Making informed hiring decisions goes beyond simply reviewing applications, interviewing candidates, and extending job offers.
It involves leveraging both background checks and reference checks to ensure candidates are the right fit for your organization.
At iprospectcheck, we regularly conduct these vital pre-employment screenings for employers across all U.S. states.
In this article, we outline the purpose of these screenings as well as the key differences between the two.
Key Takeaways
- A pre-employment background check investigates a candidate’s criminal history, employment history, educational level, credentials, and other key information relevant to the job.
- A reference check, on the other hand, involves checking a candidate’s professional references to determine their work ethic, previous job duties, interpersonal skills, professionalism, and suitability for the position.
- The main difference between reference checks and background checks is that background checks verify the candidate’s reported information and uncover disqualifying criminal records, whereas reference checks assess the candidate’s soft skills and fit for the role.
- To gain a comprehensive picture of an applicant’s background and suitability for the job, employers should conduct both background and reference checks.
What is a Background Check?
An employment background check is an investigation into an applicant’s past conduct and records, including their criminal history, past employment, educational record, credentials, and other relevant information.
Employers run background checks to learn more about an applicant’s background, ensure they are safe, and meet the employer’s experience and qualification requirements.
The following are common types of background searches that employers might request in a background check:
- Criminal history
- Employment verification
- SSN trace
- Professional license verification
- Education verification
- Motor vehicle records (MVR) checks
- Credit history
The particular types of searches requested might vary based on the industry and the job.
Employers operating in certain industries, including healthcare, finance, transportation, and social services, might be required by industry regulations to conduct background checks
What is a Reference Check?
A reference check involves contacting people who know the candidate and can provide information about their skills, experience, work ethic, interpersonal skills, job duties, and employment and educational performance.
In many cases, candidates will be asked to provide professional references, including former supervisors, employers, co-workers, and professors who can answer questions about the candidate.
Employers check references to try to determine if the candidate has the right skills and abilities for the job, and if they will fit into the company’s culture.
Background Check vs. Reference Checks
Background checks and reference checks serve different, but equally important, purposes for employers.
Benefits of Background Checks
1. Ensure Higher Quality Applicants
Employers that conduct background checks are required to disclose that fact to applicants under the Fair Credit Reporting Act (FCRA) and obtain signed consent before completing them.
The required disclosure benefits employers by discouraging applicants who have serious issues from applying.
Disclosing that you conduct background checks also encourages applicants to provide accurate information on their applications and resumes.
Employers that conduct background checks are more likely to attract well-qualified, trustworthy applicants.
Overall, including background checks as a regular part of your pre-employment screening process helps to ensure the quality of applicants who apply for jobs at your company.
2. Screen Out Unqualified Candidates
Background checks help employers to screen out underqualified applicants by verifying their employment history and educational background.
This helps to ensure those who are hired have the right blend of work experience and education to complete the duties of the position.
Screening out unqualified and underqualified applicants helps to improve the overall quality of a company’s workforce and improve productivity.
3. Protect the Company’s Brand
Hiring untrustworthy, dishonest employees could cause serious damage to your organization’s brand and lead to negative publicity.
A rogue employee can cause serious financial losses that could greatly harm your business.
Background checks confirm the information claimed by applicants on their resumes and allow employers to discover past misconduct and criminal activity that could pose a serious risk to the organization and its customers.
4. Protect Workplace Safety
Workplace violence is a serious issue.
The U.S. Bureau of Labor Statistics (BLS) reports there were 37,600 nonfatal workplace injuries and 393 fatalities caused by incidents of workplace violence in 2020 alone.
Employers must take steps to protect their employees and customers by maintaining a safe work environment.
A part of this duty includes making sure you take care when hiring to ensure you do not hire applicants who could pose a serious risk to the safety of others in the workplace.
Background checks help to protect workplace safety by disclosing whether an applicant has a history of assaults that could indicate a propensity for violence.
5. Reduce Liability Risks
Background checks help reduce your organization’s exposure to liability risks by helping your organization screen out unqualified, untrustworthy, or dangerous applicants.
Employers that hire applicants who go on to harm others while working can face negligent hiring liability if a background check would have revealed the applicant was potentially dangerous or dishonest.
6. Reduce Internal Theft and Fraud
Employers that conduct background checks can identify applicants with criminal records indicating dishonesty, including convictions for theft, embezzlement, and others.
Employers of all sizes have a significant risk of internal theft and fraud, but small businesses have the greatest risk.
According to the Association of Certified Fraud Examiners (ACFE), the median loss from internal theft and fraud for small businesses with fewer than 100 employees was $150,000 in 2022.
By contrast, companies with 100 or more employees suffered a median loss of $100,000 from internal fraud incidents.
While background checks won’t prevent all internal fraud and thefts, they can help to decrease the risk by identifying applicants who are dishonest and have a history of theft.
7. Improve Morale
When you include background checks as a regular part of the hiring process, it demonstrates to your staff that you value integrity in hiring and increases employee morale.
Having a high level of employee morale reduces turnover rates and lowers the cost of training and upskilling new employees.
When you have low turnover and high employee morale, better candidates will be attracted to your company in the future when you do have openings.
Limitations of Background Checks
While background checks offer many benefits when employers assess candidates, they also have certain limitations.
