Verifying employment means checking someone’s job history and current employment status. This is important for understanding a person’s financial reliability, especially when evaluating potential tenants or loan borrowers.
This article will explain employment verification methods and why they are important for screening tenants and approving loans.
Understanding Verification of Employment
As economic fraud rises, it’s important for you as a lender or a landlord to be aware of stricter vetting procedures. One crucial step is employment verification, which helps determine if someone is financially reliable.
For example, recent data highlights a significant increase in fraudulent applications:
➡ Fraudulent applications jumped from 15% in February 2020 to 29% just six months later.
➡ 85% of landlords reported rental fraud during this period, compared to 66% the previous year.
Learning about different methods of employment verification can help you better protect yourself from financial fraud. This understanding is essential for preventing deception and ensuring financial reliability.
Why is Verification Important?
Verification is very important in areas like tenant screening and loan approval. Here’s how it helps in each:
Role of Verification in Tenant Screening
For landlords, verification of employment is essential in:
⦿ Protecting Landlords from Non-Payment:
By verifying a tenant’s employment, landlords can assess their ability to pay rent consistently. For example, if a tenant earns $3,000 per month and the rent is $1,000, the tenant is likely to meet their rental obligations.
Without verification, landlords risk accepting tenants who may default on rent, which can lead to financial loss and legal complications.
⦿ Ensuring Tenant Stability:
Employment verification also helps ensure tenant stability. A tenant with a stable job is less likely to move frequently, reducing vacancy rates and turnover costs for landlords.
This stability benefits landlords and other property tenants, creating a more secure living environment.
Role of Verification in Loan Approval
In the context of loan approval, verification of employment is equally important for lenders:
⦿ Assessing Borrower’s Ability to Repay:
Lenders must verify employment to evaluate a borrower’s ability to repay the loan. For instance, a lender might require a borrower to have a debt-to-income ratio below 40%.
If a borrower earns $5,000 a month and has $1,500 in existing debts, adding a new loan with a $500 monthly payment results in a 40% debt-to-income ratio.
This ratio shows that their debt is manageable.
⦿ Reducing Loan Default Risk:
Verification helps reduce the risk of loan defaults. By confirming a borrower has a stable job and enough income, lenders can make informed decisions. This lowers the chances of lending to someone who might default.
As a result, it helps reduce financial losses and keeps the lender’s finances healthy.
Methods of Verification of Employment
Various methods can be used to confirm a person’s job history and current employment status. Here’s a closer look at some common verification methods:
1. Direct Employer Contact
One of the most reliable methods for verifying employment is direct contact with the employer. This approach involves reaching out to the company’s HR department or the employer.
During this process, you’ll typically verify the following details:
◘ Employment Dates: Confirm the start of the applicant’s employment.
◘ Employment Status: Verify if the individual is currently employed or if their employment has ended.
◘ Salary: Understand the compensation and pay structure.
Direct employer contact provides the most accurate information since it comes straight from the source. However, it can be time consuming and sometimes challenging if the employer is unresponsive or if the company is difficult to reach.
2. Reviewing Pay Stubs
Another common method is reviewing pay stubs or salary slips. These documents are issued by employers and show earnings over a specific period.
They confirm employment status and income for both traditionally employed and self-employed individuals.
Also Read: Proof of income documents for self-employed
When reviewing pay stubs, carefully look at:
◘ Consistency:
Check if the salary amounts on the documents match what the applicant has reported. This ensures the income information is accurate and aligns with their claims.
◘ Frequency:
Verify the pay frequency listed on the documents. Ensure it matches the payment schedule described by the applicant. For example, if they claim to be paid monthly, the documents should reflect monthly payments.
◘ Authenticity:
Ensure the pay stubs are genuine and haven’t been altered. Look for official company logos, dates, and other identifying details to confirm their legitimacy.
Authentic pay stubs typically include the employer’s contact information, a breakdown of earnings, and company stamps or signatures.
3. Employment Letters
Employment letters, also known as employment verification letters, are official documents provided by the employer. They typically include:
◘ Job Title and Responsibilities: A brief description of the employee’s role and duties.
◘ Employment Dates: The start and end dates of employment.
◘ Salary Information: Sometimes, employment letters also include salary details.
These letters are usually written on company letterhead and signed by an authorized representative. They are generally reliable but can sometimes be forged or altered.
Best Practices for Conducting Verification
Following best practices to ensure accuracy and reliability when verifying employment is important. This helps you make better decisions, whether you’re checking tenants or evaluating loan applicants.
Here are some essential guidelines to consider:
Maintain Clear Communication
Open and transparent communication with the applicant is the foundation of effective verification. Inform them upfront about the verification process, what information will be required, and why it is necessary.
This transparency helps build trust and can lead to quicker and more cooperative responses.
Check Pay Stubs Carefully
Pay stubs offer valuable insights into an applicant’s employment status and income. When reviewing pay stubs, consider consistency, frequency, and authenticity.
Create professional pay stubs here to compare with applicants’ and spot any alterations.
Use Multiple Verification Methods
Relying on a single method for employment verification can be risky. Instead, use multiple methods to cross-verify the information provided.
Combining direct employer contact, pay stubs, and employment letters ensures a thorough verification process.
Validate Employment Letters
Employment letters are usually reliable. However, they can sometimes be forged or altered. When reviewing them, make sure they are on company letterhead. Check that they include specific details such as job title, employment dates, and salary information.
Also, confirm they are signed by an authorized representative. If in doubt, follow up with the employer for confirmation.
Keep Records and Documentation
Maintain detailed records of all verification efforts. Documenting your process helps in case of future disputes or audits. Keep copies of all correspondence, pay stubs, employment letters, and notes from employer contacts.
Respect Privacy and Legal Considerations
Always respect the applicant’s privacy and adhere to legal guidelines regarding employment verification. Ensure that you have the applicant’s consent before contacting their employer or requesting sensitive information.
Familiarize yourself with relevant privacy laws and regulations to avoid potential legal issues.
Why Use PaystubHero’s Paystubs for Verification
PaystubHero provides high-quality, professional pay stubs that you can use to verify the authenticity of applicants’ documents. Our pay stubs are designed to be clear and trustworthy, making it easy to spot any alterations or discrepancies.
By comparing our reliable pay stubs with those you receive, you ensure a more accurate verification process.
Ready to streamline your verification?
FAQs
Here are the most common questions about employment verification.
