Reduce Employee Theft

from pre-employ.com

reprinted as fair use

Reduce Employee Theft

with Increased Background Screening

by Tom Ahearn

While many employees are honest, hard working, and – in this down economy – happy to have a job, it only takes a one “bad hire” due to poor background screening to take down an entire company.

Employee theft and other illegal acts can weaken or even ruin a corporation. However employee theft is defined – fraud, pilfering, larceny, embezzlement, etc. – the end result is that businesses lose because an employee unlawfully takes something from an employer. According to the Association of Certified Fraud Examiners (ACFE), employee theft costs businesses in the U.S. $6 billion and an average of 7% of revenues annually. The ACFE's Report on Occupational Fraud and Abuse shows how costly employee theft can be and includes these facts:

• The median loss for companies caused by employee theft was $175,000.
• More than one-quarter of employee theft involved losses of at least $1 million.
• The most common employee theft was corruption (27%) and fraudulent billing (24%).
• Financial statement fraud was the most costly employee theft with a median loss of $2 million.

Since a single person can destroy a business with employee theft, pre-employment background screening gains greater importance since it reduces the risk of a bad hiring decision. The first step to preventing employee theft is to perform background screening on job applicants thoroughly before hiring them in the first place. The background screening should include at least the following:

• Social Security Number (SSN) Address Locator.
• Criminal & Civil History.
• Drug Testing.
• Driver License Violations.
• Verification of Education/References/Past Employment (including reasons for leaving).

Employers may also consider running a credit check during the background screening, since prospective employees with financial difficulties are more prone to commit employee theft. However, employers must follow federal Fair Credit Reporting Act (FCRA) guidelines for background screening that legally require employers to notify the job applicants in writing that a credit report may be requested. They also need to receive the applicant's written consent for the background screening.

Dealing with confusing federal regulations can be tricky business for employers, and can lead to legal troubles if those regulations are not followed correctly. By hiring a reputable background screening firm, businesses can protect their company from employee theft and ensure their survival during the current economic crisis.