Employee Background Checks: What Every Business Needs to Know

Employee background checks help your business hire the right people. They can verify that a candidate’s history, experience, and background match what’s on their resume. From criminal records to employment history, background checks reduce hiring risks that could impact your business and your team.

Not only does background screening help keep your workplace safe, but an employment background check also leads to smarter hiring decisions. When you know more about who you’re bringing on board, you can reduce employee turnover and boost team morale. For industries like healthcare, finance, and education, background checks are especially important for compliance and safety. But whether you run a retail store, restaurant, or corporate office, knowing your employees’ backgrounds helps build trust within your team and ensures a safer, more reliable work environment.

In short, background checks protect your business, your team, and your customers while helping you make well-informed hiring decisions.

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What is a pre-employee background check?

An employee background check is a process that helps employers verify information about a potential hire’s history. This can include checking criminal records, employment history, education, and sometimes credit history to verify the information provided by the job applicant.

It’s an important tool, especially when you need to make sure that your job applicants are honest and qualified for the role they’re applying for. It helps to  reduce the risk of hiring someone who might not be a good fit or poses a potential risk to the business.

An employee background check can cover various areas, depending on the role and industry. For example, it may include criminal background checks, federal background checks, verification of education and work history, driving records, and even drug testing or credit checks. 

In highly regulated industries, like healthcare or finance, background checks are often more in-depth to comply with industry standards and legal requirements. Some businesses may also use online background check services or work with background screening companies to perform these checks.

The benefits of running employee background checks.

Conducting an employee background check is a critical step for your business, helping you protect your workforce, maintain compliance, and foster a safe environment. By taking the time to vet candidates thoroughly, you reduce the risk of hiring individuals who could pose a threat to your business or your employees.

Here are some of the most important benefits:

• Preventing fraud and negligent hiring: Background checks ensure that candidates provide accurate information, which reduces the risk of hiring individuals with a history of fraud or dishonesty. This helps avoid negligent hiring claims, which could arise if an employee with a problematic past causes harm at work.

• Improving the overall quality of hire: By verifying qualifications and criminal history, background screenings help employers make more informed hiring decisions, ensuring they hire trustworthy and qualified candidates. This can lead to better hires and a stronger workforce.

• Protecting the company from liabilities: Thorough background checks protect businesses from potential legal and financial liabilities, particularly in cases of employee misconduct. Conducting due diligence helps avoid costly negligent hiring lawsuits.

• Maintaining a safe work environment: Background checks also identify red flags, such as violent behavior, which helps your business create a safer work environment for employees and customers alike.

Types of employee background checks.

Your business can use various types of employee background checks to ensure you're hiring the right candidates. Each type focuses on a different part of the candidate’s history and can reveal critical information about their ability to take on the role.

International background check

International background checks can uncover international criminal records, education credentials, and employment history for candidates who have lived, worked, or studied outside the United States.

Criminal background check

A criminal background check screens a candidate for criminal records. A criminal background check can include things like court orders, arrests, any record of incarceration, and felony or misdemeanor convictions. 

Depending on where you’re located, criminal background checks are only allowed to go back a certain number of years. For example, it’s illegal to search for criminal records beyond the past seven years in the state of California. When you’re conducting pre-employment background checks, be sure to stay compliant with local and federal laws like these.

Employment history verification

An employment verification is similar to an education verification. This confirms whether or not a candidate was employed in their previous roles. Employment verification is a pretty simple process and doesn’t require any major background check programs or software—a simple call or email to the previous employer is usually enough. 

Another way to ensure verification is to conduct reference checks with previous managers. This is also a much more informal way to verify employment, but can still be used to check for any experiences or skills stated on a candidate’s resume.

Educational verification

An education verification check confirms the validity of a candidate’s academic history. This is a common part of a standard background check to ensure that a candidate has any credentials that are necessary as part of a job listing. For example, if a prep chef lists that they went to culinary school on their resume, an employer can add an education verification to see if their certificate or degree is completed.

