Why Small Businesses Should Use Background Checks
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Background checks play a key role in many businesses’ hiring strategies, helping them move their top candidates through the pipeline. Often, small businesses reject the idea of ordering background checks out of hand because it takes extra time or hinders them from immediately hiring employees. Building a comprehensive screening program can feel overwhelming, especially if your team is doubling or tripling in size or scaling in a short period of time.
But using background checks the right way can build your business’s reputation and help you hire your ideal candidates faster. Developing trust between applicants and your team, understanding why screening is important, and partnering with a strong background check provider can speed your time to hire and help you onboard the candidates you need.
Why are background checks important for your small business?
Background checks help you hire candidates more responsibly, building a foundation of trust with them. Conduct background checks on all candidates to protect your organization, be transparent with your candidates, and treat all applicants consistently and fairly.
Protecting your business from fraud
Background checks aren’t just a hoop to jump through—they’re also a protective mechanism for employers. Candidate theft does happen, and small businesses are one of the biggest targets. In the past decade, the Association of Certified Fraud Examiners found that small businesses lose significantly more money than teams of over 100 employees in fraud schemes.
Small businesses often have limited funds and resources and can’t afford consistent theft. In some cases, fraud could bankrupt a small team.
While a criminal record shouldn’t be a blanket disqualification for a candidate, a recent history of theft, fraud, or dishonesty may help your HR team decide which applicants may not be a fit for a role. For example, a candidate with a criminal record specifically related to theft or financial crimes, like embezzlement, may not be a good candidate for a position with the finance team.
Creating an environment of trust
Following background check laws and supporting your candidates also helps build trust. If you’re transparent about screening candidates and ask their permission to run a check, as required by federal law, you’re already laying a solid foundation with potential employees.
The adverse action process, also required by law, facilitates further honesty and directness: if a candidate has a criminal record, you’re required to notify them if you may make a negative hiring decision based on that record. Many candidates will appreciate being given the opportunity to explain their record, or to correct any inaccuracies that may have appeared on background checks.
Developing trust with your candidates can also include conducting individualized assessments, if needed. Individualized assessments for candidates with criminal records help you determine whether the offense is relevant to the role in question. Many offenses aren’t directly related to job responsibilities and therefore don’t rule out the possibility that the candidate is the best fit for the role.
Setting consistent policies for all candidates
Having a background check policy helps businesses treat all candidates consistently during the application and hiring process. Best practices for running background checks include waiting until after a conditional job offer to run a check. This allows teams to consider candidates with the right qualifications regardless of criminal history, rather than running a background check immediately and making an immediate decision before interviewing candidates.
How to conduct legally compliant background checks
A federal background check consists of searching the PACER database for federal convictions—both felony and misdemeanor. Federal offenses shown during a federal criminal background check may include criminal offenses, such as fraud, embezzlement, bank robbery, counterfeiting, and drug trafficking.
Complying with the federal Fair Credit Reporting Act
The Fair Credit Reporting Act is a federal law that governs how employers may use and consider background check information provided by a consumer reporting agency. Consumer reporting agencies (CRAs) gather information about candidates from criminal, civil, education, and employment records.
Background check providers are CRAs, so employers are required to follow the FCRA while using a third-party provider:
- Provide a standalone disclosure statement that you may run a background check. This disclosure should be on its own screen or sheet of paper, separate from the job application or description.
- Obtain written consent from the candidate before you run a background check on them.
- Send the person any information they request about the background check, such as a copy of their report once it’s completed.
- Conduct the report and review the record.
- If you might decide not to move forward with a person based on information in their background check, you generally must first send a pre-adverse action notice. Adverse action can also include other negative actions based on background check results, such as giving an applicant a different role than they initially interviewed for. After a reasonable waiting period and review of any additional information, many employers send a post-adverse action notice if they decide not to move forward.
- The candidate should be given sufficient time to provide additional context or dispute any inaccurate information reported on the background check with the provider who conducted the report. Many employers give at least five business days for people to respond to a pre-adverse action notice, but your legal counsel can help you determine the right timeframe for your organization.
- If any of the information reported is inaccurate, the background check provider will investigate that part of the background check and complete that investigation, typically within 30 days.
- Make a final hiring decision and communicate it to the candidate, whether adverse or positive.
Complying with state and local laws
Some states and local governments have additional requirements for background checks. Ban the Box laws restrict when employers are permitted to conduct background checks during the hiring process, often delaying them until a candidate has already had an initial interview or received a conditional job offer.
Additionally, some states and local jurisdictions limit how far back offenses may be reported. While the FCRA limits non-conviction information to seven years since the offense, other jurisdictions also restrict how long background checks may report convictions. Make sure you know whether any states or cities in which you’re hiring candidates have different lookback periods than the FCRA, as you’ll need to follow the shortest lookback period.
Choosing the right background check provider for your small business
The right background check provider for your team is affordable, communicative, and compliant with hiring legislation. Contact respected service providers and ask whether they offer the features your business needs. Additionally, you’ll want to ensure that they help support compliance with laws in all states where you’re hiring candidates.
Ask potential background check providers about their customer support options to ensure that they align with your team’s needs. That can include channels like live chat, phone, and email, or 24/7 support options.
Checkr helps employers run reports faster and make hiring decisions more quickly. We help employers stay compliant with evolving hiring regulations, and the Checkr candidate portal simplifies your communication with candidates by gathering data and obtaining consent to run a background check. Get started with Checkr today.
Disclaimer
The resources and information provided here are for educational and informational purposes only and do not constitute legal advice. Always consult your own counsel for up-to-date legal advice and guidance related to your practices, needs, and compliance with applicable laws.
About the author
Checkr is the data platform that powers safe and fair decisions. We’re a technology company that helps our customers assess risk, modernize hiring, and cultivate trusted relationships in their workplaces and communities.
