How to Do a Background Check

As a small business owner, you may feel like your company is one tight-knit group of employees. But just because it feels like a family, doesn't necessarily mean you should skip over the background check process when looking for new hires.

Elizabeth Milito, senior executive counsel for the National Federation of Independent Business, said conducting background checks is an essential measure toward protecting your own products and business.

"You want to ensure you get the best employees possible," Milito said. "It's important to verify credentials, past certifications, employment and references—maybe a driving record if necessary."

Here are Milito's tips for conducting a thorough, legally compliant background check.

No. 1: Be consistent. Every small business should have a consistent policy on background checks, Milito said. "Make sure you are running the same checks for everyone in the job category.

"You need to have the same verification of credentials for all the writers you hire, but for all janitors you might do something different because they may be driving or have access to sensitive areas in the business."

Leaving holes in your protocol could potentially give rise to a discrimination case, if it is found out you neglected to hire a candidate due to his or her background check, and there is not a standard in place for doing such checks equally.

No. 2: Consider outsourcing. Doing background checks can be a lot of work for small business owners to tackle on their own, Milito said.

"It's easier to outsource so you're not recreating the wheel every time," she said. "Use a refutable vendor that complies with the Fair Credit Reporting Act."

Small businesses are not exempt from compliance with the act, which requires they get a signed waiver from candidates before checking their credit report.

No. 3: Give employees notice before checking their references. Make sure you have a signed waiver from them before doing any employment, criminal or credit checks, Milito said.

"The benefit of that too, is that if employers know you have permission, a lot of times they will be more forthcoming with information," she said. "It can help with disclosure on the other end.

No.4: Confirm information is accurate. With identity theft being a common occurrence today, Milito said to check that the information you are receiving about their criminal and credit history is accurate.

"It is good practice to let them know if you take an adverse action, like not hiring someone because of a criminal background check." Ensure that if the potential hire has a bad credit background that it is actually them, and up-to-date, before jumping to conclusions, she said.

The NFIBconducted a Webinar called "Employment Background Checks: Best Practices and Risks," on Wednesday, May 11 at 12 p.m. eastern time. To view the Webinar, click here.