Opportunities and challenges of pre-employment background screening
Hiring new employees is an essential strategic investment for any business. Naturally, when a company hires a new employee, it has high expectations for that individual’s future contributions and performance.
The reality, however, is not always as ideal. Sometimes, Hiring Managers or Recruitment Specialists realize mistakes in the recruitment process a little too late. Moreover, it is not unusual for companies to learn that they’ve hired the wrong employee the hard way—following the suffering of significant company losses.
Pre-employment background screening is necessary for businesses to reduce the likelihood of this unfortunate scenario. This step is a great opportunity for the company to learn more about the candidate by verifying information claimed on their resume and obtained through interviews.
This verification process also allows companies to discover certain information that was not revealed during the previous stages of recruitment. How is best practice in background screening carried out?
Background screening, a form of corporate risk management
Yos Rizal Setiawan, an experienced HR practitioner who has worked in numerous national and multinational companies for over 22 years, shared his knowledge of companies’ pre-employment background screening practices. According to Rizal, pre-employment background screening is an integral part of company risk management.
“Pre-employment background screening is critical, particularly in high-risk industries, such as banking. It is important for companies to comprehend the candidate’s profile, history, and experience,” he said.
In practice, pre-employment background screening can be carried out by internal HR or vendors, or a combination of both. The option of working with vendors is considered an effective choice for companies to obtain comprehensive results.
He believes that collaboration with vendors is necessary since companies have several limitations.
“In terms of time, talent acquisition definitely has limitations because it requires sufficient time allocation and effort to obtain the required information. In terms of competence, they may not have the required competence to verify the authenticity of a candidate’s diploma or ID card, for instance, “explained Rizal.
“Next is limited access. Companies have limitations to certain databases, as vendors usually do, such as criminal records and bankruptcy records,” he continued.
According to Rizal, the practice of pre-employment background screening may be tailored to the job level. Some companies simply require applicants to attach basic supporting documents, such as ID cards, education diplomas, and competency certificates for entry-level positions. The more senior the position in the company, the more comprehensive and thorough the background screening practices required.
For certain positions in high-risk companies, such as banking and information technology, a more thorough verification process is required.
“In banking companies, especially for strategic positions such as directors, a more comprehensive background screening process is needed that can be held accountable to the relevant government authorities. In the fit and proper test process, the relevant government authorities must conduct an assessment and validation of the expertise, experience, and background of the candidate director,” said Rizal.
When red flags are found
The truth is, finding the right candidate for a position is often a difficult task. There are times when the company feels a candidate is right for the position based on his resume and interview and goes through with him to the offering stage, but then the background screening results reveal a red flag.
Red flag findings can be in the form of criminal records, negative credit records, discrepancies between the information found on resumes and background screening results, negative reviews from former colleagues, and several others.
Because it takes a lot of effort and expenses to get to that stage, it is not uncommon for companies to prefer to ignore red flags instead of canceling the recruitment of a candidate.
Things that can be categorized as red flags, according to Rizal, might differ from one company to another. High-risk companies that already understand the consequences of poor hiring tend to avoid taking risks. However, in other companies where the risks are not too high, certain red flags may be accepted—with the exception of extremely significant red flags, such as diploma counterfeiting.
“For example, I have yet to come across any written guidelines stating that organizations must not hire former criminals, regardless of the circumstances. It’s more about the organization’s risk appetite, or how much the company is willing to risk in order to hire candidates with criminal records,” he explained.
The dangers of latent risks
Red flags, especially criminal records, were once a hot topic for HR practitioners in the United States. In fact, there is a campaign called “ban the box” to encourage employers to provide equal employment opportunities to candidates with criminal records.
In Indonesia, this topic has not been widely discussed in the open. It comes back to the fact that whether a criminal record is a red flag or not depends on the risk appetite of the company.
However, according to Rizal, there are far riskier and more difficult to detect aspects in prospective employees.
“Actually, criminal records are rarely found in candidate profiles based on my work experience so far, because generally, companies prefer to resolve fraud cases committed by their employees through internal settlements rather than reporting them to the authorities,” he explained.
This fact is supported by the results of a study in the Report to the Nations 2022 that stated that as many as 42% of the fraud cases studied were not reported to law enforcement by companies.
The absence of a criminal record allows other companies to recruit the candidate without knowing there is a latent risk. In the case of unreported fraud, it is very possible that fraudulent activities will be carried out by perpetrators repeatedly from one company to another.
The challenges of background screening
To obtain information outside of such criminal records, a more in-depth background screening is required. Sending in-depth inquiries to HR where the candidate has worked previously might be a logical solution.
Unfortunately, oftentimes, the answers given tend to be normative and restricted to the employment records of their former employees due to confidentiality. Confidentiality is a major concern due to several reasons. First, it is related to the protection of personal data —which has turned into an issue since the Indonesian Parliament just passed the Personal Data Protection Bill (PDP).
Second, there are terms and conditions that bind both parties in writing regarding the disclosure of internal settlements which have legal consequences.
For background screening vendors, extracting unrecorded information is a challenge for their professional team.
Background screening is getting more and more adaptable
Despite these challenges, background screening itself is an increasingly complex field that has developed rapidly in the last two decades. For HR practitioners, it is important to adjust their employment background screening policies to fit the current culture, positions, and industry in which they are involved. For example, companies may need to start exploring social media as a tool to study a candidate’s profile.
In the end, employment background screening is undoubtedly a beneficial investment if done properly and comprehensively. This step aims to build and develop human resources, which is one of the elements in achieving company goals.