Calculating Prices for Background Checks | ScoutLogic
All background checks are not created equal. Background checks have many different components or searches that determine the parameters of the final report. As a result of all these different variables, it can be hard to ensure you are paying a fair price for a background check. There is nothing more confusing than trying to understand why some background checks cost $10 and others cost hundreds. This article will help you understand background check pricing models to ensure that you are getting the best value for your company.
What is the Cost of a Background Check?
The cost of a background check typically ranges from $10 to $500. The price depends on which components are in a background report. Background checks with only criminal searches tend to be less expensive than reports with employment and education verifications and drug testing. To compare vendors you must compare the components or searches in a report versus the total report cost.
Why is Background Check Pricing Important?
Recruiting leaders are under constant pressure to source great talent more efficiently and effectively. Background checks play an important role in the recruiting process as they are critical for supporting workplace safety, but also can be a stumbling block in onboarding talent; they can also be very expensive. While all companies have different tolerance levels for the breadth and depth of their background check programs, no company wants to pay above market rates for their program. Unfortunately, many background check companies make it hard to understand the cost of a background check. This can make comparing prices between vendors very difficult. As a recruiting leader, you need to have a fundamental understanding of how vendors charge for background checks. While there are many components that can go into the cost of a background check, this article covers the most frequently used types of components: Criminal Searches and Verifications (Employment and Education).
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Calculating Background Check Pricing
To better understand background check pricing, it helps to understand the cost models of your vendors. Background check vendors usually calculate their pricing based on variations in searches. Searches costs consist of
- Search types
- The depth of those searches
- The “hit” rate
- Labor required
Search types or component type refers to the specific elements in a background check report. In the background check industry, search components make up a report or background check package. For example, a report may have a national criminal file check, a county criminal search, and an employment verification. That background check package would consist of three search types.
Search depth is how extensive the search type may be. For example, searching criminal history based on one county versus all counties a candidate has lived in the past 7 years).
Hit rate is the percentage of reports that have a potentially adverse item. This is important for background check vendors, as it increases the amount of work required to complete a check accurately and compliantly. A client with a 5% hit rate is a lot less work for a background check company than one with a 50% hit rate.
Labor required is the cost for the background check company to actually review the information, ensure it is compliant, and compile the report. The more components a report has and the higher the hit rate of a candidate population, the more labor is required to compile the report.
In addition to the above cost calculations, like many industries background check vendors will generally accept lower profit margins on companies that spend a lot of money on background checks.
Now that you understand the high-level cost structure of a report, the table below will help you understand the types of searches, search depth, and pricing ranges. Please note, there are many more search types than listed below, but these are the most frequently utilized. If you would like to learn more about these search types, you can click this link to access ScoutLogic’s background services pages.
|Search Type||Depth Options||Costs|
|National Criminal File||
||$5 – $10|
|Sex Offender Registries||We believe strongly that your vendor should always include these two components as part of a national criminal file search.|
|County Criminal Search||
||$5 – $20
If you are going to run more than one county, your vendor will include a Person Search to access credit header data to determine the counties. These fees range from $.50 to $1.50 per component.
|Federal Criminal Search||
||$5 – $20|
|Statewide Criminal Search||
||$8 – $15|
||$8 – $20|
||$8 – $12|
|Motor Vehicle Record||
||$3 – $8|
|Employment Credit Report||
||$5 – $10|
Once you have determined the search types in a report, your background check provider will give you a package price. This package price will look at all of the cost elements to determine the fee. As you can imagine, there are hundreds of different combinations, depending on the search type combinations.
Most Frequent Background Check Pricing Issues
As you know, fully understanding your current background check pricing can be challenging. Many background check vendors are not transparent with their search types because the variations we discussed in the above can have a big impact on profitability. To help you avoid these “traps,” here are a few situations we come across most frequently.
