Secure Your Hire with Thorough Background Checks

Hiring the right employee can be challenging, especially for small business owners and solo HR practitioners. The stakes are high—you invest time, effort, and money in finding the ideal candidate, and a wrong choice can be costly. A poor hire can lead to wasted resources, reduced productivity, and potential legal issues, significantly impacting a small business. It’s essential to take precautions to minimize the risk of making a bad hiring decision.

Conducting thorough background and reference checks is one of the most effective ways to mitigate risks and make informed hiring choices. These checks provide insights beyond a resume and interview, offering a clearer picture of the candidate. They help verify credentials, assess past behavior, and determine if the candidate’s qualifications and character align with your company’s needs.

This guide will cover everything you need to know about background and reference checks, including what they involve, how they work, and why they are crucial for your business. By understanding their importance and incorporating them into your hiring process, you can make better decisions, avoid costly errors, and build a stronger, more reliable team.

Background and reference checks add a crucial layer of security and assurance to your hiring process. They provide insights beyond the candidate’s resume and interview performance, helping to:

• Verify Credentials: Confirm the candidate’s education, certifications, and work experience.
• Identify Red Flags: Uncover criminal convictions or financial issues that could impact job performance.
• Assess Character: Gather feedback from former employers about work ethic, interpersonal skills, and reliability.

Without these checks, you risk hiring someone who may not have the qualifications or character you need for the role.

Background checks are designed to validate a wide range of information about a candidate. They serve as a comprehensive verification process, offering a deeper look into the candidate’s history and helping to ensure they are suitable for the role. Here’s a detailed breakdown of the common components involved in background checks and what each one can reveal about a potential employee:

While background checks verify objective facts, reference checks give a subjective view of a candidate’s work style, performance, and potential fit for your company. A reference check involves reaching out to the candidate’s previous employers, supervisors, or colleagues to gather more nuanced information about their work behavior, achievements, and how they interacted with others in the workplace. This process provides insights that go beyond the resume and interview, helping you understand the candidate’s strengths, work ethic, and potential areas of concern. Reference checks are valuable because they offer a firsthand perspective on the candidate’s past experiences, giving you confidence that they will be a good cultural and professional fit for your organization. By speaking with former supervisors or colleagues, you can:

• Confirm Work Responsibilities: Verify the accuracy of the candidate’s job responsibilities.
• Evaluate Work Performance: Gain insights into how they handled duties and challenges.
• Assess Interpersonal Skills: Understand their ability to collaborate, handle conflict, and contribute to a positive work environment.
• Gauge Growth Potential: Learn about the candidate’s openness to feedback and professional development.

To get the most out of reference checks, follow these tips:

• Speak with Multiple References: Talking to at least two or three references will provide a more well-rounded view of the candidate. Different references can provide unique perspectives on the candidate’s skills, strengths, and areas for improvement. Speaking with both supervisors and peers can give you insight into how the candidate is perceived at different levels within an organization.
• Ask Open-Ended Questions: Questions like, “Can you describe a time when the candidate faced a significant challenge?” or “How did the candidate handle feedback?” can yield valuable insights. Open-ended questions encourage references to provide detailed examples, which can help you better understand the candidate’s behavior, decision-making skills, and ability to overcome obstacles.
• Verify Key Details: Cross-check employment dates, job responsibilities, and any other significant information provided by the candidate. Ensuring that these details match helps verify the accuracy of the candidate’s application and identify any discrepancies. In addition to employment dates, consider asking about specific achievements or projects the candidate worked on to get a fuller picture of their experience.
• Explore Work Relationships: Ask references about the candidate’s relationships with coworkers, supervisors, and direct reports. Understanding how the candidate interacts with others is crucial, especially if the role involves teamwork or leadership responsibilities. Questions like, “How did the candidate contribute to the team dynamic?” or “What kind of work environment does the candidate thrive in?” can provide insight into their interpersonal skills.
• Assess Problem-Solving and Adaptability: Inquire about specific situations where the candidate had to solve problems or adapt to change. For example, you could ask, “Can you provide an example of when the candidate had to adjust to a major shift in their responsibilities?” This will help you understand their ability to be flexible and think on their feet—qualities that are particularly important in fast-paced or evolving business environments.

If you are conducting background checks in the U.S., there are specific federal and state requirements you must follow.

The FCRA requires specific steps when using a consumer reporting agency for background checks:

1. Disclosure: Provide a clear written notice that a background check will be conducted. This notice must be separate from other application materials and should clearly state that the information obtained will be used for employment decisions.
2. Written Consent: Obtain written permission from the candidate. This consent must be explicit, allowing the employer to conduct the background check, and should be kept on file as proof of compliance.
3. Pre-Adverse Action Notice: If negative information is found that might affect the hiring decision, provide the candidate with a copy of the background report and a summary of their rights under the FCRA. This gives the candidate an opportunity to review the information and dispute any inaccuracies before a final decision is made.
4. Adverse Action Notice: If the decision is made not to hire based on the background check, provide an adverse action notice. This notice must include details on how the candidate can dispute the findings, the contact information of the reporting agency, and a statement that the agency did not make the hiring decision.

