June 28th, 2019 | David Bloom, General Manager, Sterling Gig, Volunteer, and Consumer

The Case & Norm for Employee Background Checks for Small Businesses

This article originally appeared in the Paycor Resource Center.

Hiring is tough, and you may feel the pressure to move fast—whether to win a candidate before someone else does, because you desperately need the role filled, or simply because you need to get back to running your business. It can be tempting to trust your gut and skip a more thorough hiring process. But each employee represents a piece of your growing brand, and the results could affect the company for the long run. It’s worth doing things right.


Zappos CEO Tony Hsieh told Business Insider that as he reflected on the company, the biggest category of mistakes was in hiring: “If you add up the cost of our bad hires, and the bad decisions they made—and then, they in turn hire more bad hires—this whole domino effect over the past eleven years, it’s probably cost the company well over $100 million.”

For smaller businesses, there’s just no room to put that kind of money on the line.

We know that replacing a bad hire takes time and drains energy. Bad hires cost money in bad decisions—and in more extreme cases, in theft or lawsuits incurred. However, no risk is greater than that to brand, the one thing you truly can’t replace. As Warren Buffett famously said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

All of us can think of brand scandals in the news generated by HR issues. Some companies have been able to come back from them eventually, but it is a very tough row to hoe. That process can be even tougher for a small company. As if these obstacles are not enough, it can also be hard for customers to disassociate problems from the rest of the company in a smaller operation. One bad hire can have a disproportionately devastating effect.


When you consider these risks, it becomes clear that due diligence in your hiring is worth every penny. This starts with asking the right questions and vetting each candidate carefully, and includes investing in a high-quality background check.

What once felt like a formality is becoming a standard across industries. “Background screening wasn’t common in our industry 20 years ago,” said Greg, a manager at a boutique architecture and design firm. “Now I’d say about half our clients ask about it.”

And for good reason: In a 2016 survey, 8 in 10 companies reported that background checks helped them uncover information they wouldn’t have found otherwise. It might sound like a simple yes or no question of criminal history, but background screens offer so much more. Do you need to verify employment history? What about motor vehicle records for your new drivers? The information needed to establish trust and suitability for the job is different from business to business, and even role to role.


Starting a background check might sound intimidating, especially for companies without a robust HR department (or an HR department at all). That’s why today’s providers are adapting the way they work to make screening more accessible to small businesses.

With the right background screening provider, the process is simplified. Fortunately, it doesn’t have to be expensive or complicated.

Insist on compliance. Thanks to the Fair Credit Reporting Act (FCRA) and various state and local laws, candidates and employers have protections in place to ensure fair treatment. Look for companies that build compliance elements right into their tools. Regulations vary by state (or even city) and by industry, so it’s worth finding a company that excels in compliance.

Make it thorough. Some background checks simply search a national online criminal database, but perhaps surprisingly, that doesn’t tell the full story. There are jurisdictions or even states that don’t contribute criminal records to national databases at all. It’s important that your provider offers searches of primary sources—typically county-level criminal court records—as well as searching the most authoritative sex offender registry database, operated through the U.S. Department of Justice National Sex Offender Public Website. Diane, an HR director in Seattle, considers the liability in the hiring process if you do a shoddy background check. “If it’s not thorough, you are still liable. You have to ask yourself: how much risk do I want to absorb?”

Find transparency and flexibility. On a provider’s web site, you should see exactly what the search entails, as well as options for add-on features. Look for clear pricing on the website and be wary of costly setup fees.

Skip the sales funnel. Modern screeners have self-service systems, allowing customers to get started right away—or whenever they choose—with no long sales calls or phone tag.

Solid background screening doesn’t need to be arduous or expensive. And it’s worth every second and penny it takes. You’ve worked hard to build your business and establish trust with your customers—there is no need to risk it all with a bad hire.

David Bloom is General Manager of the Gig, Volunteer, and Consumer groups at Sterling. David was included in Entrepreneur Magazine’s Brilliant 100 and on Business Insider’s list of 100 most interesting people in the NYC tech scene. His team launched the self-service SterlingNOW. SterlingNOW offers the same Sterling quality trusted by Fortune 500 companies, now tailored to the needs of smaller businesses. Business.com named it Best Background Check Company for Self-Service in their 2020 lineup—learn more.

Looking for an easy-to-use background check solution designed for small businesses? Check out SterlingNOW or get in touch with our SMB experts here.

Sterling is not a law firm. This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.