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Does It Make Sense to Outsource Reference and Background Checks?

One key element of hiring that is occasionally overlooked in discussions is the need for background and reference checks. A candidate can look very capable on paper and can pass an interview with flying colors, but if they’ve stretched the truth on their resume or if they left out any critical pieces of information, you don’t want to let them on your payroll. Checking with references ranges from a formality to an essential part of hiring, and a background check can reveal aspects of a candidate that can make or break their employment.

The question is, should you handle these checks in-house, or should you outsource them? The simple answer is outsourcing, and here’s why.

Faster Results

Outsourcing your background checks and pre-employment screening is almost always going to be a faster process than doing it in-house. To use an analogy, think of vehicle maintenance. Sure, you might be able to change your oil, but a trained mechanic has the tools and experience to do the same job faster, more reliably, and without taking up your own time.

When you outsource a process like background checks, you’re hiring a trained professional to handle what is typically both detail-oriented and complex work for you. You can spend your own time and resources pursuing other business objectives while getting background check results faster than if you had to put them together on your own.

Increased Accuracy

Performing a manual background check is surprisingly dangerous. There are hundreds of websites and small companies that promise to give you background check results for a fee – when the fees they charge are exorbitant and the information they give you is minimal. You end up needing to correlate information from multiple sources, many of which have their esoteric means of access.

A professional background check company can provide accuracy and attention to detail that you can’t on your own without specializing in the process yourself. You may not even know where to look for certain kinds of information, and if you do, you may not be able to access it. Katie Kulp from Chane Solutions writes:

“Without adequate infrastructure and expertise, many databases and records are unreachable, meaning that in-house screening efforts will often miss vital information.”


One of the biggest risks with modern hiring is the inherent bias in the hiring managers affecting the decision. Great pains are taken every day to minimize this bias, through anonymization in resumes to a machine-based analysis of skills and education through modern applicant tracking systems and more. Companies often need to push for diversity in hires, and as such, they need to minimize the potential for discrimination in hiring.

Background checks are an important part of hiring, but they can reveal sensitive information about a candidate that may lead to discriminatory decision-making.

Whether it’s a detail about their past, about past conduct, or a protected feature of their lifestyle, that information can be revealed whether you’re looking for it or not, and could potentially become the basis of a discrimination suit should the decision be made to reject a candidate based on that information.

Outsourcing a background screening helps remove this risk by processing and presenting data in a safe and non-discriminatory manner. You can’t make a decision based on the information you don’t have, and a background screening company knows what they should and shouldn’t put in their report.

This also minimizes the risk that a new hire is treated differently by someone who knows information about them that they shouldn’t.


Local, state, and federal regulations all apply to govern what a company can and can’t look for in background checks. Even something as simple as past salary history can be protected information in some locations. Knowing and navigating these legalities is difficult even for small businesses; large companies that operate in multiple states or multiple countries have it even harder.

Outsourcing your background checks to a dedicated screening company has the added benefit of offloading compliance to that company. You trust them to know what they’re doing and insulate your business from backlash if regulation is violated.

Company Protection

An extension of the two previous points, outsourcing something as sensitive as a background check helps protect your company from any issues that arise as part of the hiring process. This is not to say that you can’t make bad decisions or violate regulations when you outsource background checks, of course. It simply makes it more difficult to violate regulations on your own.

“Some studies predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average.”

With the steep cost of a failed hire at stake, outsourcing a background check is likely to be much more valuable than the alternative.

Additionally, by discovering hidden facts about a candidate that invalidate their candidacy, you can protect your company from the fallout of a bad hire.

This could be anything from working with someone who has a known bad reputation, to hiring someone who has been convicted of intellectual property theft, to hiring someone who is simply lying about their skills.

Lower Cost

Usually, one of the biggest benefits of performing a task in-house over outsourcing is the chance to save money by investing time and personal skills. With background checks, unless your in-house team has access to high-level resources and experience, this won’t be the case.

The fact is, all too many resources, from federal court records databases to county-level criminal databases to personal information databases, are restricted in access.

Authorized representatives of screening agencies or private investigators need to prove their identities and credentials, as well as pay a fee to access these databases.

Agencies can handle this with no problem because of the volume they use those databases, but smaller companies that only hire a few employees at a time may find it dramatically more expensive on a per-employee basis.

