HR Budgeting: How to Plan for Background Check Costs
HR budgeting helps you commit organizational resources to a range of workforce activities. When you plan your spending for background check activities, you want to budget enough to effectively manage hiring risk without taking resources away from other core HR programs.
Although 94 percent of employers conduct background checks, cost remains a top challenge for many, according to a 2020 report by HR.com and the Professional Background Screening Associate (PBSA). To get the most value from your investment, here are some tips to help you reach the right figure for your background check budget.
Consider Your Needs for the Coming Year
Before you begin the HR budgeting process, it’s important to think about your hiring plans and how other workforce planning activities will impact the scope and size of your background check program. More hires typically equates to more background checks, but the size of your background check budget will depend not just on how many hires you make, but also the type of hires you make. Any of the following activities could impact how much you need to budget for background checks:
- Merger or acquisition: A merger or acquisition can result in changes to the types of background checks you perform, so you may want to budget for a review of background check policies in all business entities.
- Company expansion or downsizing: More or fewer hires will result in a higher or lower volume of background checks.
- Recruitment in new job categories: A change in the job types you hire may impact the type of background check products you use. For example, if you will be hiring licensed individuals for the first time, you may need to add license verifications to your existing background screening program.
Evaluate Your Current Background Check Process
Each new year offers an opportunity for a reset of your HR budget. What you budgeted for background screening in previous years won’t necessarily equate to a budget number for the coming year, so you’ll need to start with a clean slate.
When you take steps to evaluate your current background check process, you may find there are aspects of your existing program you want to change. If so, those changes will affect your budget. For example, if your current process relies on HR resources to conduct employment verifications and reference interviews, it could be costing you more than having your background check company do them. Your costs can include:
- Time: The time you spend on verifications and references is time taken from other activities.
- Compliance risk: You could be increasing the hiring risk to your organization if your HR staff isn’t conducting verifications in compliance with federal and state law, for example, salary bans.
- Wasted background check fees: You may still be paying a background screening company to perform aspects of the background check your HR team is handling.
Focus on the Total Cost (and Benefits) of Ownership
Instead of thinking about background screening as a single line-item in your annual HR budget, consider the value you get from background checks over time. While it may be tempting to view background checks as a lump-sum fee, your total investment covers more than the cost of background check reports for new hires.
When you invest in the development of a comprehensive background check program, you also receive the following:
- A clearer picture of the people you hire
- Integrated technology to make the hiring process more efficient
- Guidance from a partner who is dedicated to helping you maintain compliance with hiring laws and industry best practices
Thorough background screening can also help your organization save time and money. A compliant background screening program saves dollars you might otherwise spend on fines or penalties for non-compliance. A compliant program also helps you avoid poor audit findings, for example, during a Joint Commission compliance review.
Understand Hidden Fees
When setting your background check budget, you’ll need to know the potential charges you could experience during the year, including fees for extra services. Some background check companies offer a low package price upfront, but then add on hidden fees later. For example, many companies quote fees for educational and employment verifications based on the industry standard of three contact attempts. Then, they will bill you if they have to make more than three attempts, causing you to pay more than anticipated for verifications. Some companies may also charge extra fees for clarifying vague or inconclusive background check results, which drives up costs further.
To make your background check budget more predictable, you need to understand your total costs, not just the upfront fees quoted by companies to gain your business. When you work with a reputable background check provider who doesn’t charge hidden fees and goes beyond the industry standard when conducting verifications, you’ll have a better idea of your actual costs and what you’re getting for your investment.
Examine Background Check Needs on a Granular Level
The background check isn’t a one-size-fits-all solution. You don’t need to include all the same services for every background check. You can make adjustments according to employee categories such as department, location, or job type.
Examining your background check needs on a granular level can help you continue to manage hiring risks and costs without sacrificing quality. This can be particularly helpful when you anticipate a smaller budget than previous years, but you still need to maintain background check activities in key areas. For example, you may decide to limit credit report searches to accounting candidates only.
Avoid Product Bundles
Background check product bundling is designed to convince you you’re getting value for more products than if you purchased them individually. The long list of offerings in a product bundle may look impressive, but it could be little more than a watered-down version of those products. To get real value, you’d have to pay more.
You don’t want to pay for background screening services you won’t use or don’t need. Instead of being lured by the appeal of product bundles, consider your total costs. Developing a background screening program to meet your needs may require a different mix of products and services than what is typically offered in a product bundle.
Consider Unavoidable Costs
Delivering a high-quality background check sometimes requires additional fees you can’t avoid. As you continue the HR budgeting process, you’ll need to understand the costs you may incur from time to time. The following are examples of unavoidable costs you may encounter when conducting background checks:
- Costs for expanded searches: If a social security number (SSN) trace reveals new address information for a candidate, there may be additional fees to conduct a criminal search in an additional county.
- Court search fees: Data obtained in a criminal records search may require an actual court search to verify the data.
Your budget should make room for occasional fees associated with additional searches. By working with your background screening partner to find the background check products to fit your needs, you can understand potential additional costs upfront and make sure they’re not a surprise later.
Consider Needs vs. Wants
Whether you have a limited budget or you just want to save, it’s important to have the background checks you need to manage hiring risk and stay in compliance. Your core background screening activities should include the following:
- Identity verification
- Criminal background search
- Exclusion list search
- Employment, license, and education verification
- Drug screening
Other background check services might be “nice to have” and may not be required elements of your screening program. The following services may or may not be necessary for your organization:
- Registry searches such as sex offender registries
- License verification for previous roles other than the one for which an individual is applying, for example, verifying a lab technician for a nursing license.
- Physical court record searches
- Fingerprint-based criminal checks
Conduct Quarterly Business Reviews with Your Screening Partner
Involving your background screening partner in your HR budgeting process is a great way to understand your spending and the ways you can get the most value for your investment. Your screening provider can also educate you about new product enhancements to reduce your costs. For example, continuous monitoring for employment exclusions and sanctions is more efficient and often cheaper than monthly monitoring. Without a trusted screening partner who is also concerned about your budget, you might not identify such a product as an opportunity for savings.
Improve Your HR Budgeting Process
HR budgeting must take into account a range of spending across several disciplines, from training to recruitment to pay. When you take the time to plan your background check budget, you can anticipate your spending for the year and reduce the chance of surprises down the road.
An essential part of your budget planning is a background screening partner who helps you understand costs and realize a strong background check ROI. To see how different background screening providers stack up and how to choose the right one for you, check out our competitor comparison infographic.