Learning how to reduce employee fraud and recruit top candidates without compromising on quality

Beware of panic hiring to take advantage of the economic recovery and make sure their candidates are who they say they are

In the UK, now post-Brexit, the demand will be intense for HR to find good people quickly and there will be a lot of pressure to get things right. Against increasing pressures to reduce costs, HR will need to remain diligent in in their background and reference checks or run the risk of recruiting unqualified candidates or even worse, people who are focused on depleting company resources through employee fraud or identity theft. Hiring the wrong person can have detrimental financial, reputational and legal consequences.  In order to reduce these risks, companies are now tightening up their recruiting procedures and implementing stricter background checks, as well as ensuring line managers are properly equipped to make the right hiring decisions.

Writing for the Bayside Journal, Jon Marris, gives his take on the risks for recruiters and how to make the right decisions during the recruiting process:

What are the recruitment risks?

In the face of economic uncertainty, the task of recruiting the best talent certainly presents some tough challenges for HR.  In this digital world, not only will HRs need to now use social recruiting processes, but they will also need to weed out those who have exaggerated their online profiles in order to stand out in a competitive market, or in the most extreme case, to commit employee fraud against an organisation, finding ways to limit uncertainty in the hiring process has never been more important.

Surveys suggest that lying on CV’s is on the increase, with nearly a quarter of job seekers deviating from the truth on their CV.  The truth is exaggerated on everything from salaries, previous experience, qualifications, dates of employment and job titles.

According to research from the CIPD, 25 percent of employers had to withdraw job offers last year after finding candidates had misrepresented themselves in their applications. It has also been reported that 39 percent of UK organisations have experienced a situation where their employee screening procedures have allowed an employee to be hired who was later found to have lied or misrepresented themselves in their application – applying to candidates in both junior and senior roles.

Organisations need to be extremely careful about people they employ in positions of trust and have robust anti-fraud policies and protection measures in place to cover every eventuality, including applicants who play the system and take on 3rd party profiles in order to land themselves in a highly respectable role.

The possibility of hiring someone who may pose a direct criminal threat to your organisation may seem rare, but it is, in fact, more common than many people realise. BDO Stoy Hayward’s 2009 Fraudtrack report found that 29 percent of fraud was committed by senior management, equating to a cost of £358m to UK organisations and that 8 percent was attributed to employees, equating to £95m. According to KPMG’s annual fraud barometer, the value of criminal frauds prosecuted in the courts reached a 13 year high of £1.1 billion in last year, but it is feared the worst is yet to come. 

What constitutes a bad hire?

Experian explored this issue with HR managers and Directors in an attempt to define what is really meant by a ‘bad hire’. While there are various types of ‘bad’ hire, including the criminal element, the most common ‘bad hires’ can be categorised as follows:

The under-qualified hire – This is where the candidate lacks the vital necessary skills to perform tasks within their role. The financial implications of this can include costs associated with retraining, the cost of managing them out of the business as well as the additional overtime that others will need to put in to cover the role. This type of bad hire is likely to be the most expensive at the senior level due to binding contracts and increased legal obligations.

The underperforming hire – An inability to perform in a role could be down to a bad cultural fit or a lack of willingness to perform. In these cases, it’s not so much about what the person did, so much as what they didn’t do in that they simply didn’t excel in the role and failed to meet the employer’s expectations.

The under-whelmed hire – This is when the job itself does not match up to the expectations of the individual taking it. In these instances, the employee is often dissatisfied in the role within three to six months, while the costs associated with recruiting, interviewing and inducting them into the company cannot be recovered.

A good recruitment and employee screening process can help to avoid these factors, so this is where HR can have a significant influence on preventing the above scenarios. As much as employers’ risk employing candidates without the necessary skills or experience to do the job, conversely, there is also the danger of line managers or departmental heads overselling a position in order to secure a highly qualified or even over qualified candidate. In these cases, HR has a responsibility to clearly define roles and responsibilities to new recruits or risk the consequences of losing an employee (at significant expense) only a few months down the line.

The latest Recruitment Retention and Turnover survey by the CIPD indicates that around a fifth of new starters leave their organisation within the first 6 months (19 percent). This emphasises the need for organisations to more accurately match candidates to specific roles and for them to look at the strength of their induction process in helping people integrate into to the workplace quickly and effectively.

For the lower end of the pay scale, you are likely to pay around 10 percent of salary to recruitment agencies for sourcing a new hire. For more senior positions, this could be between 30 to 40 percent of salary. Added to that, line managers may spend as much as six hours interviewing staff for junior roles and significantly more for senior level positions.

According to the CIPD, the average recruitment cost of filling a vacancy per employee is £4,000, increasing to £6,125 when organizations are also calculating the associated labour turnover costs. For a senior manager role, these figures rise to £10,000 and £9,000 respectively and you can double these for the cost of rehiring if things don’t work out the first time.

Whatever the numbers, mis-hiring is a significant expense that is costing the UK economy dearly, with estimates from the Future Foundation estimating the cost of managing poor hires at over £24 billion.

Unfortunately, poor recruitment decisions happen, but often such costly mistakes can be avoided by well-designed and regularly reviewed internal recruitment procedures as well as a robust employee screening process. An interview can only reveal so much and no matter how good a judge of character someone is, intuition is fallible and should therefore always be supported by proof.

Here are 2 important essential tasks to help recruit good hires:

Do verify a candidate’s identity: Proper identity authentication is absolutely key to the employee screening process. This should be the ultimate starting point in the recruitment process.  Do your background checks, criminal record checks (both UK and abroad), check them out on social media – really the verification process should be even easier nowadays with technology and online profiles at our fingertips.  But double, even triple check they really are who their online profile says they are.

Do get the candidate’s consent: Background screening is designed to protect the employee as much as the business, so it’s essential to gain their permission from the get-go. Experian’s own experience has also shown that there is a 15 percent drop-out rate when applicants are made aware that background checking is involved in the recruitment process, highlighting the strength of having robust checking procedures in deterring time wasters and potential fraudsters. When it comes to screening potential candidates, there seems to be some confusion around data privacy, employment, and even human rights law, but as the Serious Organised Crime Agency (SOCA) pointed out recently, the Data Protection Act should not be an excuse for firms failing to carry out effective employee screening.

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