Hiring risks in a challenging labor market

With the market for talent in Latin America companies face hiring risks in a challenging labor market to find the ideal applicants. Hiring processes must be aligned with their corporate security culture, as most disruptive acts are perpetrated internally and often involving more than one employee, creating physical, cyber and reputational risks.

For a better understanding, we refer to the results presented by the American Chamber of Commerce Mexico (AmCham). In their 2022 Business Security Survey, which enlisted companies’ major security concerns:

  • cargo theft (64%),
  • safety for employees and family (63%),
  • security at workplace (48%) and
  • security of information (35%)

Corporate security is seen as a necessary issue and important cost that involves planning, spending, and investment to prevent risks of criminal activities. According with AmCham, the percentage of companies, in Mexico, implementing reliable staff hiring process have increased from 28% in 2018 to 63% in 2022.

Designing a background check program requires striking a balance close attention to understand the company’s needs, including corporate security to balance speed, risk, and cost. As a result of the analysis of the voice of the customer, we identified that speed is the most relevant factor in their background check programs; followed by risk (33%) and cost (14%).

Triangle of risk, speed and cost

In our most recent LATAM Annual Trends Report, we presented the findings and trends from the labor market – based on the checks we conducted over the past year – so that companies may be more informed in making hiring decisions with practical knowledge.

In addition, we reviewed the responses from customers – through an Annual Survey – to learn and understand their reasons for conducting background checks on their candidates. These are the results:

Our clients in the region prioritize criminal records checks, employment and academic verifications, and drug screening as the most frequently used services to verify  applicants. These are the results for each service:

Criminal checks in the region

Surprisingly, we noticed a slight decrease in criminal record check reporting in Latin America from 2019 (.6%) to 2021 (.4%). In our major markets, Brazil, Colombia, and Mexico, we detected that by implementing our solid processes for locating criminal records in public records, we can identify potential matches with the applicant’s name or ID numbers, more effectively.

Employment verifications discrepancies

Another priority for clients is to verify the employment experience and academic credentials of those applying for a job vacancy; therefore, they conduct background check services to achieve this. The results of the Annual Survey fit perfectly, as customers highlighted that 87% of discrepancies were detected within employment and academic verifications.

When analyzing the effects in Latin America, the employment discrepancy rate decreased by 21 percent in the last three years. Our experienced operations team attributes this drop to more accurate information from applicants regarding their employment dates or reported jobs. Only in Mexico reported discrepancy rates in employment verifications decreased by 25% over the same period.

On the contrary, the discrepancy rate in employment verifications in Brazil doubled from 2019 (11%) to 2021 (22%). In Colombia, it almost tripled from 11% to 32% within the same period.

Academic Verifications Discrepancies

Now, reviewing the discrepancy rate in academic verifications, we noted an increase of 75% in the region, which can result from unintentional errors regarding dates and grades. However, some clients reported having detected discrepancies caused by what appear to have been falsified school diplomas and unfinished studies. For this reason, it is advisable for companies to conduct academic verifications to help reduce the financial and reputational risk for hiring unqualified candidates.

For example, in Brazil there is a sharp increase in academic discrepancies where they nearly quintupled from 2019 (5%) to 2021 (24%), driven, in part, by discrepant education data. In Mexico, the situation is similar, and the percentage of academic discrepancies increased by 67% within the same period.

Positivity Rate in Drug Screening

In 2021, when conducting multiple drug screenings, we detected that marijuana was the substance most used by candidates. Therefore, this situation is relevant to clients, as 31% disqualify candidates who test positive for marijuana use. Undoubtedly, their concerns are valid, as marijuana is easily accessible and has a high potential for abuse, impairing employees who use it for several hours after use, which generates many risks in the workplace.

For companies interested in promoting workplace safety, it is recommended that they continue to drug screening their employees, consulting with their legal advisors as to what legal restrictions are involved.

Our experienced operations team has discovered an interesting complementary trend, which helps explain the results, known as the “Surprise Factor.” This behavior of candidates occurs when they fail to attend a drug screening due to recent use. Hence, they reschedule their appointment until they come up undetectable.

At First Advantage – MultiLatin, we help companies hire smarter and onboard faster qualified talent with advanced technology, solid processes, faster turnaround times and customized to their needs.