Employers spent about $4.5 billion in 2024 on background checks, and for good reason. Investing in hiring, training, and retaining employees is expensive, and bad hires only make things worse. Spending a nominal amount on an employee criminal background check, educational check, and prior employment check can significantly reduce your risk.
So, what does an employee background check consist of? Here’s what you need to know.
Why Background Checks Matter More Than Ever
Beyond the financial loss from a bad hire, you can jeopardize company culture, client relationships, and even public safety in certain industries. For businesses in finance, healthcare, or logistics, a single lapse in hiring judgment can lead to regulatory violations or reputational damage.
People aren’t always completely honest when they fill out a job application. They may hide previous employers, exaggerate their skills, or outright lie about their education. You need an independent way to verify what they tell you and look for warning signs.
What Does an Employee Background Check Consistent of? Key Components
While your screening may be different from that of other organizations, here are the typical components that make up an employee background check.
Identity Verification
Make sure you’re dealing with the person you think they are. False social security numbers, name switches, and fake IDs are more common than you might think. You’ll want to gather this information on your application, but checking it is crucial. If the identity isn’t accurate, the rest of the data is unreliable.
Identity verification helps prevent fraud and ensures you're evaluating the right individual, especially when multiple people share the same or similar names.
Employment Verification
Employment verification confirms the accuracy of previous job titles, dates of employment, and sometimes salary or job responsibilities. Employers typically contact the HR departments of former employers, not just personal references, to avoid biased or inflated feedback.
Educational Verification
Education verification ensures that an applicant has earned the certifications or degrees listed on their resume. This step is particularly important in roles that require specialized training, licensing, or academic knowledge.
Employee Criminal Background Check
Criminal convictions are also more common than you might know. According to the Sentencing Project, nearly one in three Americans has some kind of criminal record. An employee criminal background check will uncover criminal records at the county, state, and federal levels. Depending on the position, the check might include misdemeanor and felony convictions, pending cases, or arrest history.
This step is especially important in roles involving vulnerable populations, financial access, or public safety. However, it’s essential to follow proper procedures and apply job-related standards. Blanket bans on hiring individuals with criminal records may violate Equal Employment Opportunity Commission (EEOC) guidelines.
Credit History Check (When Applicable)
Credit checks are typically reserved for roles involving financial responsibility, like accounting, purchasing, or executive-level positions. A credit report can reveal issues such as excessive debt, bankruptcies, or a pattern of late payments, which might signal financial stress or risk.
However, employers must get written consent before initiating a credit history check. Using this information without proper authorization can result in legal and financial consequences.
Driving Record Check (MVR)
For roles that require the operation of a company vehicle or frequent travel, reviewing an applicant’s driving history is a good idea. This check may include license status, past suspensions, DUIs, accidents, and moving violations.
In regulated industries like logistics and transportation, this check also helps you stay compliant with Department of Transportation (DOT) standards.
Civil Litigation and Bankruptcy Records
Some background checks include a search of civil court records, especially for senior leadership or financial roles.
Lawsuits related to fraud, embezzlement, or ethical misconduct may raise red flags. Bankruptcy filings can also indicate financial instability, which could be relevant depending on the position’s responsibilities.
These checks are less common for entry-level positions but are often used when trust and fiduciary duty are central to the job.
What Employers Must Know About Compliance
Before running any check, especially credit or criminal reports, employers must comply with the Fair Credit Reporting Act (FCRA). This federal law requires:
- Written consent from the applicant.
- Clear disclosure that a background check will be conducted
- A formal process if adverse action is taken based on the report, including providing a copy of the report and a summary of rights
Get Fast, Affordable Employee Background Checks
So, what does an employee background check consist of? At its core, it includes identity verification, employment and education checks, a thorough employee criminal background check, and often, financial and driving history.
Make smarter hiring decisions today. Partner with Command Credit for fast, affordable, and fully compliant background screening solutions for your business.