Laws vary by state, particularly regarding criminal history checks. Many states have “ban-the-box” laws, which restrict when and how you can ask about criminal records.

For instance:

• California: Criminal background checks can only be conducted after a conditional offer is made.
• New York: Certain criminal records, such as those sealed or expunged, cannot be considered.

Always stay informed about your state’s regulations to remain compliant. Other states may have specific laws regarding background checks, so it is important to check both local and state regulations or consult with an attorney to ensure compliance.

While background checks are helpful, they can lead to challenges if mishandled. Here are common issues and ways to mitigate them:

• Bias in Decision-Making: Avoid disqualifying candidates based on unrelated criminal offenses. Consider the relevance of any past conviction to the job.
• Inaccurate Information: Sometimes background reports contain outdated or incorrect data. Provide candidates with a copy of their report and allow them to dispute errors.
• Misinterpretation of Credit History: For financial roles, credit checks may seem necessary, but be cautious—financial hardship doesn’t always indicate a lack of reliability.
• Legal Compliance: Stay updated on both federal and state-specific laws to ensure your hiring practices are compliant.

• Get Written Consent: Always obtain written permission and be transparent with the candidate about the process.
• Use Checks Selectively: Only conduct background checks on candidates who are in the final stages of the hiring process.
• Follow Legal Requirements: Adhere to FCRA guidelines and state regulations.
• Evaluate Criminal History in Context: Carefully consider how any criminal history impacts the candidate’s ability to perform the role.
• Stay Consistent: Apply the same policies to all candidates to avoid discrimination claims.

If you lack the resources to conduct thorough checks, a background check vendor can be invaluable. These vendors specialize in accessing comprehensive databases, managing compliance, and ensuring that all necessary checks are performed efficiently. Background check vendors can help streamline the process by providing expertise and advanced technology, which small businesses may not have in-house. They can also assist in interpreting the results of background checks, ensuring that you have the information needed to make informed hiring decisions. Additionally, vendors often offer customizable packages to fit the unique needs of your business, whether you are looking for a simple employment verification or a more extensive criminal, education, and credit check.

Utilizing a background check vendor can save time, reduce the administrative burden on your HR team, and increase the accuracy and reliability of the checks conducted. This allows you to focus more on interviewing and assessing the suitability of the candidate, knowing that the necessary verifications are being handled by experienced professionals.

Consider using an external background check vendor if:

• Comprehensive Checks Are Needed: Vendors access multiple databases, streamlining the verification process and providing more in-depth information than what you might be able to gather internally.
• Hiring Multiple Roles: Outsourcing background checks can save your team significant time, especially when hiring for several positions simultaneously. Vendors can handle the increased volume efficiently, allowing your HR team to focus on other aspects of recruitment.
• Legal Compliance Is a Concern: Vendors stay up-to-date with changing regulations, ensuring compliance with both federal and state laws. This helps mitigate the risk of legal issues that may arise from improper background check procedures.
• Limited Internal Resources: Small businesses may lack the personnel, technology, or expertise needed to conduct thorough background checks. A vendor can fill this gap by providing specialized skills and tools to perform comprehensive screenings.
• Need for Consistency: Vendors follow standardized processes, ensuring that every candidate is subjected to the same checks. This consistency helps avoid any claims of bias or discrimination and maintains a fair hiring process.
• Desire for Faster Turnaround Times: Vendors have the capacity to complete background checks faster due to their specialized systems and experience. This helps to expedite the hiring process, reducing the time-to-hire and ensuring that top candidates aren’t lost due to delays.
• Complex Verification Requirements: For roles that require multiple types of verifications, such as criminal, financial, and professional license checks, a vendor can efficiently coordinate these efforts. They can provide bundled services that are both time-saving and cost-effective.
• Access to Advanced Technology: Background check vendors often use advanced technology and databases that are not readily available to the general public. This ensures that the checks are comprehensive and that no crucial information is missed.

For a comprehensive list of vendors, refer to our directory of Popular Pre-Employment Background Check Vendors. Some of the well-known vendors include GoodHire, Certn, Checkr, HireRight, Sterling, and Intelius, all of which offer services such as criminal history searches, employment verification, and other essential background checks.

Background and reference checks are critical steps in the hiring process that help ensure you select the right candidate for your small business. Conducting these checks thoroughly not only helps verify the candidate’s qualifications but also protects your company from potential risks associated with hiring someone unsuitable for the role. By being diligent and following best practices, you reduce the chances of hiring individuals who may pose risks to your team or business operations. Additionally, staying compliant with relevant federal and state laws ensures that your hiring process remains fair, transparent, and defensible.

Using the right resources, such as specialized background check vendors, can significantly simplify the process. Vendors offer expertise and advanced technology that make background checks more efficient and accurate, saving your HR team valuable time. Moreover, background and reference checks allow you to gain insights into a candidate’s work ethic, personality, and compatibility with your company culture, making it easier to determine if they will fit well into your team.

Ready to incorporate background checks into your hiring process? Check out some reputable background check vendors today to ensure your hiring decisions are backed by solid, verified information and reduce any uncertainties that might arise.