Why Run Background Checks in High-Turnover Industries? 10 Jan 2019

While some individual businesses might experience employee attrition due to poor management or a shifting local economy, many industries just naturally have high employee turnover rates. In the following fields, more than 1 in 10 employees will leave the average employer in a given year:

• Software and Information Technology, with 13.2 percent of all employees leaving each year;
• Retail, with 13 percent of employees leaving each year (including 17.2 percent of restaurant employees and 14.8 percent of sporting goods employees);
• Media and Entertainment and Professional Services, with 11.4 percent of employees leaving each year; and
• Government, Education, and Non-Profit Services, with 11.2 percent of employees leaving each year.

If your business operates in one of these sectors, fighting against attrition can seem like a losing battle. A better approach is to find ways to hire the best employees, which can keep turnover at a minimum, and have an action plan for filling any vacancies that arise.

Pre-Employment Screenings Mitigate Risk in High-Turnover Industries

Pre-employment screenings (like identity verification, criminal background checks, sex offender registry searches, and even credit checks) are arguably most important in high-turnover, customer-facing industries. But businesses in these industries are often the most likely to skip over this important hiring step.

Doing so can allow one bad employee to drive off your otherwise loyal employees, harm the company culture you’ve worked hard to build and even subject your business to legal liability.

Bad Employees Increase Turnover and Cost You Money

Turnover, even when inevitable, is expensive. Replacing an entry-level employee can cost an employer up to half of that employee’s annual earnings, while losing a specialized or high-level employee can cost employers 1.25 times that employee’s salary.

This means that if you’re in an industry that tends to lose about 10 to 15 percent of its employees each year and you have 10 full-time employees, you may actually be paying for 11 to 12 employees—while getting less than 10 employees’ worth of work. Reducing your attrition rate by half can often increase your cash flow enough to reward the loyal employees who remain, further protecting against increased turnover.

Using pre-employment screening tools to preemptively eliminate individuals who have criminal records, whose credit makes them a financial risk, or who can’t prove that they’re legally allowed to work in the U.S. can reduce your risk of hiring a worker who sends good employees looking for greener pastures.

Bad Employees Harm Workplace Morale

For many employees, it’s not the salary or the perks that make a job worth working—if it were, only the highest-paying employers would be able to attract new candidates. Instead, many employees seek out or stay with a particular employer because of the workplace camaraderie that exists or the friendships they’ve developed with their coworkers.

A single bad employee can harm this dynamic. Someone who openly brags about their past criminal exploits can leave fellow employees worried about their safety, while a worker with an incredibly poor driving record may be unreliable when it comes to making it to work on time. Customers often pick up on this change in workplace morale, and the effort you’ll need to spend to repair your workplace camaraderie after a problem employee has left can seem insurmountable.

Legal Liability for Problem Employees

If your non-vetted employee harasses a customer or coworker or commits a criminal act at your business, you could be slapped with a negligent hiring lawsuit that alleges you should have known about your employee’s background and anticipated the harm they would later cause.

For example, if you hire a new employee for your trucking company without conducting a motor vehicle records check that would reveal that this person had several prior DUIs, you may be per se liable if this employee later gets into an alcohol-related accident while on the job. The same principle holds if you hire a worker for your daycare center without checking to see whether this person is listed on a sex offender registry.

Non-vetted employees can also increase your risk of an employment discrimination lawsuit. These lawsuits often focus on the employer’s creation of a “hostile work environment.” This generally alleges that you, by hiring a bad employee, contributed to this employee’s creation of a workplace atmosphere that made other employees feel unsafe. Even if you never witnessed any of the employee’s problem behaviors, if you knew (or should have known) that this employee was creating issues and didn’t take action to correct them, you may be liable.

What Background Checks Do You Need?

At a minimum, you’ll want to verify a prospective employee’s identity and conduct a local, state, and federal criminal background check. You may also want to consider some of the following public records searches:

• Sex offender registry check
• Motor vehicle record check
• Credit check

And if you’re hiring for a non-entry-level position, you’ll want to verify the employee’s education, past employment, professional references, and any relevant licenses or professional certifications as well.

By doing your due diligence before extending an employment offer to a new employee, you’ll protect your employees, your clients, and the business reputation you’ve worked so hard to build. Ready to learn more about background checks? Schedule a call with our team to see what you need to include.