Background Screening: In-House Verifications vs. Third-Party Screenings – A Guide for HR Teams

Hiring the right candidate is one of the most critical responsibilities for HR teams. A key part of this process is background screening, which verifies a candidate’s credentials, criminal history, and overall suitability for a role. However, HR teams face a pivotal decision: should they conduct background checks in-house or outsource them to a third-party screening provider? Each approach has its own processes, benefits, and challenges, and choosing the right model can significantly impact efficiency, compliance, and hiring outcomes.

This blog explores the differences between in-house verifications and third-party screenings, comparing their pros, cons, and processes. Our goal is to equip HR teams with the insights needed to make an informed decision about which service model best aligns with their organization’s needs. For additional information, we reference insights inspired by industry practices, including those outlined by Reference Services, Inc. (www.referenceservices.com).

 

What is Background Screening?

Background screening is the process of verifying a candidate’s personal and professional information to ensure they are qualified and trustworthy. Common components include:

  • Criminal history checks: Reviewing local, state, federal, or international records for convictions or pending cases.
  • Employment verification: Confirming past job roles, dates, and responsibilities.
  • Education verification: Validating degrees, certifications, or credentials.
  • Credit checks: Assessing financial history for roles involving fiscal responsibility.
  • Driving records: Checking motor vehicle records for positions requiring driving.
  • Reference checks: Contacting past employers or colleagues to gauge work ethic and performance.

The Fair Credit Reporting Act (FCRA) and other regulations, such as the Equal Employment Opportunity Commission (EEOC) guidelines, govern how these checks must be conducted to ensure fairness, accuracy, and privacy. HR teams must decide whether to handle this complex process internally or partner with a third-party provider.

 

In-House Verifications: Processes and Considerations

How In-House Screening Works

In-house background screening involves an organization’s HR team or a dedicated internal department managing the entire process. The steps typically include:

  1. Obtaining Consent: HR collects written authorization from the candidate, as required by the FCRA, along with personal details like name, date of birth, Social Security Number, and past addresses.
  2. Data Collection: HR manually verifies information by contacting schools, previous employers, or courts. This may involve phone calls, emails, or accessing public records databases.
  3. Criminal Record Checks: HR searches county, state, or federal databases for criminal history, often requiring coordination with multiple jurisdictions.
  4. Verification and Reporting: HR compiles findings into a report, ensuring accuracy and compliance with legal standards.
  5. Adverse Action Process: If a candidate is disqualified based on the report, HR must follow FCRA protocols, including providing a pre-adverse action notice, a copy of the report, and an opportunity to dispute inaccuracies.

 

Pros of In-House Verifications

  1. Control Over the Process: HR teams have full oversight, allowing them to tailor screenings to specific roles and organizational needs. For example, they can prioritize certain checks (e.g., education verification for academic roles) or adjust the depth of investigation.
  2. Cost Savings for Small Volumes: For organizations with low hiring volumes, in-house screening may avoid the per-report fees charged by third-party providers. Internal staff can handle checks using existing resources.
  3. Direct Candidate Interaction: HR can communicate directly with candidates, building trust and addressing concerns during the screening process.
  4. Data Security: Keeping sensitive candidate information in-house may reduce the risk of data breaches associated with sharing data externally, provided robust internal security measures are in place.

 

Cons of In-House Verifications

  1. Time-Intensive: Verifying credentials, contacting multiple sources, and navigating court systems can be labor-intensive, diverting HR resources from other priorities. Screening timelines can range from days to weeks, depending on the complexity.
  2. Compliance Risks: The FCRA, EEOC guidelines, and state-specific laws (e.g., “ban the box” ordinances) impose strict requirements. Without expertise, HR teams may inadvertently violate regulations, risking legal penalties or lawsuits.
  3. Limited Resources: In-house teams may lack access to comprehensive databases or international records, leading to incomplete or inaccurate reports. For example, verifying a candidate’s overseas employment history can be challenging without specialized tools.
  4. Scalability Challenges: As hiring volumes increase, in-house screening becomes less feasible. Managing dozens or hundreds of checks simultaneously can overwhelm small HR teams, leading to delays or errors.

