporting Act

• Public and Private Companies using 3rd parties
• Protects Consumers and Companies
• Regulates use of disclosure form
• Cant be hidden as part of application
• Adverse Action
• Grants opportunity to contest information in
  reports
• 99 of time candidates go away

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Competitive Front

• Early Nineties approximately 30 screening firms
  performed screening services
• 2007 over 1,800 screening firms in existence
  across the U.S. (includes P.I. firms)
• Industry consolidation
• Companies emerged to capitalize on growing
  security concerns
• Price Competiveness

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Todays Industry Landscape

• Overall growth estimates
• Past decades growth 25-35
• Today 5-7
• Currently, 2.5 billion in total annual spending
  by employers, non-profits and volunteer groups
• 96 of employers or larger firms across the U.S.
  conduct some type of employment screening
• 55-60 are small to mid-size employers
• Source 2006 Society of Human Resource
  Management (SHRM) study

10
Need for Background Screening
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Does Screening Make Sense?

• Employee Fraud and Abuse cost companies 600
  Billion
• 2 million people physically attacked in workplace
  related incidents, 6 million threatened
• 800k for average negligent hiring lawsuit
• Internal theft costs companies over 19.5 Billion
• 35 of Resumes and 70 of Job Applications
  contain falsified or embellished information.
• 30
• Business Fail due to poor hiring practices
• Of annual salary cost of hire
• Decrease in employee fraud by those companies who
  conduct background screening

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Candidates with Derogatory Information

• Criminal Records 8.6
• Education Discrepancy 17.55
• Employment Discrepancy 28.53
• Motor Vehicle Record Derogatory 41.9
• Credit Report 49.0
• Drug Testing 2.6

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Question

• What Question is everyone going to ask after a
  bad hire is made?
• How did you hire that person?

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Benefits of Screening to the Company

• Lower Liability
• Safe Work Environment
• Negligent Hiring
• Brand Protection
• Quality Hires
• Reduced Losses (Fraud and / or Abuse)
• Compliance (Regulated Industries)

15
Current Environment and Challenges
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Todays Economy and the Effect

• Increase in Falsification
• Stretching the Truth
• Desperation
• Increase in Cloaking Negative information

• Top 5 Lies
• Job Title
• Date of Employment
• Graduation Dates / Attendance
• Grades / GPA
• Degree

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Current Job Market

• Top Question
• How can I reduce cost?
• Hiring is down significantly
• Organically, spending is down
• Employee pools are much larger
• Screening is more imperative
• Less desired candidates

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Liability Coverage

• Vendor Programs
• Who is coming on to your facilities?
• Are you screening appropriately?
• Industry specific
• Job categories
• Government Regulations
• Practiced Policies (National and International)

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Current Job Market

• Actions to Consider
• Revising Policies
• Streamlining screening
• Positive Actions to Take
• Find a vendor who is a better fit.
• Is your vendor an NAPBS Member?
• Does your vendor have a compliance expert on
  staff?
• Education of newly created service offerings
• Streamline processes

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Challenges

• Push to tie-in other services (contd)
• Identity Theft Products
• The number of US adult victims of identity fraud
  decreased from 10.1 million in 2003 and 9.3
  million in 2005 to 8.4 million in 2007.
• The mean fraud amount per fraud victim decreased
  from 6,278 in 2006 to 5,720 in 2007.
• The mean resolution time was at a high of 40
  hours per victim in 2006 and was reduced in 2007
  to 25 hours per victim. The median resolution
  time has remained the same for each Survey year
  at 5 hours per victim.
• Source http//www.privacyrights.org/ar/idthe
  ftsurveys.htm

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Challenges

• Identity Theft Products
• What do they do?
• Varies Depending on product
• May include
• Fraud Monitoring Stolen Wallet Assistance
• Fraud Alerts No Call List / Mailing list
• Credit Monitoring Service Guarantee
• Credit Reports Protection of other information
• Do they work?

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International Challenges and Pitfalls

• Imperfect Practice
• Legal and cultural differences
• Company policies do not address actions to take
• Privacy laws, security standards and
  discrimination
• Court system variations and terminology
• Information access and credible source concerns
• Language and time zone barriers
• Name variations and complete identifiers
• High costs and slow turnaround times

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Opportunities

• Biometrics and Fingerprinting
• I-9 Compliance
• Internet Name Searches
• Periodic Screening
• Data-mining
• FBI Database Searches
• NAPBS Accreditation

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Questions Answers