- National Criminal File vs. County Criminal Searches. National Criminal File databases do contain county criminal records. However, they only contain a portion of the United States counties and the data vendors update this information on an irregular basis. We run into companies who think they are getting a county criminal check for a low cost…when in reality they are missing substantial U.S. counties and are putting their business at risk.
- National Criminal File Sources. Many companies assume that this search includes sex offender registries, terrrorist watchlists, and financial sanctions data. However, some background check companies separate out these sources and charge more for them. We met with a company last year that thought they were getting this information in the national criminal file search…only to find out sex offender registries we not included. Upon a rescreen, they found several employees had sex offense related records. Always ask your background check provider for a source list.
- Employment Verification Attempts. When purchasing employment verifications, you want to ask the vendor how many attempts they make before declaring a verification “unable to verify.” Most vendors will say “three attempts,” and you need to ask how they define an attempt. For some vendors, one attempt is one phone call. For other vendors, one attempt is a phone call, an email, and a fax. Obviously, the level of effort is much different and can drive different prices between vendors. In addition to the cost, this is why you want to pay attention to that “unable to verify” rate…so the work doesn’t fall back to your recruiting team.
- All Names & Aliases. To run an exhaustive background check, you want to include all names & aliases that are associated with a candidate. In order to sell you a more profitable check, background check vendors won’t mention that they are only searching the candidate’s given name…which dramatically reduces their work. However, many candidates have multiple aliases (e.g. maiden names) and you want to search those to ensure that you are capturing all of a candidate’s potential criminal history.
Additional Considerations in Background Check Pricing
In addition to the above, there are a few additional considerations in determining background check program fees.
- Access Fees. Access fees for criminal records and verifications. Access fees for criminal records pertain to the charges a county or state may charge for a criminal record. These fees can also include the costs of third party “court runners” to access this information. Background check companies add these fees on to reports and they should not be marked up. Some states can have very expensive fees (e.g. New York is $95), but most are single digit or no fee at all. Access fees can make budgeting a challenge and we suggest you work with your vendor to come up with an estimate based on where your candidate population typically lives.
- Contractual Terms. Background check contracts can also be very confusing. The key item to look for is to ensure that you are not required to use the provider exclusively. Background check companies need to earn your business every day, and it is common practice to not have exclusivity or minimum spending provisions. Do not let your background check vendor try to charge you higher fees because there is no exclusivity or minimum spending provision.
- Set-up Fees. Background check companies do have costs to set-up a new client. These fees are typically associated with credentialing, which is a process to confirm that your company has permissible purpose to run a background check. These fees are typically waived for companies that spend more than $5,000 per year. For those companies who spend less, the fees can range from $250 to $1,000.
# Tips for Bidding Background Check Pricing
To help you bid your program accurately and get the best possible pricing, you need to gather the information a background check vendor needs to bid your program.
This typically includes the following information:
- How many reports you run per year or per month
- The different packages you have and the components that make up those packages
- The “hit” rate of your candidate population (e.g. the percentage of reports that show something potentially adverse). This is often easily available in your current system.
- The length of reporting history
- The length of residence history
- The number of years or employers for which you require verification
- The use of aliases
In addition to the above, you may need help deciphering which components your current vendor has built into each report. We often find companies believe they are buying a service which then turns out to be an “add on” for the current background check vendor. To help you do this analysis accurately, you may want to share a copy of an invoice with your potential partners to ensure an apples-to-apples comparison. You might also want to understand which components are included in elements like your National Criminal check or person search.
As a recruiting leader, your job is to find great talent for your company as efficiently as possible. You need a background check partner who makes your life easier so you can fulfill your primary role. The last thing you need to do each month is comb through invoices to ensure your company is not being gouged. That is why you want to look for a background check partner that both provides fair pricing and does so transparently. The great news is that with a little preparation and understanding of background check pricing, you will be able to maximize the value for your company.
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ScoutLogic is not a law firm. You should always check with qualified counsel before you make any changes to your background check program. If you need a qualified attorney, we would be happy to make a referral for you.
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