 

Best Fit for In-House Screening

In-house verifications are ideal for organizations with low hiring volumes or simple screening needs. For example, a nonprofit verifying volunteer credentials may prefer in-house checks to maintain control and minimize costs. However, these organizations must invest in training to ensure compliance and efficiency.

 

Third-Party Screenings: Processes and Considerations

How Third-Party Screening Works

Third-party screening involves outsourcing background checks to a professional Consumer Reporting Agency (CRA) like Reference Services, Inc. The process typically includes:

  1. Partnership Setup: The employer selects a CRA and integrates their services into the hiring workflow, often through an Applicant Tracking System (ATS).
  2. Candidate Consent: The employer collects candidate authorization electronically through a secure portal, which the CRA uses to initiate checks.
  3. Data Collection and Verification: The CRA accesses extensive databases and networks to verify criminal records, employment history, education, and other relevant data. For example, Reference Services, Inc. searches over 2,200 data sources containing 1.2 billion records for comprehensive criminal checks.
  4. Report Delivery: The CRA compiles a detailed, FCRA-compliant report, often within 12–48 hours, depending on the provider’s efficiency.
  5. Dispute and Adverse Action Support: If discrepancies arise, the CRA handles disputes and guides employers through the adverse action process, ensuring compliance.

 

Pros of Third-Party Screenings

  1. Efficiency and Speed: CRAs leverage advanced technology and extensive networks to deliver results quickly. For instance, Reference Services, Inc. boasts a low dispute rate due to rigorous data verification, reducing delays.
  2. Expertise and Compliance: Third-party providers specialize in navigating complex regulations like the FCRA, GDPR, and state laws. They ensure proper consent, accurate reporting, and adherence to anti-discrimination guidelines, minimizing legal risks.
  3. Comprehensive Data Access: CRAs have access to national and international databases, enabling thorough checks that in-house teams may struggle to replicate. This is critical for roles requiring global background verification.
  4. Scalability: Third-party providers can handle high-volume screening for large organizations or seasonal hiring surges, streamlining workflows and reducing HR burden.
  5. Cost-Effectiveness for Large Volumes: While per-report fees apply, the time and resource savings often outweigh costs for organizations with frequent hiring needs.

 

Cons of Third-Party Screenings

  1. Cost: Third-party services charge per report, which can add up for organizations with high hiring volumes. Pricing varies based on the depth of checks, however, volume discounts by the CRA can be very attractive.
  2. Less Control: Employers rely on the CRA’s processes and may have limited ability to customize checks for niche roles. Clear communication with the provider is essential to align expectations.
  3. Data Security Concerns: Sharing candidate information with a third party introduces potential risks, though reputable CRAs use advanced encryption and comply with data protection laws.
  4. Dependency on Provider: If a CRA delivers inaccurate reports or experiences delays, it can disrupt hiring. HR teams must carefully vet providers for reliability and accuracy. Look for Professional Background Screening Association Accredited members, like Reference Service, Inc.

 

Best Fit for Third-Party Screening

Third-party screenings are well-suited for all size organizations, especially those with complex or high-volume hiring needs, or industries requiring specialized checks (e.g., healthcare, transportation). Companies lacking in-house expertise or resources to ensure compliance also benefit from outsourcing.

