Neeyamo’s Success Mantra for PEOs

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Helping clients succeed by leveraging pre-employment background checks to reduce risk and improve quality of hire.

HIPAA violation, credit card forgery, unlawful conduct, disregard for company policy, and finally legal battles for the employer!- Contributions of a bad hire. The question that arises here is who is responsible for the bad hire? Client or PEO? Would it matter if a third party claim arising? Who is accountable? Who could have mitigated the risk?

Protecting the organization and its integrity is of primary concern for performing applicant background screening. According to a research by American Databank statistics show that around 30% of the resumes have false information, 45% of potential employees have criminal record, and sexual harassment has increased by over 15% annually, the most important statistics though is that 30% of the business failures are caused by employee theft and over 2 million crimes occur in workplace annually. Estimates of fraud committed by employees cost US companies approximately 20 billion dollars. An employer’s responsibility does not only revolve around “Providing the right kind of asset at the right time with the right skills” but of equal importance should be “Providing an asset that would enable a safe working environment”.

Well, its time PEOs commit to improve or reform its hiring practices. It should consider leveraging “effective” pre-employment background screening process to insulate it (and its client) from incurring reputation, financial and/ or business risks.

Success Mantra 1: I will help my clients make the “right” hire.

In an environment where companies are scrambling for talent, it is very likely that many a times organizations end up hiring the first one that fits the bill and not necessarily the best one. In an environment where companies are more and more resorting to “just-in-time” hiring practices based on data points made available in the resume, the importance of ensuring the data points considered for hire is true and accurate cannot be undermined. Falsification of academic records or fabricated information is an endemic problem. Manipulation of resume is equally very as well. Academic and reference checks (multi-dimensional) can go a long way in validating the basis on which the decision to hire the employee was made.

A number of annual reports, including BDO Stoy Hayward’s Fraudtrack 41 and CIFAS’s2 (The UK’s fraud prevention service) ‘The Enemy Within’ have showed a rising level of major discrepancies and embellishments on resumes over previous years. Such business fraud costs businesses billions of dollars every year!

Good hire ensures good client reputation and relationship. It is therefore important for the PEO to ensure that adequate academic and reference checks are done to be assured about the quality of hire.

Success Mantra 2: I will protect my client from liability arising out of negligent hiring suits

Employer’s inability to exercise proper ‘due -diligence’ will expose to negligent hiring risk litigations, a growing problem from which no employer is immune. An employer has an obligation to its employees to provide a safe and secure working environment. Workplace violence can lead to liability not only for the client but also for the PEO. The primary measure for preventing negligent hiring would be to perform a background check on potential hires. Of course, a check alone will not ensure that the employer will not be held liable, but it confirms that the employer used a diligent approach and reasonable care during hiring to screen potential violators.

Statistics at American Databank3 show that employers lose 72% of all negligent hiring suits. Employers repeatedly are held liable with penalties, most times running them into millions of dollars negligent hiring lawsuits. Would a PEO be insulated from such a liability if the client went bankrupt? Having a written policy for BGV is paramount but enforcing the policy would protect the client and PEO.

Reasonable pre-employment screening procedures would include checks for employment, credit, criminal, arrest, incarceration, sex offender, citizenship, immigration or legal working status, driving and vehicle records, drug abuse, and other checks regardless of the job, its duration, role, or background of the applicant.

Success Mantra 3: I will share the responsibility of creating a safe and secure environment for my co-employees to work

In a 2008 report released by the U.S. Bureau of Labor Statistics, 13 percent of the 5,840-workplace fatalities that happened in 2006 were the result of assaults and violent acts. Needless to say, a robust pre-employment background screening can do wonders when it comes to avoiding workplace violence. People with histories of domestic abuse, assault and battery, drug and alcohol abuse, etc. are more prone to on-the-job violence, according to SHRM. Background checks help uncover these behaviours.

American Databank shows that over 2 million crimes occur in the workplace annually and 45% of potential employees have a criminal record, bad driving record, worker’s compensation claim or a bad credit history.

While background check provides no guarantee that employees with “clean records” will not indulge in workplace violence, nevertheless, they are important in achieving the larger goal of providing employees with a safe working environment.

Success Mantra 4: I will consult as a risk advisor to my co-employing customers that will help in improving overall pre-employment check efficiencies

In a co-employment pact with PEO, the clients are actually seeking to shift the risk of loss for its permanent workforce. Businesses are not equipped to handle onslaught of regulations and regulators and the burden is particularly onerous on small businesses. Barring full compliance, the agreement between PEO and its client normally places all liability for any benefits or damages back on the client. Host of labor risks could be mitigated by a proactive and value-added PEO could go a long way in being a risk advisor/ partner of its client.

Each state in the U.S. has differing regulations for workers’ compensation insurance and state unemployment insurance, so PEOs are typically regulated at the state level . Regulations pertaining to FMLA Act, National Labor Relations Act and other such regulations only mean the regulatory framework can indeed be complex for a small enterprise and therefore the need for a risk advisor in the form of its PEO partner.

A PEO is mostly better equipped than its average clients to ensure compliance with employment law requirements and provide for improved worker safety. It is better equipped to educate its client on the need to have adequate and efficient pre -employment screening.

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