We all experience major milestones throughout our lifetimes, such as buying a car or applying to be a tenant in an apartment complex, including your employees. As an employer, you may find yourself getting employment or income verification requests from third parties like a lender, landlord, or government agency. 

But what is employment verification, and why is it important? Put simply, employment verification is exactly what it sounds like—verifying an individual’s employment history and income. But there’s more to employment and income verification than meets the eye. In this guide, we’ll explore why employment verification is important, the benefits for employees, documents that serve as proof of income and employment, and more.

What is income verification and verification of employment

Key Takeaways Learned in This Guide

  • Income and employment verification refers to the process of confirming a current or previous employee’s income and employment history.
  • Various parties, such as lenders, landlords, and government agencies send income verification requests to make informed lending and leasing decisions to ensure applicants have the necessary income to make timely payments.
  • Timely employment verification responses can benefit employers by building their reputation as an organization that supports their employees and their major life decisions, such as buying a home or leasing a car.
  • Several documents can be used to verify income, such as pay stubs, tax returns, bank statements, and wage and tax statements.
  • Employees must give consent before an employer responds to an income or employment verification request.

What is Verification of Income?

For many employers, “what is income verification?” is a common question. Income verification or employment verification refers to the process of third parties, such as landlords, lenders, and government agencies, reaching out to employers to request financial information on a current or previous employee. Employers often receive these requests to verify an employee’s income as part of a loan application, rental agreement, or other financial-making process.

There are several key elements of an income or employment verification request, including:

  • Employee’s salary or wages
  • Job title and employment status, such as full-time or part-time
  • Pay frequency, whether weekly, bi-weekly, or monthly
  • Duration of employment to understand job stability
  • Additional earnings, such as bonuses, commissions, or overtime pay

As an employer, it’s important to note that you must receive consent from the employee before disclosing employment and income details with the third party requesting this information.

 

When must an employer respond to an income verification request?

When Must an Employer Respond to a Request for Income Verification?

While employers have no legal requirement to respond to verification of income or employment requests, unless legally required through a court order or subpoena, failing to respond can be extremely disadvantageous to employees. It’s recommended for employers to respond to requests for income verification promptly as a professional courtesy to show employees you care for their major life milestones outside of work, such as buying a home or car. A timely response can help ensure employees get approved for securing a loan, rental, or other financial commitment before missing out on a preferable interest rate or apartment, for example.

Benefits of prompt income and employment verifications

Timely and Efficient Fulfillment of Verification Requests Makes a Huge Difference to Your Business

Promptly responding to verification requests can have a significant impact on your business, improving both your reputation and employee satisfaction.

  • Legal Compliance: Responding to verification requests accurately helps ensure your business complies with applicable laws, such as the Fair Credit Reporting Act (FCRA) and other privacy regulations, which govern when employee information can be shared. Failing to gain consent is a common employment verification mistake. Through proper employee consent, you can ensure your company remains legally compliant while providing employees with prompt and secure verifications.
  • Risk Mitigation: Timely handling of verification requests can help avoid potential legal issues related to data privacy breaches, unauthorized information sharing, or employee complaints, highlighting the importance of employment verification security. An accurate and timely verification process can also help prevent fraudulent activities, such as someone impersonating an employee to obtain confidential information.
  • Improved Hiring Decisions: If another employer reaches out requesting employment and income verification, you can help ensure your former employee experiences a timely response that improves the overall hiring decisions.
  • Protects Against Discrimination Claims: Through timely and consistent verification of employment, you can prevent the risk of discrimination claims, ensuring all employees, regardless of background or status, are treated equally.
  • Improved Work Culture: Timely verification fulfillment can help show employees that your organization values their time and privacy, whether it’s for securing a loan or renting a home, to enhance employee satisfaction and engagement.

 

Who makes income and employment verification requests?

Who Makes Income Verification Requests? And Why?

There are several entities that may make income verification requests for specific reasons. Some of the common cases include:

  • Lenders: Auto, mortgage, and personal lenders request income verification to confirm whether the borrower can afford to repay the loan.
  • Landlords: Tenants seeking housing will often have potential landlords submitting income verification requests to determine whether they can meet monthly rent payments.
  • Government agencies: Various government agencies running public assistance programs may need to verify income to ensure individuals qualify for programs like food assistance or unemployment benefits.

