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Hiring Horror Stories

by Midwest Builders’ Casualty

Employers understand the impact that a bad hire can have on their business but often the need for immediate additional labor overrides this know-ledge. A March 2013 survey found that 41% of companies surveyed said that a recent bad hire has cost them at least $25,000 in the past year. Unfortunately, almost every business owner or manager has their own hiring horror story and these stories usually share one similarity – the company did not use effective hiring practices.

Industry-wide employment and hiring surveys consistently show that the majority of bad hires could have been avoided if a formal hiring practice was implemented and consistently utilized. Company’s often rush to hire because the need for labor is immediate and in doing so they either circumvent existing policies or fail to follow them at all. Making the right hire is important regardless of the position and employers should do all they can to protect their company and their existing employees.

Mindy Yancey, Director of Claims for Midwest Builders’ Casualty, has found that over her twenty six years of claims experience a large percentage of claims come from what employer’s describe as a “bad hire”. When talking to business owners she uses the analogy comparing hiring to how a person answers the door of their home for a stranger. Ms. Yancey said “You would never just open the door of your home to a complete stranger, nor should you for your business”.

Unfortunately, Ms. Yancey and her staff often see situations where employers didn’t do enough with their hiring practices and were ultimately left to deal with the resulting problems. Although the hiring process can be both time consuming and expensive, employers should consider the costs associated with making a bad hire and the resulting long lasting implications it can have on their business.

The U.S. Department of Labor currently estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first-year potential earnings. That means a single bad hire with an annual income of $50,000 can equal a potential $15,000 loss for the employer.

A company's basic hiring practices should include a written job application, face-to-face interview, drug/alcohol screening, background check consisting of social security number verification, and criminal activity in both state and federal as well as a state workers’ compensation check (if allowed in the employers state of domicile). Additionally, a POET program or post-offer of employment questionnaire should be included to address any physical limitations or restrictions. Having effective hiring practices is an important part of any successful risk management program.

Consider the recent real-life situation where an employer elected not to conduct a background check on a new hire who after several weeks of employment filed a suspicious workers compensation claim for a back injury. Through the claims investigation it was discovered that the new hire has a criminal history involving both violent crime and illicit drug use. Additionally, they have had four prior workers compensation claims all for back injuries. Is this someone that you would knowingly want working for your company? Would you have hired them had you known this information beforehand?

While not every hiring horror story can be prevented, employers should work diligently to put in place every possible process they can in an effort to eliminate potential bad hires before ever putting them on the payroll. Understanding the importance of making the right hire and accepting the costs associated with doing so far outweigh the cost that one bad hire can have on your company and potentially your Experience Modification Rating (EMR). When a bad hire creates a workers compensation claim issue a business owner is left dealing with that bad hire long after their employment ended because of the impact their claim(s) will have for three years as part of the EMR calculation.

As the labor pool continues to shrink and skilled labor becomes harder to find, employers are facing a hiring crisis – is your company ready to face the challenge? Midwest Builders’ Casualty would welcome the opportunity to help you review your current hiring practices and discuss possible improvements. Please contact your Loss Control Representative or Claims Representative if you would like more information on this very important topic.

Originally printed in Midwest Builders' Casualty The Compass Vol. 8. Re-posted with permission.