Small Business needs to be BIG on Applicant Background Checks!

Small Business needs to be BIG on Applicant Background Checks!

Small businesses are most vulnerable to the impact of a single “bad hire”, yet small businesses are also the least likely business demographic to conduct pre-employment background checks. Hmm? While a number of factors contribute to this trend, the main deterrents to small businesses maintaining an applicant screening program are…

A) The assumption that applicant screening is cost prohibitive vs the return on investment.
B) Uncertainty in regards to legal compliance…which translates into time to determine the legalities, along with potential cost for expert advice. Below, we’ll look at each of these factors and separate the facts from fiction.
 
A) Cost vs Return on Investment 
The price of a background check will vary from background screening agency to background screening agency but as a general guide, here is what you should expect to pay for a background check from a reasonably priced professional background screening company, per employee. Keep in mind that several variables can go into the exact pricing. For example, how many places an applicant lived in a short period of time or how many recent places they worked. Consider this a chart of averages.

 

To break this cost chart down a little further, I’ve listed the minimum searches we (SafeScreener.com) would perform in each general “level” of screening.  This does not take into account job specific searches that could be added to any package such as Motor Vehicle Driving Records, Credit Reports, Drug Testing, etc.
 
Volunteer
  • Nationwide Criminal Record Database Search: This is a compilation database from many sources that are obtainable electronically.  Nationwide criminal databases are NOT perfect, and if budget permits, should be used in conjunction with additional criminal record searches. (learn more about Nationwide Criminal Record Databases here)
  • 50 State Sex Offender Registry Search
  • Social Security Trace for residential history and identity validation.
Level One
  • Nationwide Criminal Record Database Search: This is a compilation database from many sources that are obtainable electronically.  Nationwide criminal databases are NOT perfect and, if budget permits, should be used in conjunction with additional criminal record searches. (learn more about Nationwide Criminal Record Databases here)
  • 50 State Sex Offender Registry Search
  • Social Security Trace for residential history and identity validation.
  • Criminal record search in county of current residence.
Level Two
  • Nationwide Criminal Record Database Search: This is a compilation database from many sources that are obtainable electronically.  Nationwide criminal databases are NOT perfect and, if budget permits, should be used in conjunction with additional criminal record searches. (learn more about Nationwide Criminal Record Databases here)
  • 50 State Sex Offender Registry Search
  • Social Security Trace for residential history and identity validation.
  • Criminal Record Search in county of current residence. (Preferably all counties from past seven years of residence history.)
  • Federal Criminal Record Search via federal jurisdictions based on residence history
Level Three
  • Nationwide Criminal Record Database Search: This is a compilation database from many sources that are obtainable electronically.  Nationwide criminal databases are NOT perfect and, if budget permits, should be used in conjunction with additional criminal record searches. (learn more about Nationwide Criminal Record Databases here)
  • 50 State Sex Offender Registry Search
  • Social Security Trace for residential history and identity validation.
  • Criminal Record Search in county of current residence. (Preferably all counties from past seven years of residence history.)
  • Federal Criminal Record Search via federal jurisdictions based on residence history.
  • Verification of Education (highest level at minimum)
  • Verification of Past Employment (Dates, title, pay, etc) of one or more past employers.
When applicant screening is conducted through a reputable background screening company the value will exceed the costs many times over. Along with limiting your exposure to a worst case scenario such as violent behavior, fraud or theft. Recent studies (Center for American Progress 2012) have shown that replacing a “bad hire” will cost a company over 20% of the the applicant’s full annual salary. In comparison, the cost of a single screening, as shown above, averages $15 to $100.
 
B) Compliance and Legalities 

Next, there is the issue of compliance.  Large corporations have legal representatives, even whole departments, focused on legal matters and compliance. Small businesses on the other hand may have just an owner wearing many hats. Slightly bigger companies may have a full time Human Resources representative (or third party) but the laws that cover background checks are often too much for people outside the background screening business to keep pace with. Don’t let a lack of knowledge be a deterrent to proper applicant screening. Just as you’d trust a good accountant to know the tax laws and guide you on how to abide by them, a good applicant screening company will guide you on applicant screening compliance matters. The greatest risk comes when small businesses thinks they are immune to “The Fair Credit Reporting Act” because they have less than fifty employees. While small businesses with under 50 employees are exempt from several government regulations, that is not the case with applicant background screening.  Employers of any size are expected to follow the rules of the Fair Credit Reporting Act which regulates all aspects of pre-employment background checks.

Here are the most commonly forgotten/mishandled items that get employers into trouble when they process pre-employment background checks.

Signed Authorizations
·      The employer MUST have a background check authorization form signed by the applicant.  Digital signatures are also acceptable.  The authorization MUST be a separate document from any employment application forms.
“Adverse Action” Notifications
  • Pre-Adverse Action Notice:  If any part of the background check may disqualify the applicant from employment, the employer MUST send the applicant a “Pre-Adverse Action” notification.  Your applicant screening vendor should make this process very easy to manage.  With the right screening company, a simple click of the mouse can send the applicant a properly formatted pre-adverse action notification.  This notification allows the applicant to see what was found on their background check and dispute any information they deem as inaccurate.
  • Adverse Action Notice:  Assuming the report is not under dispute by the applicant who has already received the Pre-Adverse Action Notification (disputes rarely occur), a final notification of adverse action must be provided to the applicant after a recommended 5 business day period.  This brief notice can be provided via email, verbally, mailed, etc.  
The Bottom Line
Small businesses cannot afford to underestimate the importance of  screening their employees. With a smaller pool of staff, the effect of hiring someone with fabricated qualifications or a dangerous criminal history can have an immense negative impact on the business.  Remember that you can be cost effective and maintain due diligence by working with a reputable screening company.  Look to partner with a screening company that requires no monthly minimums, no set-up fees and no monthly or annual fees.  A good background screening vendor will also provide F.C.R.A. compliance information and the tools to make it simple to follow state and federal law at no additional charge.


Please note:  This summary is not intended  to replace professional or legal guidance.

Questions?  Please feel free to call our offices. We’re here to help!  800-578-8600 x100 or email us at bjones@safescreener.com.

About the author:
Brad Jones is the Founder and Director of Operations of SafeScreener.com, a background screening agency that has been providing corporations of all sizes with applicant screening services since 2004. Brad is an active member of the National Association of Professional Background Screeners (NAPBS) and serves on the Chicago Chamber of Commerce’s Workplace Well-being Committee.  For more information on applicant screening services, or a free F.C.R.A. Compliance Checklist, please call 888.578.8600 x113 or email bjones@safescreener.com.                                                                                                                                                                                                             
Please note: Any person or entity utilizing a third party to conduct applicant background checks for employment or leasing purposes must follow applicable federal and state laws including but not limited to EEOC Title VII, the Fair Credit Reporting Act and all applicable state laws.  Articles, blogs, newsletter and other materials issued by Brad Jones or any employee of Background Screening Consultants LLC (DBA SafeScreener.com) should not be regarded as, or substituted for, legal advice.

One Response

  1. This article was extremely informative. One of my friends is starting her own business and she will eventually need to hire employees. I'm not sure if she plans on doing background checks or not, so I'll be sure to share this information with her.

    Susan Hirst | http://www.fpproslv.com/

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