How do companies do employment verification?
Several scenarios exist where companies will be asked or will initiate a request to verify an individual’s work history and other details associated with their current or past employment. This process, not surprisingly, is known as “Employment Verification.”
The hiring process is a particularly common time for a company to do employment verification, and it typically requires professional reference checks. Companies also frequently receive employment verification requests from third parties, such as lenders originating new loans or property owners confirming that a lessee will be able to make adequate payments on a new lease.
There are several methods for proving employment, ranging from securing a “Proof of Employment” (PoE) letter to providing paystubs, references, or executed contracts and agreements. Here, we’ll look at the main reasons for employment verification requests and several ways for companies to fulfill such requests.
What situations call for employment verification?
With the rise of professional networking sites like LinkedIn, it may seem like a person’s online presence or resume/CV will suffice to prove their employment. However, many would-be verifiers will want a more formal certification, especially when it’s related to a financial transaction.
Lenders originating a loan
Lenders evaluating an applicant for a new loan have a prerogative for verifying an individual’s employment: Making sure that a new customer can make their payments on time. In addition to validating employment, employers can also verify salary information for an employee but must be careful to heed local laws. Some locales like the State of California and New York City bar employers from releasing salary information during the hiring process, but that rarely affects requests that apply to loan origination.
Property owners issuing a lease
Like loan providers, property owners will usually verify an individual’s employment in order to ensure they’re able to handle a new lease. Earnings history is also relevant to help provide a sense of a lessee’s future income.
Employers extending offers to new employees
Although employers will often confirm an applicant’s job history by checking professional references, they will occasionally require a more formal attestation, usually in the form of an Employment Verification or PoE letter. We look at these letters in more detail below.
Work visa holders validating their employment
Work visas typically require an applicant to have gainful employment before securing permission to remain in a given country. Likewise, application renewals usually hinge upon a visa holder’s continued employment, so the visa holder must inform the office issuing the work permit if they’ve lost or otherwise changed positions.
Methods for employment verification
As a start, companies should notify a current or past employee that they’ve received a request for their employment details to make sure the request is legitimate before turning over any information.
Next, before gathering the information necessary to respond to an employment verification request, determine the best way to present it. Has the person making the request specified a format? Have they provided a form to fill out, or will an informal reference do?
When in doubt, companies should issue a PoE letter, as it’s the most common method used for employment verification. A PoE letter contains all relevant information about an employee’s history with a company. A combination of other methods will often suffice as well.
Proof of Employment Letter
A PoE letter issued by an employer provides formal confirmation of a current or former employee’s relationship with the company.
The majority of PoE letters include:
- Employer’s business name and address (or use standard company letterhead): Verifies the name and location of the company verifying employment.
- The current or former employee’s job title: Confirms an employee’s role at a company.
- The dates the current or former staff member was employed: Verifies the duration of the employee’s tenure with the company.
- A list of the employee’s responsibilities: Sheds light on an employee’s mastery of the position and related tasks.
- An employer’s contact information: Aids with future contact regarding the verification request.
Other methods for proving employment
If it’s difficult to contact an employer, whether due to inadequate HR support or a tenuous relationship between the company and the employee, there are other approaches to completing employment verification.
- *Paystubs *provide a record of an employee’s past income from an employer. The information is relevant when an employee’s earnings are the key focus of a verification request, such as a credit card application, but sometimes providing that information is illegal. Employers should consult an attorney or local laws to ensure that they’re not disclosing protected information.
- *References *describe an employee’s role within a company and their overall performance. An employee’s past manager or colleagues can vouch for him or her, and most companies receive reference checks from time to time.
- *Contracts & Agreements *prove an employee’s relationship with a company, although only in the sense that the employee accepted a job offer. One issue with this method of verification is the lack of proof that the employee actually stayed on to perform the role for which they were hired.
- *Third-Party Services *remove the stress from employment verification requests by automating much of the process. This is usually only relevant when an employer is an active user of such a service.
What information is legal for employers to share in all states?
Employment verification requests may ask for details that employers aren’t required to submit. In fact, employers may face legal penalties for disclosing protected information. Health and Salary & Earnings information are the most sensitive data held by employers, and they must be especially careful when asked to share details related to these categories.
Sharing information about an employee’s health is generally a bad practice. A verifier’s motives may be impure, ranging from an insurer seeking to gain insight on a potential customer’s pre-existing conditions to a company’s hiring officers aiming to build the most attractive workforce possible.
Information about an employee’s disabilities is especially sensitive. The Americans with Disabilities Act of 1990 provides explicit protections for individuals’ disability information, preventing that information from being shared with any third party for any reason.
Hiring employers are welcome to confirm that a potential employee will be able to adequately complete the responsibilities for the role under consideration. Employers may also verify whether an employee will need “reasonable accommodations” for a given role that will enable the employee to complete all of their required tasks
Salary & Earnings History
Certain situations, like loan origination, require an individual to secure proof of their earnings. However, several locales, including the State of California and New York City, have passed laws banning companies from requesting previous salary information during the hiring process. This is designed to protect an employee from having a salary for a new role unfairly compared to their previous earnings, which may have been below market rate or otherwise unfair.
Getting it right
Many companies will have to respond to a number of Employment Verification requests, so thoughtful development of a process for doing so will help the company save money and speed up response time. Sourcing the information needed to fulfill a request can prevent HR and other employees from completing other essential tasks, as it may require continued outreach to different departments. And many important decisions, like an employee’s ability to buy a new home, hinge upon timely verification of employment. Choosing a PoE letter will usually suffice to complete a given verification request, but employers can also automate the process via Truework and other third-party verifiers.
Learn more about Truework
Request a demo to learn how Truework can simplify your income verifications through a unified platform.