The benefits for your employees

The Benefits of Verification of Employment for Your Employees

The verification of employment for your employees can be beneficial for several reasons. Through accurate, consistent, and timely employment verification, your employees can get approved for financial decisions like renting a home or buying a car quicker. However, there are several additional benefits, such as:

  • Identity Protection: Through secure income and employment verification, your employees can have peace of mind knowing their identities are protected. Employment verification adds a layer of security to their personal information, ensuring only details are released with proper authorization to protect against identity theft or fraudulent attempts to use their employment status for financial gain.
  • Accurate Employment Records: With a consistent verification process in place, you can ensure the information provided to third parties is accurate and up-to-date, preventing issues from arising from outdated or incorrect employment records. This benefits employees, as it can help prevent delays in loan approvals or discrepancies in government benefits.
  • Job Security: When employees know their employer has a reliable employment verification process in place, they can feel more secure in their ability to navigate important life decisions that depend on their income and job stability. In turn, this confidence in their employer can lead to a stronger commitment to their overall job satisfaction.
Bringing your employment verification into the future.

Bring Your Income Verification Process into the Future

Now that you know the answer to “What is verification of employment?” it’s time to bring your verification process into the future. With a modern verification process in place, you not only improve employee satisfaction but can satisfy your bottom line, too. A digital employment verification process can expedite the application process for employees becoming tenants or borrowers and reduce the risk of fraud.

Documents you'll need for income and employment verification.

Income Verification Documents

There are several income verification documents that can confirm an individual’s income, including:

  • Pay stubs
  • W-2 Forms
  • Tax returns
  • Bank statements
  • Employment verification letter
  • 1099 Forms
  • Social Security proof of income letter
  • Unemployment compensation letter
  • Annuity statement
  • Workers’ compensation letter
  • Severance statement
  • Interest and dividend income

Partner With Experian Employer Services for Employee Verification

Partnering with Experian Employer Services for employee verification automates the income and employment verification of your employees for fast and accurate verifications. With our verification fulfillment services, you can improve the employee experience by offering top-of-the-line security, timely responses, and a consent-driven process that shows you care about your employee’s major life decisions.

How Experian Verification of Income Works

Our verification fulfillment services automate your income and employment verification process with a contemporary solution that streamlines your workflow. With employee consent, verifiers can submit verification requests directly to Experian to eliminate internal manual verification that shifts the costs away from employers and to the verifiers. Completely compliant with federal and state privacy acts and laws, you and your employees can have peace of mind knowing their personal data is only shared with consent and the strictest security protocols.

Why do companies need to verify employees’ incomes?

Companies need to verify employees’ incomes to ensure lenders, landlords, and similar parties have the information they need to make an informed lending or leasing decision. This allows a company’s employees to have confidence in making important life decisions, knowing their employer will provide accurate and timely verification services.

There are several parties that may request your employee’s income verification, including lenders like auto, mortgage, and personal loan lenders, landlords, and government agencies that run public assistance programs. These parties use income information to ensure your employees’ income qualifies them for these major life events, such as buying a car or renting an apartment.

Yes, employees are permitted to see what data is shared with an income verification request. Employees must authorize the release of their income or employment information through written or electronic consent, and may request copies from their employer or third-party verification service provider to see what information was shared.

A common example of income verification comes when an individual is applying for a mortgage to purchase a home. In this major milestone, a lender will need the applicant’s income to determine whether they can afford their monthly loan payments. The lender will submit an income and employment verification request to the applicant’s employer, where the employer will then need to verify the applicant’s income and employment history, typically by providing an official letter that confirms their job title, income, and employment status. The lender will then review this information to make a decision on whether to approve the mortgage loan based on the applicant’s verified income.

There are several documents that can prove someone’s income, including a pay stub or pay statement, bank statement, income verification letter from an employer, tax return, wage and tax statement, or unemployment compensation letter.