4 Hidden Costs In Your Background Checks (And What They Mean)
On the surface, this seems like an easy question. Simply look up your total screening service bills for the time in question.
If that's the end of your accounting, though, you'll likely miss hidden costs that add up to real organizational impact.
1. Extra Fees
To start your hunt, compare your actual spend per background check with the original proposal from your screening provider.
This step will reveal any unexpected fees as well as any "off-contract" ordering.
Fees for specific services should appear in the services agreement you sign with a background check provider. These listed fees likely include itemized searches (criminal background checks, motor vehicle records checks, and employment verification, and so on).
Extra fees often arise from county-level court searches. These searches typically return the most accurate and up-to-date results. But many counties charge a fee to access this data, which may get passed through to you or incorporated into the package price.
Background screening providers that offer transparent pricing should explain these fees upfront. Of course, you won't know in advance how many of your candidates live in counties with data-access fees, so expect some variation in your bills.
Red flags to look for, though, include unexpected charges. One GoodHire customer told of a previous background screening vendor that ran (and billed) county-level searches any time a national database search returned a criminal record.
It may make sense to take that extra step. But the vendor ran the searches for any hit returned, no matter how minor. And it happened without the customer realizing it – until he reviewed his bills and saw fees as high as $400 per check (for searching multiple expensive New York counties).
The takeaway: Analyze extra charges on your employment screening bills. They may signal it's time to revisit your pricing plan – or to look for a new vendor.
2. Off-Contract Ordering
Comparing the screening you actually ran to what you expected to run can offer insights beyond your vendor relationship. It may reveal a need for education among your own team.
If the number of searches you expected to run differs from those you actually ran, you might simply have hired fewer people than expected.
But, if you’re running different kinds of checks than you expected to run, your team members may need training on your screening policies.
The hidden figure to consider here isn't added cost – in fact, team members could choose less expensive checks than you planned.
But those surface-level saving could open up an expensive risk: charges of discrimination or negligence.
Your screening policy may specify drug testing on every candidate who applies for a certain role, for example. If your team doesn't apply that policy consistently, candidates could claim they were singled out based on gender, race, or another protected characteristic.
Now consider what could happen if a team member failed to run a drug test on a candidate hired for a role where your policy required one. If that person contributed to an injury (the employee's own, a customer's or another staff member's), your company could face negligent hiring claims. And, if regulations in your industry dictate that drug test, you could face compliance penalties.
The takeaway: Compare the services you actually used against what you expected to use to make sure your team applies your employment screening policy consistently.
3. Time Spent
How many hours do you and your team spend running background checks?
Consider the time you spend:
- Selecting which check to run
- Entering candidate details
- Explaining the process and answering candidate questions
- Checking for results and following up on delays
- Deciphering results when candidates have a criminal record and taking mandated steps such as preparing and documenting:
- Pre-adverse action notices
- Individualized assessment
- Final adverse action (if you decide not to hire)
Do you know how much this time spent screening your candidates costs?
Let's say your team's pay averages $50/hour, they spend two hours per background check, and you hire 100 candidates a year. Your formula would look like this:
$50 [salary per hour] x 2 [hours spent per candidate] x 100 [number of candidates screened] = $10,000 [cost of time spent on screening]
The takeaway: Add the cost of your time spent to the price of the background checks run during the same period. You may find you could save money by switching to a vendor that does the work for you, even if the per-background check cost is similar.
4. Opportunity Costs and Hiring Expenses
Anyone who has lost a candidate at the job-offer stage knows how frustrating that experience can be. You've spent time and money to attract and woo the candidate, only to have your hopes dashed at the last minute.
But the impact goes beyond frustration. A recent article in Entrepreneur claims a bad hiring process may be "killing your company."
That's not necessarily your fault.
Let's say you're following best practices: making a good first impression, building a relationship, and streamlining the hiring process. Still, you find you're losing your the best candidates far too often.
Is a bad background check pushing candidates away?
To find out if your screening process could be a factor, ask your team members and hiring managers these questions:
- Do you field complaints and frequent candidate questions about the employment screening process?
- Do you get frequent complaints about unexplained delays
- Have you lost a candidate while waiting for a delayed background check?
Other places to look for mentions of a bad background check experience:
- Glassdoor interview reviews from candidates
- Your background check provider's reviews (check SHRM, Consumer Affairs, Better Business Bureau, etc.)
Getting negative feedback about screening but positive feedback about the rest of your hiring process should tell you it's time to make a change.
If you need to quantify the associated costs to justify a switch, try this.
SHRM puts the average cost associated with filling a position at $4,129 and average time-to-fill at 42 days. If you've established that your screening process is costing you candidates, add any overage to the cost of that screening program.
Then figure out the opportunity cost of any hiring delays you attribute to the employment screening process.
To estimate opportunity costs:
- Make a list of job reqs where you suspect the background check process caused you to lose a candidate.
- Figure out how many extra days you spent to fill that position.
- Consider the impact of not filling that position (average amount of sales a salesperson might have brought in or the cost of project delays from the unfilled position).
The takeaway: If a bad background check process is raising your hiring and opportunity costs, look for a vendor that cares as much about the candidate experience as you do.
Consider Both Background Screening Costs And Value
When it comes to employment background checks, costs alone can't determine the value.
After all, companies run background checks for important reasons. They help manage risks to employees, customers, and brand reputation. And, in some fields, they're required.
The value of protecting people and your future business may be priceless, but employment screening costs real dollars.
To make sure you're getting the best deal, just make sure you look beyond the list price.