A background check will not be able to tell you the following about an applicant:
- How well the candidate gets along with others in the workplace
- How dependable and responsible the candidate is
- The candidate’s communication skills
- The candidate’s flexibility and creativity
- Whether the candidate accepts constructive feedback
- The candidate’s long-term potential within your organization
- The candidate’s fitness for your company and workplace culture
While background checks provide a good picture of the candidate’s history, they do not show more intangible information about the candidate’s soft skills and potential fit within your organization.
For these types of information, reference checks might help to fill in the picture.
Benefits of Reference Checks
Reference checks can provide important information about how the candidate performed at their past employers, whether they have good character, and their work ethic.
Here are some of the potential benefits of reference checks:
- Gain insight into how well the candidate performed their jobs while working for past employers
- Learn about the applicant’s strengths and weaknesses
- Learn about the candidate’s job skills and qualifications
- Gain information about the candidate’s interpersonal skills and ability to work well with others
- Help you evaluate the applicant’s fit with your company’s values and workplace culture
- Help you determine whether the applicant has long-term potential within your organization
Limitations of Reference Checks
Like background checks, reference checks do not provide all of the information employers need to make fully informed hiring decisions.
Some of the limitations of reference checks include:
- Some candidates might provide references who are biased in their favor and will be unlikely to reveal anything negative
- Some candidates might provide false references by claiming a friend is a former supervisor, etc.
- Some references will not be forthcoming
- Some references might be unfairly biased against the applicant
- Checking a candidate’s references can be time-consuming and might slow down the hiring process
- Reference checks won’t reveal a candidate’s criminal history, educational background, or complete work record
- Companies might be limited in what they can disclose about candidates
While both reference checks and background checks come with their respective limitations, using both methods in tandem can help to mitigate the weaknesses inherent in each approach.
Know Before You Hire
How to Get a Background Check
If you want to conduct background checks at your company, you should follow these steps:
1. Create a Background Check Policy
Multiple laws govern background checks and how they should be conducted. To ensure your staff complies with the law, you should start by creating a compliant, effective background check policy.
Include the specific steps HR staff should follow when conducting background checks. Ensure your background checks are uniform to prevent the influence of unconscious bias.
Train your staff on your background check policy and the relevant laws.
2. Adhere to Notice and Consent Requirements
Under the FCRA, you must notify applicants that your company conducts background checks.
Your notice should be prominent and included on a standalone form.
Before you initiate a background check, you must also obtain the applicant’s signed consent and confirm you have complied with the notice and consent requirements.
3. Partner With the Right Background Check Company
Not all background check providers are created equal. You want to ensure the company you choose is reliable, accurate, up-to-date, and legally compliant.
At iprospectcheck, we leverage advanced technologies, extensive resources, and cutting-edge research methods to deliver reliable, current, and accurate reports that comply with the FCRA and other background check laws.
Our background check process is also fast, allowing us to return comprehensive reports to you quickly so that you can make swift hiring decisions.
4. Select Appropriate Background Searches
Choose only the background searches that are relevant to your industry and the job for which you are hiring.
At iprospectcheck, we have a variety of packages you can choose from. We also have a large catalog of add-on background searches, so you can create a background check tailored to your company’s unique needs.
5. Keep Your Candidates Informed
Make sure to communicate with your candidates before, during, and after the background screening process.
Being transparent throughout the process builds trust. Our mobile app allows your applicants to stay up to date during the background check process.
Once you have received the results, tell your applicant. If you have decided to move forward, schedule them for onboarding, and set their start date.
6. Conduct an Individual Assessment of Criminal Records
The Equal Employment Opportunity Commission (EEOC) is the agency that regulates and enforces Title VII of the Civil Rights Act of 1964.
According to guidance the EEOC has issued, employers must individually assess convictions they discover on background checks before they decide against hiring the applicant based on their criminal record.
Assess a conviction as it relates to the job for which the applicant is being considered before making a decision not to hire them.
7. Complete the Adverse Action Process
If you decide against hiring an applicant because of information revealed in a background check, the FCRA requires you to complete the adverse action process before making a final decision.
Start by sending a pre-adverse action notice to the applicant. Identify the problematic information in the report, and include a copy of it with the information highlighted.
Give the applicant a reasonable time to respond by providing evidence the information is wrong or that the applicant has been rehabilitated. Typically, a reasonable time to respond is five business days.
If you make a final decision not to hire the applicant, send a final adverse action notice. Include a copy of the applicant’s rights under the FCRA and relevant state laws.
How to Complete Reference Checks
Contacting multiple professional references provided by candidates can be time-consuming, especially when you have a large number of applicants.
The best way to complete reference checks is to partner with a third-party provider like iprospectcheck.
Our automated reference checking process allows you to track when references have been received or declined and when the questionnaires have been answered.
The service also has built-in screens to verify the references provided by a candidate are who the applicant has claimed them to be.
iprospectcheck: Your Background & Reference Check Partner of Choice
Our team of background check experts serves businesses of all sizes across many different industries.
We’re ready to help elevate your hiring process with comprehensive and compliant background and reference checks.
To learn more about our services or to receive a free quote, contact us today: (888) 509-1979
DISCLAIMER: The resources provided here are for educational purposes only and do not constitute legal advice. Consult your counsel if you have legal questions related to your specific practices and compliance with applicable laws.