Credit checks

A pre-employment background check can often include a pre-employment credit check, which is when an employer runs a full credit check before a candidate is hired. This type of background check isn't as common, as most employers don’t need to know a candidate’s previous financial history before employing them. 

However, it's common for candidates to receive a credit check if they’re applying to more finance-specific roles, such as in banking. It’s important to note that a pre-employment credit check doesn't include the candidate's actual credit score. This information is private to the candidate and should never be used for consideration for employment.

Driving or motor vehicle records (MVR)

 A motor vehicle record (MVR) check is a record of an individual’s past driving history. It’s most commonly requested by potential employers and might be one part of the entire background check process.  If you’re looking to hire somebody who operates a moving vehicle as part of your business, it’s best to implement an MVR check as part of the background check process. An MVR record includes important driving information such as an individual’s date of birth, driver’s license number, any license suspensions or traffic citations, DUI convictions, and accident reports.

Social media checks

A study by The Harris Poll finds that almost 71% of US hiring decision makers agree that checking out a candidate’s social media profile is an effective way to screen applicants. Social media screening is a much more common practice, but isn’t necessarily part of an official background check. The most common way employers conduct a social media check is by doing an unofficial search for the candidate on common social media sites to see what information is readily available to the public.

Reference checks

This involves contacting personal or professional references provided by the candidate to get insight into their work ethic, character, and abilities. Reference checks help confirm whether a candidate is truly suited for the role and how they perform in real work settings.

Drug testing

Drug testing in the workplace has gotten more complicated in recent years due to the legalization of marijuana in some states and privacy laws surrounding the Health Insurance Portability and Accountability Act (HIPAA). However, it could be a necessary part of a background check for roles that require operation of heavy machinery or moving vehicles. In some instances, it might even be required by insurance providers to help minimize the risks a business can run into. If you plan to implement a pre-employment drug screening, it’s important to create a consistent policy so there’s no possibility of discrimination when it comes to completing a drug test.

Medical check-up

A pre-employment physical is a standard medical exam employers require before a candidate starts a new job. These are not the same as human performance evaluations (HPE), which evaluates more specific physical skills a candidate might experience in the role. Pre-employment physicals are more to evaluate the general health of an employee. These aren't as common anymore as an individual’s health records, since this can be a violation of the HIPAA. 

Run an employee background check.

Running an employee background check involves several key steps, each aimed at collecting information while maintaining compliance with legal standards. Here’s how to run an employee background check effectively.

Step 1: Get employee consent

You need to get written consent from the candidate before conducting any kind of check. According to the Fair Credit Reporting Act (FCRA), employers must inform applicants that they're conducting a background check and must obtain their permission in writing. Failure to do so can lead to legal issues. For transparency, make sure your disclosure is clear and separate from other employment forms.

Step 2: Choose a reputable background check provider

To streamline the process, choose a reputable background check company. Several background check companies specialize in employment screening and offer comprehensive services such as verifying criminal records, work history, and education. 

If you need to make your hiring process seamless, consider payroll and HR solutions like Homebase. When selecting a provider, make sure they comply with all legal guidelines and have a solid reputation for accuracy and security.

Step 3: Request and verify required details

Once you've selected a provider, choose the kinds of checks your business needs, such ascriminal background checks, work history verification, education confirmation, and credit reports (for finance-related roles). 

Keep in mind that different industries may require additional checks, such as driving records or drug testing. By gathering the right data, you’ll have a well-rounded view of your candidate's suitability for the role.

Step 4: Review results and follow legal guidelines

After obtaining the background check results, carefully review the information provided. If the background check reveals any issues, such as a criminal record or false employment history, you'll need to handle the situation in compliance with legal requirements. 

Under the FCRA, if you decide not to hire the candidate based on the background check, you must provide the individual with a copy of the report, explain their rights, and give them an opportunity to dispute the findings.

