Should I Conduct a Background Check?

Background checks can shed light on a candidate’s skills, knowledge, experience, and trustworthiness. Here’s what you should know about conducting them.

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Reasons why a background check is important in the candidate selection process

Your job candidate looked great on paper. They seemed to have all the right skills, credentials, experience, and attitude. They aced the interviews by winning over the hiring manager and the team. So, you offered them the position, and they accepted. But in just 6 months on the job, your “stellar” new hire’s performance doesn’t match the skills on the resume, the experience talked up in the interviews, or the congenial attitude you admired during the recruiting process.

You have a “miss-hire” on your hands because the candidate exaggerated his skills and hid the truth about their character. Now you must restart the often long and costly recruiting process to replace them. You’re even wondering whether the extensive background check you skipped could have saved you the trouble.

Being duped by dishonest or unqualified job applicants is nothing new to HR professionals, recruiters, and hiring managers; they regularly come across questionable job applications, resumes, cover letters, and queries. But what’s not always evident is the level of deception, misrepresentation, or risk involved among job applicants and the cost and consequences of foregoing background checks for employers.

Why screenings are critical

Studies have confirmed that lying and truth twisting to land a job is common. In a ResumeLab survey of over 1,000 Americans, a third of respondents admitted to lying on their resumes. And of those who did, only 31% were caught and penalized. The survey also revealed that an overwhelming number of respondents — 93% — said they know people who have lied on their resumes.

In a ResumeLab survey of over 1,000 Americans, a third of respondents admitted to lying on their resumes. And of those who did, only 31% were caught and penalized.

Dishonesty normally is a deal-breaker in hiring. In fact, a lie on a resume would make most HR professionals reconsider or outright eliminate a candidate. But a more recent study by Checkster found that 78% of job seekers in their survey of 400 applicants and 400 hiring managers falsify their skills and credentials. It also revealed that two thirds of hiring managers said they’re unfazed by the practice.

As problematic as lies and exaggerations are in hiring qualified candidates, you also want to minimize the risk of hiring people whose criminal past or violent history could cause problems in the workplace later on. A background screening can also find out if a candidate is on a terror watch list or in a sex offender registry.

The dollar cost of a bad hire can be astronomical for small and medium-sized businesses, based on figures from the Professional Background Screening Association. The membership organization says that workplace fraud, theft, violence, and embezzlement are a “multi-billion dollar drain on the (United States) economy.” The price of replacing a candidate varies by position, but a 2017 CareerBuilder survey found the average cost was about $15,000.

A wrong hire can be a costly mistake that a thorough candidate screening might have prevented.

Structuring a background check

Background screenings fall into several categories:

  • They can uncover information relating to skills, knowledge, experience, and training
  • They can provide insight into such character traits as integrity, reliability, trustworthiness, and camaraderie

The Society for Human Resource Management describes background investigations and reference checks as the two principal ways of collecting information on would-be hires.

A background screening investigates a candidate’s:

  • Driving record
  • Credit history
  • Criminal convictions

A reference gathers work, academic, and character assessments from a candidate’s:

  • Former employer
  • Manager
  • Colleagues
  • Educators

Having a policy

The first step is to have a screening policy, whether you conduct your own or hire a third party. The policy should include the types of information you want and a list of procedures to follow. Another important step is to let candidates know that you conduct background checks, and have them sign a background check authorization form that grants their consent.

SHRM has sample policies, including a general policy that you can download and customize. The policy has 3 segments:

  1. Screening as a requirement. This statement can explain that background checks are mandatory for all final candidates, and that employment is contingent upon the findings.
  2. Search categories. This section can list the type of searches to be conducted, including verification of a candidate’s Social Security status, previous employment, academic background, criminal inquiry, credit history, and motor vehicle records.
  3. Procedures. The information in this section can include instructions for candidates, such as the need to sign the background check authorization form ahead of the screening. The section also can specify when the screening will begin, whether HR or a third party will conduct it, and how you will use the findings.

Information to uncover in a background screening includes:

  • Work history
  • Work authorization
  • Education
  • Criminal records
  • Credit history
  • Social media profiles
  • Driving records
  • Medical records (restrictions apply)

Reviewing the report

The final step in the screening process is to review the background report to make a reasonable, informed hiring decision. You may want to get legal advice and allow candidates to respond to the information you find, rather than automatically disqualify them.

Background checks may take from 24 to 72 hours or as long as 10 to 15 working days, according to various screening experts. However, the time frame can vary based on the type of screening conducted and the volume of information available on a candidate.

The price of replacing a candidate varies by position, but a 2017 CareerBuilder survey found the average cost was about $15,000.

Legal restrictions to remember

You or any third-party company you hire to conduct background checks must comply with federal, state, and local laws. For example, restrictions apply when gathering information on candidates’ credit and medical histories.

The Fair Credit Reporting Act limits the kind of information a third-party screening company can access from a person’s financial history. The credit screening generates a consumer report. If you decide not to hire someone because of the report’s findings or want to rescind an employment offer, you must give the candidate a “pre-adverse action disclosure,” which explains the candidate’s rights and includes a copy of the report.

The FCRA is a law under the Federal Trade Commission. However, state mandates on credit checks also may apply; therefore, you should use only registered credit reporting agencies (CRAs) that are compliant with all applicable laws.

Although you have the legal right to conduct a background check and ask questions about a candidate’s background, you’re not allowed to request medical information until you make a job offer. Also, asking for genetic information is illegal, except under rare circumstances.

As an amendment to the FCRA, the Fair and Accurate Credit Transactions Act requires employers to handle and dispose of consumer credit information in a secure manner.

States and municipalities have ban-the-box ordinances that prohibit employers from asking about a person’s criminal history on job applications and in interviews. According to the National Employment Law Project, bans are part of a national “fair-chance hiring” effort to prevent felons who are otherwise qualified for a job from being stigmatized or shut out of the hiring process. These ordinances allow queries and background checks on ex-felons only when a job offer is made.

What to ask third-party vendors

The U.S. Equal Employment Opportunity Commission enforces antidiscrimination laws impacting background checks to protect candidates’ rights. Just like miss-hires can occur, so can background screening errors. Bad screenings often let critical information like criminal data and other red flags go undetected.

When conducting your own screenings, you must have reliable tools for your search. Use rating sites as a guide, or get recommendations from other small businesses about third-party background screening services.

Ask third-party vendors about such things as:

  • Their knowledge and compliance with screening laws
  • Whether they’re PBSA members
  • What screening tools they use
  • Their information reporting practices
  • Whether they have cybersecurity insurance
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