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Background Checks For New Hires: What, Why, & How

by Karyn H. Rhodes | SHRM-SCP, SPHR on Oct 5, 2021 4:16:20 AM

Even though many companies are experiencing a shortage of available workers right now, that doesn’t mean you should skip one of the most important steps in the hiring process: background checks. These valuable tools can help ensure you make a good choice for your position and culture – and avoid a bad hire. But with multiple options available to screen candidates, how do you decide on the best approach for your business?

Complete Payroll Solutions provides outsourced HR recruiting services to help thousands of companies find and onboard the right talent. We know the value of background checks for new hires but also understand that it can be overwhelming to conduct one. To help you learn more about the screenings so you can leverage them in your organization, here we’ll discuss:

  • What is a background check
  • Why are background checks for new hires important
  • When should I conduct a background check
  • What information do I need to conduct a background check
  • How do I run a background check
  • How long does it take to get the results
  • What should I look for in a background check
  • How much does a background check cost
  • What laws do I have to worry about when running a background check

After reading this article, you’ll understand the importance of background checks for new hires and how to make them a standard practice in your company.

What is a background check?

A background check is a third-party review of an applicant’s pre-employment history. Depending on the type of information that’s important to you, a background check can include a review of several types of information, such as their:

  • Criminal convictions
  • Motor vehicle violations
  • Credit, where allowed by law
  • Education and work experience
  • Military records

Some of this information can be obtained from databases while interviews such as with former employers may be needed for other details.

Why are background checks for new hires important?

According to one survey, 78% of candidates lie on their job applications, so a background check is important to make sure you’re eliminating uncertainty and bringing on the right candidate for the role. For example, if someone lies about how long or what they did at their previous company, that may impact your decision to hire them.

In addition, a background investigation can be a critical tool to protect your company, employees, and customers. Let’s say you’re hiring someone to work in a hospital but you find they were recently arrested on a serious drug violation. The screening may prompt you to decide they’re not the best fit since they’ll have access to controlled substances, which could put themselves and your workforce at risk.

It’s important to note that, while generally not required, background checks for new hires are  mandatory in certain industries such as transportation, education, and healthcare depending on where you operate.

When should I conduct a background check?

Most commonly, employers conduct a background check during the hiring process. Usually, you’ll do this after you extend an offer that’s contingent on successful completion of a screening.

Once an employee is on board, there are certain circumstances that may warrant future background checks as well such as when it’s required by law or if your customers require them annually. Just be aware that if your policy is to conduct screens every year, you’ll want to make sure employees are aware and sign a handbook or individual policy to show they agree when hired.

What information do I need to conduct background checks for new hires?

To run a background check, you’ll need the applicant’s:

  • Full name
  • Date of birth
  • Social Security number
  • Address

Federal law requires that you get an applicant’s consent before you run a background check. You’ll need to let the candidate know – in writing – that you may use the information from the background check when making decisions about their employment and then get their written permission to obtain the report.

How do I run a background check?

Once you have the necessary information, you’ll want to work with a background screening company. There are many third-party providers who can run these for you. Just make sure you look for one that complies with the Fair Credit Reporting Act.

Most of these company’s services will allow you to buy a preset “package” or screenings or just pick the ones you want a la carte. So, for example, what we call a Level 3 plan includes a Nationwide Database, Federal Criminal Search (terrorism watchlist, sex offender database) and an address and  Social Security number trace.

How long does it take to get the results?

The typical turnaround time for a background check is about 2-3 days; however, it can take longer depending on how in depth the information you’re requesting is. For example, if your background screening requires interviews with an applicant’s former company or university, it could require more time to complete.

What should I look for in a background check?

When you get the results, you’ll want to review the information for any red flags like a criminal conviction. However, it’s important that you consider more than just the conviction. For example, if a candidate was convicted of marijuana possession 15 years ago and they have a clean record since, you may still decide to proceed with hiring them.

No matter what you plan to do based on the information, before you reject a candidate based on the information in their background check, make sure you give them a copy of the report that you relied on to make the decision and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act” from the company you contracted with to run the report.

If you decide to take adverse action based on the results, you’ll need to provide a notice that includes:

  1. The name, address, and phone number of the company that supplied the report
  2. A statement that the company who supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it
  3. The applicant’s right to dispute the accuracy or completeness of any information the reporting company furnished or get an additional free report from the company within 60 days

How much does a background check cost?

The costs for a third-party background screening vary but you can generally expect to pay between $25 and $75 for a report.

At Complete Payroll Solutions, we always recommend what we term a Level 3 screen for all new hires, which we described previously. For this report, we partner with a preferred vendor that charges $40 per employee.

What laws do I have to worry about when running a background check?

Any time you use an applicant’s background information to make an employment decision, you must comply with federal nondiscrimination laws. So you’ll want to make sure you have a fair policy that applies to all candidates, meaning, if you run background checks on some candidates, you’ll need to run them on all.

You’ll also have to make sure you don’t treat applicants differently based on their criminal history under the EEOC. So, if you have 15 or more employees, you can’t exclude certain applicants disproportionately or unjustifiably based on race, color, national origin, sex, relegation, disability, age, or genetic information. For an exclusion to be lawful, you’ll need to make sure it’s job-related and consistent with business necessity.

You’ll also have to make sure you comply with the Fair Credit Reporting Act. As we discussed earlier, you’ll want to look for a screening company whose practices adhere to the FCRA rules and requirements.

Lastly, your state may prohibit or limit the use of background checks for new hires and the information they contain so you’ll want to check applicable laws.

How to Best Implement Background Checks For New Hires

Background checks are an important tool in ensuring your workforce’s culture, productivity, and safety. But there’s a lot to consider when it comes to running these screenings at your company. Hopefully, this article clarified the steps involved so you can start implementing these checks going forward.

If you don’t have the time or staff in house to manage the background screening process, you may decide to partner with an outsourced HR provider. At Complete Payroll Solutions, we can help with all aspects of the recruiting process, including background screenings. We can be a good fit for your business if you:

  • Want a cost-effective approach
  • Prefer a recruiter who can assist you with other HR functions as you expand such as employee onboarding or training
  • Need additional support to recruit and onboard a new employee

To learn more about how to choose the right outsourced HR partner for your company’s recruiting needs, read our next article on the top factors to consider.


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