Hiring Peace of Mind

Unless your in-house team is very experienced with background checks, chances are pretty good that you might miss something. There are too many details spread throughout too many resources to be able to casually step in and find them all for a thorough background check. This leaves you with niggling doubt and lingering potential for regret, in case you missed something important by not doing your due diligence.

Contracting with a background screening company eliminates this problem. The screening company will have a thorough process and a checklist they can go through to ensure that they check every box and dot every I in their screening. You can rest assured that they are far less likely to make a mistake and miss a critical piece of information than you would be trying to DIY the screening process.

Information Access and Continuity

Many background screening companies offer data APIs or formatted reports designed in such a way that they can plug directly into your applicant tracking system. This allows you to keep all of the relevant information about a candidate in one place. In addition to ensuring ease of access, this also ensures data security; the background check report cannot be accessed by anyone who does not have access to the ATS itself, limiting liability.

The ability to use a simple API rather than paperwork and disjointed systems also can smooth out and speed up the process. A background screening company can simply submit its report to your company system rather than having to process it through your HR team.

“Background screening providers can offer an automated turnkey solution, where human resources professionals can access the information they need quickly and easily. Results can be returned much quicker than some in-house checks.”

Employee Comfort

Another benefit of using a third-party background screening company is the comfort and peace of mind of the employee you hire. A point we mentioned above was that, if you learn something that changes your personal views of a candidate, even if you still hire them, it can affect how you treat them. It’s possible that the information was hidden for a reason, and the employee doesn’t feel comfortable revealing it, specifically to avoid that kind of treatment.

Employees are legally allowed to request the results of the background check performed on them and can determine for themselves whether or not sensitive information has been revealed. This gives them peace of mind to know that the background check results are correct and accurate and that they don’t reveal information that they shouldn’t.

Reasons Not to Outsource

The fact is, trying to complete a background check using an in-house team is very rarely a good idea. For some of the largest companies in the world, it might be a duty relegated to the legal team, in conjunction with the HR team. For most small and mid-sized businesses, as well as most large businesses, it simply doesn’t make sense.

There are (despite all of the above) a couple of small reasons why you might consider in-house background checks instead of an outsourced company.

You’re more familiar with what matters to your company. In particular, when speaking with references, it can be worthwhile to discuss a candidate with them personally than it is to outsource it. You may be more familiar with the specific concerns that you have about the candidate, and what questions you need answered when you talk to a reference.

The downside to this is the ever-present risk of asking questions as part of a conversation that reveals protected information. While a reference might accidentally volunteer information they shouldn’t, you can’t use that information in a decision, and you especially can’t ask for it. A screening company can simply exclude that information from the report they give you; you can’t un-learn the information itself.

You may be able to perform the background check at a lower cost. The cost was listed above as one of the benefits of outsourcing, and that fact remains true. However, it’s possible that you may be able to complete a background check for a lower cost than outsourcing the screening to a company. The situation needs to be just right for it to happen, however. You need to have access to databases you can use to complete the check, and you need to have a process established for what to check and where.

It’s also likely that you need to otherwise be contracting a higher end company; finding a different company might be cheaper in the long run, as long as you aren’t sacrificing the quality of your results.

Wrapping Up

There are too many benefits to outsourcing a background screening to ignore. Peace of mind for both you and your employee, access to only the data that is allowable and legal to request, and the ability to make an unbiased decision are all crucial benefits of outsourcing. Even the few possible benefits of doing your screening in-house are generally not that beneficial.

Keeping your company insulated from liability and the threat of discrimination suits and other issues alone is often enough to convince business owners to outsource. Even if you’re relatively confident in your ability to only look up relevant information, be certain that the information is correct and accurate, and make an unbiased decision based on that information, it’s still better to not have to worry about all of that yourself.

Rather than asking whether or not it makes sense to hire a company to handle screening for you, you should ask yourself what you should look for in a screening company. Specifically, you should look for details such as:

  1. Background check companies need to be FCRA compliant for their information to be legally allowable in hiring decisions.

  2. A background check should run between $30 for a basic screener and $100 for a comprehensive and detailed check.

  3. Some screening companies specialize in specific industries that may have unique concerns; find one that fits your industry.

Regardless of your concerns, you can certainly find a company that meets them.

Do you have any questions for us about screening candidates with reference checks and background checks? Please let us know in the comments section below!

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