 

Key Considerations for HR Teams

To choose between in-house and third-party screening, HR teams should evaluate the following factors:

  1. Hiring Volume and Frequency:
    1. Low-volume hiring (e.g., 1–5 hires per year) may justify in-house screening to save on fees.
    2. High-volume or seasonal hiring benefits from third-party efficiency and scalability.
  2. Compliance Needs:
    1. Organizations in regulated industries (e.g., healthcare, finance) or those operating across multiple states should prioritize third-party providers with proven FCRA and GDPR compliance.
    2. In-house teams must invest in ongoing training to stay current with legal changes.
  3. Budget Constraints:
    1. Small businesses with limited budgets may prefer in-house screening but should weigh the hidden costs of time and potential legal risks.
    2. Larger organizations often find third-party services more cost-effective due to economies of scale.
  4. Complexity of Checks:
    1. Simple checks (e.g., local criminal records) may be manageable in-house but have elevated risk factors.
    2. Complex checks (e.g., international verifications, professional licenses) require third-party expertise and resources.
  5. Candidate Experience:
    1. Third-party providers often offer mobile-optimized portals and clear communication, enhancing the candidate’s experience.
    2. In-house processes may feel more personal but can be slower, potentially frustrating candidates.
  6. Technology Integration:
    1. Third-party providers like Reference Services, Inc. integrate with ATS platforms, streamlining workflows.
    2. In-house screening may require manual data entry, increasing the risk of errors.

Best Practices for Choosing a Screening Model

Regardless of the model, HR teams can optimize their background screening process with these strategies:

  1. Conduct a Needs Assessment:
    1. Identify the types of checks required for each role (e.g., criminal, education, credit).
    2. Estimate annual screening volume to compare costs and scalability.
  2. Vet Third-Party Providers:
    1. Choose a CRA with Professional Background Screening Association (PBSA) accreditation, like Reference Services, Inc., for guaranteed compliance and reliability.
    2. Ask about turnaround times, database access, and ATS integration capabilities.
  3. Train In-House Teams:
    1. If opting for in-house screening, ensure HR staff are trained in FCRA requirements, adverse action processes, and data security.
    2. Use reliable public records databases to supplement manual checks.
  4. Prioritize Compliance:
    1. Ensure all screenings follow FCRA, EEOC, and state-specific guidelines to avoid legal risks.
    2. Maintain clear documentation of candidate consent and adverse action notices.
  5. Enhance Candidate Communication:
    1. Inform candidates about the screening process upfront to set expectations.
    2. Provide a point of contact for questions or disputes, whether in-house or through a CRA.
  6. Audit and Refine Processes:
    1. Regularly review screening outcomes to identify inefficiencies or inaccuracies.
    2. For third-party services, evaluate the provider’s performance annually to ensure alignment with hiring goals.

Case Study: A Real-World Perspective

Consider a mid-sized healthcare organization hiring 50 nurses annually. Initially, the HR team conducted in-house screenings, manually verifying licenses, education, and criminal records. However, the process took 7–10 days per candidate, delaying onboarding and straining resources. Compliance errors led to a costly FCRA violation when a candidate disputed an inaccurate report.

Switching to a third-party provider like Reference Services, Inc., the organization integrated screenings with their ATS, reducing turnaround time to 24–48 hours. The CRA’s access to national and international databases ensured thorough checks, while built-in compliance tools eliminated legal risks. The per-report fees were offset by reduced HR labor costs, and the streamlined process improved candidate satisfaction.

 

Conclusion: Making the Right Choice for Your HR Team

Deciding between in-house verifications and third-party screenings requires balancing control, cost, compliance, and efficiency. In-house screening offers flexibility and potential cost savings for small organizations with simple needs but demands significant time and expertise to manage compliance risks. Third-party screenings, exemplified by providers like Reference Services, Inc., deliver speed, scalability, and regulatory assurance, making them ideal for larger organizations or those with complex requirements.

HR teams should assess their hiring volume, budget, and compliance needs to determine the best fit. Small businesses may start with in-house checks and transition to third-party services as they grow, while larger organizations benefit from outsourcing to focus on strategic priorities. Whichever model you choose, prioritize clear communication with candidates, robust compliance measures, and regular process audits to ensure effective hiring outcomes.

 

For more information on background screening solutions, visit www.referenceservices.com to explore how professional services can enhance your hiring process. By making an informed decision, HR teams can build a safer, more reliable workforce while minimizing risks and maximizing efficiency.

Ready to enhance your hiring process? Contact us today to design a screening program tailored to your needs.