Are Background Checks Necessary for Small Businesses?
Short answer (if you listen to anything we have to say regularly, this answer will not surprise you one bit:
It depends.
Background checks can feel like a corporate-level task, something massive companies with entire HR departments handle. But small businesses often face even greater risks when making a bad hire—one wrong move can ripple through a small team in ways big companies might not notice. So, are they necessary? The answer isn’t one-size-fits-all. Let’s explore when they make sense, how to use them responsibly, and why compliance matters.
When Are Background Checks Necessary?
Background checks aren’t legally required for most small businesses, but they can be a smart step depending on the role and risks involved.
Consider a background check if:
The role involves high trust or sensitive information, such as positions handling finances, confidential client data, or proprietary information.
There’s safety on the line, particularly in roles where employees interact with vulnerable populations (like children or elderly clients) or operate heavy machinery.
Your industry demands it, as certain industries like healthcare or education may have regulatory requirements for employee screenings.
For lower-risk roles, such as an entry-level retail associate or administrative assistant, a background check might not be as critical. That said, it could still provide peace of mind—just make sure it’s necessary and fair.
If You Do Background Checks, Do Them Right
Conducting background checks isn’t as simple as calling someone’s old boss or Googling their name. There are laws and best practices you need to follow to avoid trouble for your business or unintentionally violating someone’s rights.
Here’s how to do them compliantly and fairly:
Follow the Fair Credit Reporting Act (FCRA):
Notify candidates in writing that a background check is part of your hiring process.
Get their written consent before proceeding.
Provide a copy of the report and a summary of their rights if you decide not to hire them based on the results.
Be Consistent:
Apply the same process to all candidates for a specific role. For example, if you’re checking the criminal history of one applicant, check it for all applicants for the same position. Inconsistency can lead to claims of discrimination.
Focus on Role-Relevant Information:
Only look at information directly related to the job. A credit check might make sense for a CFO but would be unnecessary for a barista.
Know State and Local Laws:
Some states have “ban the box” laws, which limit when and how you can ask about criminal history. Others restrict credit checks. Research your area’s requirements to stay compliant.
Use a Reputable Background Check Service:
Avoid DIY searches that could return inaccurate or incomplete information. Professional services ensure you’re getting reliable data and adhering to legal guidelines.
Why Fairness Matters
Background checks can provide valuable insights, but they shouldn’t be a barrier to opportunity. A misstep years ago doesn’t necessarily mean someone can’t excel in the role you’re hiring for.
Keep these fairness principles in mind:
Evaluate context: A single misdemeanor from a decade ago might not be relevant to the job. Focus on patterns and severity, not one-off incidents.
Communicate openly: If something in the report concerns you, talk to the candidate before making a decision. They may have a reasonable explanation or proof of rehabilitation.
Don’t over-rely on them: Background checks are just one part of the hiring process. Weigh them alongside interviews, skills tests, and references.
By approaching background checks with fairness and transparency, you can avoid eliminating great candidates while still protecting your business.
When to Skip Background Checks
Not every role requires a deep dive into someone’s history. For smaller, lower-risk roles, you might be better off focusing on a strong interview process, skills assessment, and reference checks. These steps are often enough to ensure you’re bringing the right person onto your team.
If you’re tight on resources or the position doesn’t involve sensitive responsibilities, skipping the background check could save time and money. Just be clear about the risks you’re comfortable taking.
The Bottom Line
Background checks aren’t always necessary, but when used thoughtfully, they can help you make smarter hiring decisions and safeguard your business. The key is knowing when to use them, staying compliant with regulations, and approaching the process with fairness and consistency.
If you’re unsure about how to navigate background checks—or whether they’re right for your business—Peopleish can help. From creating a compliant hiring process to building role-specific strategies, we’re here to guide you every step of the way. Let’s find the balance between protecting your business and giving candidates a fair shot.
