Paper Trails

What is the Federal Bonding Program?

The “Great Reshuffle”, caused by the pandemic, has put the stress of hiring and retaining employees on many industries. Consequently, employers are consistently seeking to hire hard working and dedicated individuals. When hiring, many businesses rule out numerous applicants because red flags appear during background checks. The Federal Bonding Program was created to incentivize employers, giving them access to job seekers and opening doors of opportunity. But, what is the Federal Bonding Program? Let’s take a look.

What is the Federal Bonding Program?

The Federal Bonding Program is an employer incentive program created by the United States Department of Labor in 1966. This program grants fidelity bonds to protect businesses whom hire certain individuals that insurance companies deem not bondable. The Federal Bonding Program seeks to assist individuals with significant barriers in their background that typically prevent employment opportunities. These individuals include:

  • Justice-involved citizens
  • Individuals in recovery from substance use disorders
  • Welfare recipients
  • Individuals with poor credit records
  • Economically disadvantaged youth and adults who lack work histories
  • Individuals dishonorably discharged from the military

Who is eligible for bonding services?

At-risk job applicants from the above categories are eligible for bonding services. Additionally, any individual who cannot secure employment without bonding against acts of fraud or dishonesty. Full or part-time employees receiving wages and paying taxes can be bonded.

While typically used for an applicant to secure a job, bonds can be issued to cover already employed workers who need bonding in order to:

  • prevent being laid off
  • secure a transfer or promotion to a new job at the company

From an employer perspective, all businesses are eligible to participate in this program.

How much is are these bonds worth?

This program provides fidelity bonds to employers that hire the above certain individuals. These bonds are worth up to $5,000 with a $0 deductible for the first 6 months that the employee works for the employer. There is no cost to the employer for these bonds, they just have to hire eligible individuals.

What are the bonds used for?

These bonds are used to protect employers against the “dishonest” and “fraudulent” acts of the bonded employee. If an employee commits one of these acts, an employer can file a bond claim with $0 deductible and be reimbursed for their loss up to $5,000. Dishonest and fraudulent acts include, but are not limited to:

  • theft
  • forgery
  • larceny
  • embezzlement

These bonds can be applied to any job, any state, and any dishonesty committed on or away from the worksite.

Why should employers take advantage of the Federal Bonding Program?

Many employers have already begun taking advantage of the Federal Bonding Program as part of their hiring practices. This program opens up the door to a pool of potential applicants that a business would otherwise overlook. One of these applicants may be the best fit for an employer, but the employer does not want to take a chance on an applicant with certain red flags. With this program, a business can protect itself against potential dishonest acts from the bonded employee and hire the best candidate for their open position.

The administrative work of these bonds is minimal. Issued bonds are become effective the day that the applicant is scheduled to start work. The bonds require no termination paperwork. Furthermore, the employer does not sign any papers in order to receive the bond free-of-charge. The steps for applying for these bonds can be found here.