What Is a Background Check and Its Importance

Did you know that applicants lying on their resumes is more common than you think? From fake job titles to fabricated educational qualifications, many candidates misrepresent themselves to secure employment. A 2023 study found that 64.2% of Americans have admitted to providing false information on their resumes, especially younger applicants.

As remote work becomes more common, these risks are even higher. With less face-to-face interaction, it's easier for people to hide their true backgrounds. That's why it's more important than ever for you, as an employer, to conduct thorough background checks.

Background checks are essential to avoid costly hiring mistakes and ensure you’re bringing in the right people. They help you protect your company’s reputation and ensure you hire trustworthy, qualified candidates.

In this blog, we’ll explore the importance of background checks, the key components involved, and why they're crucial for ensuring that you hire trustworthy and qualified candidates.

What is a Background Check?

A background check is a process used by employers to verify the information provided by job candidates and assess their suitability for a role. This process helps ensure that potential hires are trustworthy, qualified, and pose minimal risk to the organization. An overwhelming 95% of U.S. employers conduct some form of pre‑employment background screening, according to the Professional Background Screening Association.

Employers typically conduct background checks after extending a conditional job offer but before finalizing employment. With the rise in identity fraud and misinformation on resumes, conducting a background check has become essential for any organization.

To take a closer look at how this process typically begins, let’s explore what a pre-employment background check involves.

What is a Pre-Employment Background Check?

A pre-employment background check is a screening performed after a candidate receives a conditional job offer, but before they begin working. It’s designed to confirm the accuracy of their resume and ensure they meet role-specific requirements. A typical pre-employment check covers:

• Criminal records (county, state, federal, and sometimes international)
• Employment and education verification
• Identity confirmation (e.g., SSN tracing)
• Drug screening
• Role-dependent checks (e.g., driving records, credit reports)
• Reference checks and sanctions screening

These checks typically take about a week, though international or detailed checks may take longer.

Difference Between Pre-Employment Background Checks and Post-Hire Checks

Pre-employment and post-hire background checks differ in timing, scope, and intent. Here's a detailed look:

• Pre-employment checks help avoid risky hires and verify resume claims.
• Post-hire checks maintain a safe and compliant workforce over time.

Below are the common factors that are considered in a background check.

Common Components of a Background Check

Background checks are essential for verifying key details about a candidate’s identity, qualifications, and history. To understand what employers typically assess, read the components listed below.

• Identity & Social Security Verification
  Verifies that the candidate is who they claim to be, confirming full name, Social Security number, and current and past addresses. This step helps prevent fraud and ensures their eligibility.
• Criminal Records Check
  Searches county, state, federal, and sometimes international databases for misdemeanors, felonies, pending charges, convictions, and sex‑offender registrations. This component is essential for mitigating legal and safety risks.
• Employment History Verification
  Confirms roles, dates, titles, and sometimes reasons for leaving. Essential for ensuring resume accuracy and assessing relevant experience. Professional HRBP services can also help you mitigate resume fraud risk and hire with greater confidence.
• Education & Professional Credential Verification
  Confirms degrees, diplomas, licensing, or certifications through contact with institutions or use of verification services. Prevents credential misrepresentation.
• Credit Report (Role-dependent)
  For positions handling finances or sensitive data, credit reports can illuminate financial integrity, covering debt, payment history, and bankruptcies (typically outdated after 7–10 years).
• Driving Records (If relevant)
  Checks for license status, violations, DUIs, suspensions, and points are vital for roles requiring driving or vehicle operation.
• Reference Checks & License Validation
  Engaging previous employers or references to assess performance, reliability, and rehire eligibility. Verification of professional licenses may occur if required for the position. You can also outsource PEO hiring services to get reference management support.
• Drug Screening
  Often includes 5‑ or 10‑panel tests, especially in safety-critical roles. Drug results typically accompany the full screening report.
• Social Media & Online Presence Screening
  Some employers review only public social media activity for red flags (e.g., racism, violence, inappropriate content) under strict, policy-driven procedures to avoid discrimination.
• Global Sanctions & International Record Checks (For global hires)
  Ensures the candidate isn’t on terrorism watchlists or international criminal databases, which is critical for multinational organizations.

Having explored what background checks entail, it's essential to understand why they are important for businesses.

Why Employee Background Checks Are Crucial

Given the high incidence of resume fraud, background checks have become indispensable for employers. These checks help verify the authenticity of a candidate's claims and ensure the hiring of qualified and trustworthy individuals. Read why they matter:

1. Verify Candidate Information

Background checks help verify details such as employment history, educational qualifications, and professional certifications, ensuring that candidates possess the skills and experience they claim. Even minor date errors account for 11.2% of employment and 8.6% of education discrepancies

2. Enhance Workplace Safety

Background checks are crucial for maintaining a safe work environment. By screening for criminal records, employers can reduce the risk of workplace violence, theft, and other misconduct. This is especially important in industries like healthcare, education, and finance, where employees interact closely with vulnerable populations.