Legal considerations for employee background checks.

When conducting employee background checks, employers must navigate a series of legal requirements to ensure compliance and avoid potential legal consequences. There are a few critical legal factors to consider when running background checks for employment.

Fair Credit Reporting Act (FCRA)

The FCRA is a federal law that governs how background checks are conducted by third-party consumer reporting agencies. Under the FCRA, employers must inform candidates that they intend to run a background check and must obtain written consent from the applicant before proceeding. 

The FCRA also mandates that if a background check reveals information that leads to an adverse hiring decision, the employer must provide the applicant with a copy of the report and an explanation of their rights to dispute the findings. This is known as the “pre-adverse action” process, and failure to comply can result in penalties or lawsuits.

State-specific laws

In addition to federal regulations, many states have specific laws that impact employee background checks. Some states, for instance, restrict how far back a background check can go when looking at criminal history, while others prohibit employers from inquiring about arrest records or certain misdemeanor convictions. 

States like California and New York have more stringent guidelines on how employers can use criminal background information in hiring decisions. Understanding both the federal and state laws that apply to your business location is essential to maintaining compliance. For instance, some states now have “ban-the-box” laws, which prohibit asking about criminal history on job applications.

Employee consent

Consent is one of the most critical legal aspects of running a background check. As mandated by the FCRA, employers must provide candidates with a clear and conspicuous notice that a background check will be conducted. 

This notice must be provided in writing, and the candidate must give their written authorization before the check takes place. The notice cannot be combined with other documents, such as a job application, and must be a standalone document to avoid confusion. 

Additionally, the candidate has the right to request information about the nature and scope of the background check.

How long does an employee background check take?

If everything goes according to plan, a background check process should take around one to three business days. But if there are delays, they can take up to two weeks or more, depending on how advanced the search is.

How long your background check takes depends on the tool you use to conduct it. If you use a traditional human resource service that relies on snail mail to get the job done, receiving your report can take weeks. Using a modern, online service will make the background screening process run a lot smoother.

Homebase hiring can also make other areas of your process run smoother and quicker. You can identify the best candidates with screening questions, message them and schedule interviews, send them onboarding documents and have them securely stored, and check everything off your onboarding checklist, all in one place.

How much does an employee background check cost?

The cost of running a background check varies depending on the provider and the information being requested. On average, businesses in the United States can expect to pay between $30 to $100 per background check for standard services. 

These typically include criminal history, education verification, and employment history. However, for more extensive checks—such as credit reports, driving records, or federal background searches—the cost can rise to $200 or more.

Free vs. premium background check providers

While there are some free services available online, these are often limited in scope and accuracy. Free background checks may not provide up-to-date information, miss critical criminal records, or fail to meet compliance requirements.

In contrast, premium background check providers offer more comprehensive services, including detailed reports, legal compliance, and additional features like drug testing or global background checks. If your business needs to prioritize accuracy, security, and legal adherence, investing in a reputable background check provider is highly recommended.

Factors such as the number of checks you run annually or the complexity of the screening process can also impact pricing, with some payroll providers offering bundled services to help small businesses reduce costs.

Top Employee background check providers

Here are some of the most well-known background check services for businesses to consider:

1. Checkr

Checkr offers a comprehensive, AI-powered background check solution that caters to small and large businesses alike. Their platform integrates well with payroll and HR systems, making it easier to streamline the screening process. Checkr provides criminal records, driving history, education verification, and drug screening, along with compliance tools for companies that need to meet strict legal requirements.

2. GoodHire

GoodHire is known for its user-friendly interface and customizable screening packages. It covers criminal history, employment, education, and identity verification, as well as credit checks for specific roles. GoodHire is also compliant with the FCRA, ensuring legal adherence when conducting pre-employment screenings.

