Credit Checks

by Evil HR Lady on March 4, 2009

We already run criminal record, adult maltreatment and child abuse registry checks, but what about credit checks? Employees who are unable to manage their financial lives results in us having to deal with garnishments, difficulty in make direct deposit of checks (either they keep changing accounts or can’t get one at all) and petty theft or worse. What is the best way to do this and what are the pitfalls? We are a nonprofit serving people with disabilities and a staff of 90 plus.

I’m not so sure you want to get involved with credit checks. First of all, people claim that credit checks are discriminatory because minorities tend to have lower scores. Whether this is due to discrimination or not is irrelevant. What is relevant is that a perception of discrimination can open you up for law suits and win or lose, the employer always has to pay costs to defend.

Garnishments are a non-issue. You can have stellar credit and still have a garnishment. (For instance, some states don’t allow you to write an actual check for alimony or child support–it comes out of your paycheck directly.) Your payroll should be set up to handle garnishments.

You can make it clear to prospective employees that your company will honor all legal garnishments and you will not discuss them, but the person must take it up with the state. I realize that won’t stop your payroll manager from being screamed at. But, as I said, credit checks won’t make that go away.

Your second concern is direct deposit. I’m guessing, given the nature of your work and your nonprofit status, that your employees are not highly paid. You aren’t going to find adults making $10 an hour with credit scores in the 800s. You are also going to find that many of them don’t have bank accounts at all. (In fact, a friend who is a payroll manager at a large company said she finds that many professional level people from certain countries also don’t use bank accounts, or at least not direct deposit. They get live checks and sometimes wait months to cash them.)

My best advice is to stop fighting the lack of direct deposit problem and just acknowledge that some percentage of your workforce prefers a live check. I know it’s more expensive. I know it’s a huge pain. But, there it is. You can do things to encourage direct deposit. (See if you can join your business to a credit union–that could help. I have no idea how that is done or if that’s even feasible, but it seems like a good idea.)

The last thing is petty theft. Again, I don’t think a credit check is going to help you with this. Someone stealing $10 in supplies from an employer isn’t going to have that theft show up on her credit report. If prosecuted, it would show on a criminal report. I realize you are trying to weed out people who are in bad financial straits and therefore tempted to commit petty theft.

While that may be your best justifiable reason for running a check, the liability that opens you up to–I think you’re obligated to show how a good credit relates directly to the job–isn’t worth it. Instead implement policies and practices that discourages and punishes petty theft.

Now, don’t make your policies so punitive that people are scared to accidentally take home a company pen. One thing to keep in mind is that companies typically allow their office staff privileges that their hourly staff don’t get. For instance, you don’t freak out at all if Jane in accounting photocopies her Christmas letter on the color copier every year (100 friends she sends to!), but if Jill in housekeeping takes home a plastic mug you are all over that, even though Jane cost the company a lot more.

But, go ahead and let people know that taking company supplies is unacceptable and grounds for termination. And then do it.

As I said, I don’t think credit checks are the answer to your problems. Perhaps better interviewing techniques, or raising pay to attract a more skilled set of employees. If these aren’t feasible, print some paper checks, garnish away, and lock up your supplies.

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