3. Protect Company Reputation

A single bad hire can tarnish your company's reputation. Background checks help mitigate this risk by identifying candidates who may pose a threat to your brand's image.

4. Ensure Legal and Regulatory Compliance

Certain industries are subject to strict hiring regulations. Background checks help ensure compliance with laws and regulations, reducing the risk of legal challenges. With evolving regulations, nearly 47% of employers are uncertain about whether their background screening processes comply with all applicable laws

5. Reduce Costs Associated with Bad Hires

The cost of a bad hire can be substantial. According to the Society for Human Resource Management (SHRM), the average cost to hire an employee was $4,700 in 2023. However, replacing a bad hire can cost up to six to nine months of their salary. Background checks help minimize this risk by ensuring that candidates are a good fit for the role and the company culture.

To fully grasp the significance of background checks, it's important to understand the process behind them.

The Employee Background Check Process

Conducting thorough background checks is a critical component of the hiring process in the U.S. These checks help verify a candidate's qualifications, ensure workplace safety, and protect the company's reputation. Here's an overview of the key steps involved:

1. Obtain Candidate Consent

Before initiating a background check, employers must obtain explicit written consent from the candidate. This is mandated by the Fair Credit Reporting Act (FCRA), which ensures transparency and protects candidates' rights. Employers are required to inform candidates about the nature of the background check and obtain their authorization before proceeding.

2. Identity Verification

Employers verify a candidate's identity to ensure they are who they claim to be. This typically involves confirming details such as Social Security numbers, addresses, and previous employment records. Accurate identity verification helps prevent identity theft and ensures compliance with employment eligibility requirements.

3. Employment History Verification

Employers contact previous employers to validate job titles, dates of employment, and reasons for leaving. This step ensures that the candidate has the experience they claim and helps identify any discrepancies in their employment history.

4. Educational Qualification Verification

Verifying academic credentials is crucial, especially for roles that require specific educational qualifications. Employers contact educational institutions to confirm degrees, diplomas, and certifications. This helps ensure that candidates possess the necessary academic background for the position.

5. Criminal Record Check

Employers may check public records and police databases to determine if an individual has a criminal history. This is particularly important for roles involving trust and responsibility. Employers must comply with federal, state, and local laws regarding the use of criminal records in hiring decisions.

6. Reference Checks

Contacting provided references helps employers gain insights into the candidate's work ethic and character. References can include former supervisors, colleagues, or academic mentors. This step provides additional context about the candidate's suitability for the role.

7. Address Verification

Verifying the candidate's current and previous addresses ensures accuracy and helps assess their stability and reliability. This step can also help identify any discrepancies in the candidate's background.

8. Credit History Check (When Applicable)

For positions involving financial responsibilities, employers may review the candidate's credit report to assess financial reliability. This helps ensure that candidates can manage financial tasks responsibly. Employers must comply with the FCRA and state laws regarding the use of credit reports in employment decisions.

9. Compliance with Data Protection Laws

Throughout the background check process, it's crucial to adhere to data protection regulations, such as the FCRA. These laws require obtaining consent from candidates before conducting background checks and ensure the secure handling of personal data. Employers must also provide candidates with the opportunity to dispute any inaccuracies in their background check reports.

How Wisemonk Simplifies Background Checks

Wisemonk simplifies background checks through its comprehensive Employer of Record (EOR) services, making the process faster, more compliant, and cost-effective for businesses expanding or hiring remotely.

By handling critical HR functions like background verification, payroll management, and compliance, Wisemonk allows businesses to focus on growth. With local expertise in labor laws and tax regulations, Wisemonk ensures compliance at every step.

Offering competitive pricing starting at $19 per contractor and $99 per employee per month, Wisemonk provides a cost-effective alternative to setting up a local office.

Let Wisemonk simplify your hiring process, ensuring a smooth, efficient, and compliant experience as you build a trustworthy workforce. Contact us today to learn more.

Ready to hire confidently? Contact us today to discover how Wisemonk can assist you with background checks, compliance, and all your HR requirements.

FAQs

Q: Why are background checks necessary in the hiring process?
A: Background checks verify candidate information, ensuring they are qualified and trustworthy, which helps prevent costly hiring mistakes and protects your company's reputation.

Q: What components are included in a standard background check?
A: A standard background check includes identity verification, criminal records check, employment history, education verification, reference checks, and, if applicable, credit history checks.

Q: How does Wisemonk help with background checks for remote hiring?
A: Wisemonk provides EOR services that simplify the background check process by integrating it with other HR functions, ensuring compliance and efficiency for businesses hiring remotely.

Q: Are employers required to obtain consent before performing background checks?
A: Yes, under the Fair Credit Reporting Act (FCRA), employers must obtain explicit written consent from candidates before conducting any background checks.

Q: What are the risks of not conducting background checks?
A: Failing to conduct background checks can lead to hiring unqualified or unsafe candidates, damaging your company's reputation, and leading to potential legal and financial liabilities.