What small businesses should know about background checks


If you think large companies are the only ones who need to worry about conducting background checks, you may be setting up your small business for potential problems. Because of close working quarters, staff members often have significant access to accounts and confidential information. Bringing to light past instances of untrustworthiness before hiring may save your small business from putting such sensitive things in the wrong hands.

Likewise, we all know the hassle involved in firing and rehiring when a new employee doesn’t work out. CareerBuilder research found that nearly 3 in 4 small business employers have hired the wrong person for a position; 17 percent say one bad hire cost between $1,000 and $2,500, 20 percent say it cost between $2,500 and $5,000, and 11 percent say it cost between $5,000 and $10,000. Discovering a candidate misrepresented his education or experience before adding him to your staff can save valuable time and money down the line.

And if an employee or customer gets hurt by someone you hired, besides the trauma of such a situation, you could be hit with a negligent hiring claim contending that you should have looked into the offender’s risk potential. Such legal cases, unfortunately, are on the rise.

While many small business owners understand the purpose of background checks, some still shy away from them due to costs or perceived complexity. When the well-being of your staff and your livelihood are at stake, however, can you really afford not to make the investment?

To make the process easier and more cost-efficient, many small businesses turn to full-service background-check vendors. (Some small business employers try to handle checks on their own through do-it-yourself sites, but experts warn that information obtained in this manner is often inaccurate and limited.) Look for one accredited by the National Association of Professional Background Screeners to ensure reputability. A knowledgeable background-check provider can help with issues such as:

  • Determining which screens should be performed. Searching motor vehicle records makes sense when hiring a delivery person but probably isn’t necessary when filling a spot in IT. Professionals know the various screens available and can pinpoint which ones will yield information valuable to your particular needs.
  • Legal compliance. Since small businesses may not hire employees as often as larger firms, they oftentimes aren’t up to speed on the latest regulations regarding background checks. But being unaware doesn’t get your company off the hook if it makes errors. The Fair Credit Reporting Act specifies how background checks must be conducted, and skilled HR personnel can walk you through everything from obtaining necessary written consent from applicants to notifying candidates when something questionable turns up. They also can help your company develop consistent background-checking policies so that you don’t subject your small business to charges of discrimination or personal intrusion.

Don’t be shy about asking questions before selecting a vendor. A good employment screening firm should be transparent about costs, including any access fees. (With certain background checks, jurisdictional and data access fees are charged by select counties, states and data providers – and likely passed on to you.) You should be given an estimate of how long it will take to get results and what details will be included in your written reports. Knowing what to expect takes some of the mystery out of background checks and enables you to make the best decisions for your small business.

Learn how to choose a good background check provider with our guide.

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