In our past articles we have listed the qualitative benefits for conducting an in-depth background check. Most of the HR managers agree with the fact that a thorough background check is the best aid in finding a qualified and dependable employee that can be a long term player and a driving force in the company’s growth. Others however need more convincing and some numbers to help them make the transition from a skeptic to a believer. In this post I have tried to quantify the Return On Investment (ROI) for a background check and dispel any skepticism for the need to carry out employee background verification.
Before we take out our calculators and start crunching numbers, it is important to understand the cost involved when a employee leaves an organization. The simplest way to chalk out the costs involved is to detail the employee lifecycle which begins with the hiring process and ends with the employee leaving the company.
The costs associated with the employee lifecycle can be outlined as below:
1. Pre-Hiring Costs: Includes advertising costs. These costs include the cost for posting in daily classifieds, job boards, social media, commissions for third party recruiters, etc. These costs are variable and depend on the position to be filled. An executive level post is harder to fill than an entry level one, and requires more impression and exposure and has more costs associated with it.
2. Screening Costs: These costs include the time spent by the HR department in screening through the resumes received and short listing a set of candidates for the first round of interview.
3. Interviewing Costs: This cost is highly variable and depends on the pay scale of the interviewer’s and the number of interview rounds involved. Example. If an interviewer is earning Rs 50,000 per month and interviews a new hire for 2 hour then the cost associated would be Rs 313per hour.
4. Administration Costs: Once the desired candidate has been finalized, the administration costs kick in. This refers to the costs associated with putting together the relevant paper work, setting up the new hires work space, among others.
I have purposefully left out the costs associated with carrying out a thorough background check. We fill factors in this cost in our final ROI analysis.
5. Training Costs: These costs include induction program costs and the costs associated with providing domain, process, skills or software related trainings.
In today’s market there is no dearth of opportunities for a job seeker. This abundance of job has created unique challenges for HR managers in their effort to hire and retain new talent. Today the employee attrition rate for IT/ITES companies stands at around 25%.
The final cost associated with the employee turnover rate is the Employee attrition cost.
6. Employee Attrition Cost: This cost occurs when an employee leaves the company and includes both direct and indirect expenses. The direct expense would be the overtime paid to other employees to take over the workload of the employee that left the company. Indirect costs relate to be the summation of all the costs incurred to find and hire a replacement.
To help calculate the employee attrition cost lets head over to http://bit.ly/Employee-Turnover-Calculator and enter the required information. The turnover costs that are estimated based on a 25% attrition rate can be a real eye opener. The resulting expenses are a testament that even a 2% decrease in attrition rate can result in significant savings.
Eventually control over attrition rate boils down to the degree of information and understanding an HR manager can develop about a new hire. The cost incurred for hiring the services of a premium employee verification company pales in comparison to the net saving that can be achieved.
We at JantaKhoj understand the need to be result oriented. We can provide you with the most detailed information about your prospective hire and help you make the most profitable decision. Reach us on 040 42007092 or sales@jantakhoj.com to get a free sample of the employee background verification services we provide.