3. HireRight

HireRight offers global background screening and supports various industries, including healthcare, finance, and transportation. It covers criminal records, drug testing, employment, and education verification. HireRight's platform integrates well with HR and applicant tracking systems (ATS), offering automation options for faster screening.

4. Sterling

Sterling is another major player that provides customizable screening solutions, including social media checks, criminal history, and healthcare-specific background checks. Sterling is particularly suitable for industries with unique compliance requirements and high-volume hiring needs. Its strong focus on accuracy and security makes it a reliable choice for businesses.

5. Accurate Background

Accurate Background provides easy-to-use, cloud-based solutions for background checks. It supports industries like retail, healthcare, and technology. Accurate Background covers criminal records, education, and employment verifications, among other screenings, and offers flexible pricing models for small to large businesses.

How to choose the best provider for your business

When selecting a background check provider, consider the following:

• Compliance: Ensure the provider complies with FCRA and state-specific laws.
• Integration: Look for platforms that integrate with your HR or payroll systems.
• Turnaround time: Some providers deliver results faster than others, which is crucial for urgent hiring needs.
• Customization: Opt for a provider that offers customizable packages to fit your industry-specific requirements.
• Pricing: Assess whether the provider offers competitive pricing models and if they provide cost-effective solutions for your hiring volume.

Streamline hiring and stay compliant.

Get Homebase to help track hours, calculate overtime, and store important information. You can rest easy knowing you're covered on federal, state, and city compliance rules. Looking for someone to help establish your background check process? Get advice from Homebase HR pros to help customize your hiring and compliance policies. Get started for free.

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Frequently asked questions

How long does a background check take?

A background check typically takes between 1 to 5 business days. The time varies depending on the depth of the check and the provider used. Some checks, like employment and education verifications, can take longer if third-party verifications are delayed. If criminal records are involved, state-specific laws and backlogs might affect the timeline as well.

What does a background check consist of?

A background check can include a variety of screenings such as criminal history, employment verification, education verification, credit checks, and driving records. Depending on the job or industry, drug testing, social media checks, and reference checks might also be part of the process. Each type of check serves a specific purpose in ensuring the candidate meets the employer's requirements.

Can employers run background checks without consent?

No, under the FCRA, employers must obtain written consent from applicants before conducting a background check. Failure to do so can result in legal consequences. The FCRA also requires employers to notify applicants if any adverse decisions are made based on the background check results.

How often should businesses run background checks?

While most businesses conduct a background check during the hiring process, some industries may require periodic re-checks to ensure continued compliance with regulations or industry standards. It's common in fields like healthcare, finance, and transportation to re-run background checks annually or bi-annually.

Are social media checks legal?

Yes, social media checks are legal, but employers must be cautious about how they use the information found on social platforms. It’s important to avoid using any information that could be considered discriminatory. Social media checks should comply with the FCRA, and it’s recommended that they be conducted by third-party background screening services to ensure compliance.

What background check do most employers use?

Most employers use a combination of criminal background checks, employment history verification, and educational verification. For certain industries, such as finance or healthcare, credit checks and drug testing might also be included. The specific checks depend on the nature of the role and the level of risk involved.

What are red flags in a background check?

Red flags in a background check can include a history of criminal offenses, discrepancies in employment or education records, poor credit scores (if relevant to the role), or failed drug tests. It’s important to weigh these factors based on the nature of the job and the severity of the findings.

What typically shows up on a background check?

A background check typically reveals information such as criminal records, employment history, education verification, driving records, and credit history (for jobs in finance). Other potential findings include drug test results and social media activity, depending on the employer's requirements.

How to get a background check in Michigan?

In Michigan, you can use a professional background check provider or go through the Michigan State Police’s Internet Criminal History Access Tool (ICHAT). Employers conducting background checks must comply with both federal regulations like the FCRA and Michigan-specific laws. Additionally, Michigan limits how far back certain criminal records can be searched, especially for non-violent offenses.