Why Failing to Perform Background Checks Could Cost You Money

Hiring used to be relatively easy – relatively.  You would place an advertisement, screen, and the interview applicants, and then decide who you think is the best fit for the position.  However, that has changed and the current business environment has become much more risk-averse in recent years.
What does this mean for small and mid-sized businesses? For starters, you need to rethink your hiring practices and a big part of this is to include authentication for new employees as a key part of your onboarding processes.

Failing to do so could cost you money, a lot of money.  As such this article will take a deeper look at the importance of background checks for your employees.

Reason 1: Most Resumes are Wrong

We used to take resumes for granted but a study from ADP noted that nearly half of all resumes survey had discrepancies.  While some of these were minor infractions, such as misstating a start or end date at a job; others were more serious.  Examples include lying about positions and responsibility, as well as claiming bogus academic credentials.

As such, you really can’t take anything for granted.  If you do, then you might end up in big trouble with your customers – especially if someone on your team had misstated their credentials.

Remember, this is tantamount to fraud and just because you failed to perform a proper background check doesn’t mean your company will be able to survive the reputational damage.

Reason 2: Not Defining the Scope

Some companies claim they perform background checks and some service providers state that they have an airtight process to review the credentials of potential employees.  However, the reality is somewhat murkier.

The first thing to know is that you need a well-defined scope when considering background checks.  This includes what you need to check, the potential sources, what can be done with this information, and even what is allowed under the law.

As such, you just can’t assume that calling a previous employer or relying on free online databases is enough.  The truth is that you usually need to go much deeper – but in doing so, you will often need a release from the applicant to access certain pieces of information.

So, in considering background checks you need to work numerous stakeholders to make sure your process meets their requirements.  This not only means checking the applicable laws, but also looking at what your customers expect, and the norms in your industry.

To give you an idea, the most common checks include: 1) education, 2) criminal records, 3) bankruptcy records, 4) medical records, 5) military service records, 6) professional licensing, 7) reference checks.

As you can see, the entire process has become more complicated than it ever was and this means that you need a clear outline of what is required – if not, then you could end up putting your business at risk.

Reason 3: Assuming Reference Checks are Enough

In the old days, you would call someone you knew to ask about someone you didn’t know.  It was easy and many times it was enough just to get a quick answer on someone you were consideringto hire.

How things have changed and today, you can’t even count on the validity of reference checks.  Here’s why – most employers are legally restricted from giving out information on previous employees.

These restrictions often mean that former employers can only give start and end dates, last position worked, and maybe whether they would consider rehiring the individual or not.  However, they usually cannot give their reasons for not wanting to rehire someone.

As such, you can’t assume that reference checks are enough.  In most cases, they aren’t and if you are considering someone for a position of responsibility then you want to make sure you have your ducks in a row before deciding to hire someone.  This means performing a proper background check on a prospective employee.


Hiring the wrong person can damage your business in many ways.  First, there is the disruption that such a decision could cause to your team.  But there also is the reputational damage that hiring someone with the wrong credentials could do to your business.  This could lead to fines, lawsuits, and maybe even bankruptcy.

As such, you don’t overlook the need to perform an adequate background check before hiring someone.  Don’t check reference checks at face value; instead, define your scope to include other searches that you will need to perform to make sure you have your bases covered.

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