Employers justify the costs associated with employment screening with the clear Return on Investment, or ROI, that these programs bring to the workplace.
Two costs are associated with a screening program. First, is the cost of the in-house time and effort needed to pursue a Safe Hiring Program; second, the cost of any outsourced services such as background checks. These costs are covered in greater detail in The Safe Hiring Manual 3rd Edition. In the meantime, let us assume as a general rule, the cost of a background screening is likely less than the cost of an employee’s salary on just his or her first day on the job. Of course, the depth of screening, and therefore the costs, will vary depending upon the job position. Screening for a janitorial position, for example, will likely cost less than that for an executive. Since executives are more highly paid, however, the cost of a screening as a percentage of salary is still less than their first-day salary.
Two Approaches to Calculating ROI
Because the purpose of background screening is to prevent harm, it is often difficult to quantify the ROI of events that did not happen. A firm hit with even a single incident of workplace violence or related legal action immediately recognizes the advantages of a Safe Hiring Program.
Method One: Making a Judgment as to the Value of Avoiding the Parade of Horribles
Assume an average background check performed by a third party firm is $50, and a firm submits 100 names to a screening firm during a twelve month period. Keep in mind that most employers only screen finalists, not all who apply. The third-party costs of this service would be $5000.
If a firm can avoid just one problem employee as a result of a background check, the $5000 cost of the screening program was more than worth it. Just one bad hire can exceed the cost of an applicant’s yearly salary. Given industry statistics that suggest up to 40% of all applicants contain potential issues, it is likely that a background check would save an employer a great deal of time, money, and grief in terms of a bad hire. Given the negative impact that even one bad hire can cause, it would appear to be a very small price to pay.
Method Two: Calculation of Benefit from Lack of Turnover
The benefits of a Safe Hiring Program can also be measured by estimating the average costs associated with a single employee turnover. An easy way to consider these costs is by building a turnover calculator that breaks down all the costs associated with having and filling a vacancy on an item-by-item basis. When the expenses involved are broken down to basics, it is easy to see how such costs can add up to a sizeable figure.
This information was taken from The Safe Hiring Manual 3rd Edition by Lester S. Rosen. For more information on this publication, please visit the BRB Bookstore or contact Katee@brbpublications.com.