Background Check vs. Reference Check: What’s the Difference?

You've found a strong candidate, but you're not sure whether a background check alone tells you enough, or whether you need to call their references too. It might be tempting to only obtain one, but the differences between the two checks can influence the hiring process considerably. Get this wrong, and you could end up with a hire who looks great on paper but isn't who you thought.

What Is a Background Check?

A background check is a great tool to help you hire the best candidate for the open role. Background checks allow you to gain reports on a range of details in a prospective employee’s background; from verifying their educational and employment history, to gaining insight into their criminal background (or lack of), what a background check consists of depends on what area you want to explore, but regardless, it is an essential tool at your disposal. 

The key component when considering using background checks is that they should be used to make more informed decisions, not to reinforce negative discrimination against candidates. Background checks also have a variety of rules and regulations that accompany them, and you'll want to understand these before you proceed with a check. It’s also key to understand how the rules and laws change from state to state; while there are universal federal laws, each state handles background checks differently, and if you aren’t informed about all the rules, you increase the risk of proceeding illegally. 

Some of the areas that show up on a background check can include:

• Criminal history 
• Credit check 
• Driving record check
• Education verification
• Employment verification
• Drug Testing 

Together, these checks help you verify that a candidate is who they say they are, so you can move forward with confidence, not guesswork.

What Is a Reference Check?

While a criminal background check will look at facts, a reference check allows for more qualitative data to be gained about the prospective employee from the people who know them best, or have worked with them in a professional capacity in the past. A reference check allows you to gain a better understanding of how the prospective employee performs in similar roles or roles with transferable skills. It also allows you to ask questions of the prospective employee surrounding their skills, experience, role responsibilities, overall employment or educational performance, interpersonal skills, and work ethic. 

References are a crucial addition in the hiring process because a background check can only offer you facts about a candidate’s past (and sometimes in limited windows). For example, in a background check, you might discover that the prospective employee has no criminal history, but a reference might tell you that there are other areas of concern that should be considered before hiring them.

With both employers and prospective employees using AI in the hiring process, talking to a real, human contact is crucial in gaining a better picture of who the prospective employee is and where their strengths lie. 

Background Check vs. Reference Check: 4 Key Differences

Purpose

The purpose of a background check is very different from the purpose of a reference check. While both have the same aim of building a more comprehensive picture of prospective employees, both checks go about this in different ways. While a background check's main purpose is to verify or report on information from an individual’s past, a reference check is about building a more character-based image of the prospective candidate in more recent history.

Gaining information on a person’s background often helps verify that their skills or qualifications are up to standard so that you can rest assured that you are hiring a person with recognized skills and qualities. However, how a person uses those skills is essential. So while a background check gives you quantitative, objective information, a reference check gives you qualitative, subjective information. 

Legal Requirements

While reference checks are under less legal scrutiny, written consent is a legal requirement before running either check. Employers who skip this step generally expose themselves to compliance risk and potential legal claims.

Background checks, on the other hand, follow federal and state laws; it’s important to understand exactly what the Fair Credit Reporting Act dictates in terms of the legal processes and how to be FCRA compliant before you begin conducting a background check. 

Scope and Depth

Each check holds differences in its scope and depth. For example, a background check, depending on how thorough you want it to be, can report information on a host of different aspects. If you wanted to, you could gain a breadth of information on their criminal (subject to federal and state laws), employment, credit, driving, and educational history. This allows you to have a chunk of information about a prospective employee that will help in your hiring decisions. 

While a background check has the capacity for breadth, it doesn’t offer a more subjective opinion on the candidate from people who know them. Often, a background check will verify the information that the prospective employee has already given, which doesn’t then give you a clearer picture of who they are in terms of how they work with others, what their strengths are, or their work ethic. At first it might seem that reference checks don’t have much breadth, but they offer the depth that background checks don’t. 

Risk Management 

A background check can surface a history of violent behavior, which helps employers reduce risk to their workforce and reputation before making a hiring decision. Limiting risk to colleagues, members of the public, and your company's reputation starts in the hiring process.

While references are useful, they're still subjective. If a candidate has a history of violence, a background check can reveal that information.

What a Background Check Cannot Tell You

• How the candidate handles workplace conflicts 
• The scope of the candidate’s knowledge base 
• How well the candidate has performed 
• What the exact role responsibilities were and how well they were achieved
• The candidate’s communication style 
• How reliable a candidate is 

That's why a background check alone can't tell you how someone will actually perform on the job, which is where a reference check fills the gap.

What a Reference Check Cannot Tell You

• If the information about their education is correct
• What their driving record is like 
• What their check report is like 
• If they have a criminal history 
• If they’ve had any bankruptcies 

References fill in the character and performance context a background check can't reach, but they can't replace it when it comes to verifying hard facts like criminal history or credentials. The two checks cover different blind spots.

Background Checks and Reference Checks Work Better Together

One check indeed gives you objective information, and the other gives you subjective information. However, together, the two checks can give a clear and accurate picture of your prospective employees. By combining the two checks, you can be as informed as possible and make the right choice for the role and company. 

What Employers Need to Know Before Running Either Check

The FCRA is a federal law that has strict rules surrounding what needs to happen throughout the entire process of obtaining a background check. The first key consideration is obtaining written consent from the prospective employee to conduct your proposed background check. 

After conducting the check, employers are generally required to follow the adverse action process. This process involves telling the prospective candidate if there was anything in their background check that raises concerns for you. You'll then need to allow them to respond to the findings. If, after their response, you wish to withdraw a conditional offer or wish to no longer move forward in the application process, you need to justify this in writing. 

While reference checks aren’t dictated by such strict rules, it’s vital that you don’t ask leading questions or discriminatory questions. Any discriminatory behavior could result in legal action, so it’s important to still be informed and careful. 

Frequently Asked Questions

Are Reference Checks the Same as Background Checks?

While both checks have the same aim of gaining a better insight into the prospective employee, it’s important to note that they don’t serve the same purpose and they offer a different scope of information. Where references offer subjective information, a background check offers more objective information.

Which Comes First, a Background Check or a Reference Check?

Often, due to laws about when you can conduct a background check, a reference check will be conducted first to ensure that the candidate, from those who know them, seems like a good fit for the company after conducting an interview. After offering a conditional offer, a comprehensive background check is conducted. 

Should Employers Conduct Both Checks?

If you want to gain a subjective and objective opinion of a candidate before offering them the role, then both checks combined are an excellent tool. The more informed you can be, the more likely you are to hire the right person for the job.