Who demands it and does it really happen in large volumes?

The need for employee background check (BGC) has been widely publicized in the last couple of decades. This has been an important topic of discussion for major HR (Human resources) administrators across enterprises to small companies.

BGC is one area where it is impossible to find credible data online. Our team had to resort to primary research – by discussing with HR heads across various industries – in order to gauge the reality of employee verification. The insights we gathered are as follows:

Top 6 reasons why BGC is done (From MOST to LEAST significant):

  1. When BGC is mandatory requirement as per Master Service Agreement (MSA) – strictly based on US and EU Company requirements. This is an undisputable reason for foreign clients whether they have their presence in India and hire in-house or outsource projects to Indian companies. In the latter case, only specific project resources are subjected to BGCs. These clients also insists that BGC get outsourced for professional reporting as their audit rules require it.
  1. Employment history of a person – Skills and experiences are exaggerated or manipulated. This is why companies ask for references from previous employers – executed by in-house recruiters.
  1. Talent pool from NCR, Andhra and Telangana regions are subjected to educational degree checks as most candidates from these regions carry fake degree certificates – executed by in-house recruiters
  1. Proof of residence: There is a tendency for some candidates to abscond from work without notice, especially those coming from Pune, Bangalore, Ahmedabad, Jaipur, Vijayawada etc. So companies want to keep a record of such people. This is why companies ask Aadhar, driver’s license or passport as mandatory verifications from every employee – executed by in-house recruiters
  1. Drug abuse – this is zone specific – especially in NCR, Pune and Bangalore regions. This is unique to high earning candidates, especially international based projects. In this elite hired pool, drug abuse is as common as coffee drinking supposedly. This is a negligible volume and testing gets outsourced to a diagnostic lab.
  1. Specific designations in banks, insurance and financial companies require Cibil score to check a candidate’s credit worthiness because they will be in a position for sanctioning large amounts of loans / procurement to other people / vendors. This practice is in a nascent stage and has a very low demand as it caters to only top-level positions.

Cost for BGCs (3 Special cases):

  1. Mostly NO costs are associated for companies to conduct BGCs because their in-house recruiters conduct it themselves – be it address, education or previous employment verification. They don’t use professionals like Verifacts or E-Crossings – unless an MSA from foreign clients demand a third party engagement.
  1. Companies that hire large volumes of professional candidates – such as engineering or MBAs – especially in top ITES and financial companies, it takes a lot of time to conduct BGCs in-house. So they outsource it to BGC companies when it can’t be handled on time in-house. They only check for employment history and education. A combined package costs INR700 – 800 (maximum) and a bulk volume carries a discounted cost per verification. The address verification is still done in-house.
  1. Based on MSA from international companies, to get a professional BGC report, it will not cost more than INR 1,200 to 1,500 (including GST) as a package and this includes every BGC metric except the drug test. For Drug test, it varies from INR800 to INR 4,000 (Executed mostly by SRL Diagnostics and Dr. Lal Path Labs across India).

Overall, the 5% of BGCs that gets outsourced, will average a total cost of INR800 for employment history and education verification and INR 1,500 for full package (Maximum, including GST). Drug testing volume is significantly low.

Conclusion

  1. 95% of BGCs are executed in-house by HR teams with no extra costs.
  1. The remaining 5% of BGCs are outsourced only when a foreign client’s MSA demands it. This is much smaller volume.
  1. The costs associated with BGCs saturates at INR 1,500 Maximum in 95% of the cases.

Considering these insights, it is clearly evident that global enterprises (Especially US and EU based) prioritize the need for BGC. There are only about 3,000 international companies in India, while there are 1.7 million Indian enterprises (not including small to medium enterprises). Majority of Indian companies restrict employee verification to addresses only. In the fewer cases where previous employment is verified, a simple email or phone call suffices. Overall, the demand for official BGC from a third party is a negligible volume.

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