Excerpts from www.hrmsingapore.com, April 2007

Shadows from the past

Insufficient background checks on employees can occur at every level of a company's hierarchy. The CEO of RadioShack Corp, David J Edmondson, hastily resigned last year to limit the fallout after the American press unveiled some discrepancies on his resume. The school where he claimed to have earned two college degrees did not have a record of them. Edmondson had worked at the company for nearly 12 years.

Uncovering lies
“Our experience is that in Asia, between 18–20% of job applications have some level of discrepancies; in the US it's between 8–7%,” explains Bart Valdez, president of First Advantage Employer Services, a provider of pre-employment background screening services in Asia-Pacific. About half of these discrepancies are traced to education records, with most of the remainder being previous employment discrepancies. “About 1% relates to hidden criminal record,” he says.

In today's litigious environment, and one that is increasingly under pressure from regulators and tightening legislation, employers are increasingly held liable for their employees' actions. No matter what type of business you represent, employing honest, qualified people is critical to a company's success.

A KPMG fraud survey report in 2004 showed that 25% of respondents in Singapore had experienced fraud in the previous two years, with 68% of the fraud incidents having been perpetrated internally. The typical fraudster was male, 25 to 40 years old, drawing an average annual income of less than S$50,000, had been employed by the organisation for between two and five years, and had a secondary or college education.

“Pre–employment screening is an important tool and an effective way to use past behaviour to predict future performance. Reference checks help to verify and confirm the information gathered during the interview stage,” notes Mark Sparrow, Hudson Global Resources' country manager, Singapore.

Valdez also points out that the cost of recruiting and training an employee can run in the thousands of dollars, while the cost of pre–employment screening will average only S$100–$175 per head: “If you have an early vetting process ensuring they have the right skillset and the right attributes for your organisation, the likelihood is that the employee will stay longer with your organisation, and your staff turnover will decrease.”

Common screenings
Pre–employment screening is the process of using psychometric testing, background checks, and drug testing to determine the background and identity of a person before hiring him/her. The most common types of pre–employment screening include verifying education qualifications and making medical checks for recurring health problems like high blood pressure and diabetes.

Another key background check performed by most companies is the previous employment check. But HR professionals advise that employers should not only ask for a reference from previous employers but should also ask the prospective employee why he or she left their previous job and should document the response. If there has been an employment gap that is greater than 60 days, it should be queried as the applicant might be covering up a bad employment experience, advises Valdez.

“Your screening should also be related to the type of job and the access to information and data the employee will have. The more sensitive the job, the more vetting the employer should be doing,” he adds.

Additional background checks
In certain industries which are highly regulated and where a high level of probity is demanded, such as in the finance sector or security industry, prospective employees will go through much more stringent screening, including criminal record checks and credit bureau checks.

For example, for the finance industry, the Monetary Authorities of Singapore stresses that banks must be responsible and ensure proper reference checks have been done, though it does not elaborate on how extensive the checks should be.

In the security industry, the depth of background checking will depend on the nature of the job, explains Jaclyn Lee, vice president of Corporate Human Resources at CISCO Security. While the company will only perform a simple medical and obtain a testimonial to check previous employment for a low security clearance job such as a general secretarial position, the highest security clearance jobs, like CISCO auxiliary police officers will be checked for their criminal record and will also be put through an MMPI psychological test “to make sure they are mentally sound.”

In positions where handling cash is involved, the company might also perform an ISD screening. “We've found such background checks are necessary because you do find people that have had a criminal record before, applying for jobs,” Lee says, “If someone has a criminal record, we wouldn't hire them. This is due to the stringent nature of the security industry.”

Navigating discrimination
Pre–employment screening can be a legal minefield unless employers are clear what they can and cannot do. A spokesperson at the Ministry of Manpower notes that employment opportunities in Singapore are open to all citizens. “An employer should only refuse to employ a potential candidate if he/she is found to be unsuitable to perform the job. Factors not relevant to job performance should be disregarded,” the spokesperson says, while adding that incidence of discriminatory practices in Singapore was low, with only 68 complaints made in 2006.

Valdez advises that employers should disclose to their prospective employees the background check and seek a release.

Data protection is quite strong in Singapore, and Lee points out the right to privacy and database access is tight. “If you want to check on criminal background, only government agencies can do this. Private investigators wouldn't be able to access records. And you can only do it for certain positions that have been deemed by the government to be necessary to check. You couldn't perform a criminal check on someone applying for a secretarial job,” she says.

Because pre–employment screening and background checking can be a lengthy and time–consuming process, most HR professionals recommend outsourcing the work.

Box 1 – CASE STUDY – ABN AMRO
At ABN AMRO, pre–employment screening starts at the first job interview with the prospective employee required to provide personal identification documents, such as NRIC or passport. Health screening will also be performed prior to an offer letter being issued. “Once a person is considered a suitable candidate, we make an offer letter and that's when we proceed to do all sorts of reference checks on the person,” explains Molly Yeo, Head of Human Resource at ABN AMRO, adding that while an employee might actually start working, given that some checks can take several months, the final employment is pending all checks having been cleared. Past employer reference checks are a basic requirement and the bank usually looks for references over the past five years or the three previous employment periods, whichever is the longer. “We try to confirm the person worked there, the period he worked and position held. We usually ask for last salary and reason for leaving,” she says. If a company does not want to disclose salary, ABN AMRO will ask the person joining the bank for their latest payslip. Inflated salaries are the most common lie, Yeo says pointing out that for the bank this was not tolerable. “It's not so much the money but an integrity issue. You have lied. And working in a bank, integrity is very important.” During the interview the prospective employee will be asked to fill out a questionnaire asking about bankruptcy and criminal record. Yeo points out that the bank does not discriminate against bankrupts; “It's a case–by–case decision. Sometimes there might be very sympathetic reasons why they've been made a bankrupt. We've seen cases where the wife signs as guarantor for her husband, who then runs away and leaves her to bare the burden and she has no choice but to be made bankrupt. So the reason why the person has been made a bankrupt is very important.” She also cautions, “Some people that are made bankrupt can be very desperate and it may force them to do things that are not very rational. “Some of the pre–screening ABN AMRO does in Singapore goes beyond what most companies would perform, Yeo admits. “We have an ‘undesirable database.’ A customer or ex–employee that we'd like to blacklist because of various experiences is put in that database,” she says.

Box 2 – Top tips of background checking

• Check all levels of staff and be consistent
• Don't take any documents at face value
• Don't keep it to yourself – be overt about background checking. It acts as a deterrent!
• Continue to check employees throughout their employment
• Treat contractors and temps with the same rigour you treat permanent employees
• Insist suppliers of personnel adopt your background–checking regime
• Understand your statutory and regulatory requirements to avoid legal penalties