what is a reference check, and why is it important?

Most employers run some sort of reference check for most of their new hires. But only some of them see the actual value of it. Instead, it’s often viewed as a final piece of admin to verify the candidate before a job offer is made.

Verifying the candidate’s claims is an essential part of reference checking, but so much more can be done. Understanding the basics of reference checks is the first step to getting as much value out of them as possible. So, in this article, we’ll cover what reference checks are, why they’re a vital part of recruitment, and how they differ from other types of pre-employment checks.

what is a reference check?

During a reference check, an employer contacts a candidate’s former colleagues or managers to learn more about their potential new hire and verify they have the skills and qualities required for the job. 

the purpose of reference checks in recruitment

On the most basic level, candidate references are checked to verify employment details — like whether the candidate had the role they said they had and how long they worked at their previous company. However, reference checks are also an excellent opportunity for employers to get a fuller picture of a potential employee and a chance to confirm their positive impression from the candidate’s job application and interviews. It’s often the final step before a job offer is made and provides the new employer with a (theoretically) unbiased, third-party account of what the candidate is like as an employee.

what’s the difference between a reference check and a background check?

Reference checks rely entirely on input from former colleagues and managers that the candidate has chosen. During reference checks, references give feedback on how the candidate performed when they worked together. This information is valuable but only covers a part of the candidate’s employment history.

Background checks are more detailed. Here, the employer does much of the investigation themselves without relying as much on input from the candidate’s selected sources. The level of detail in background checks can vary, but they may involve:

• contacting the candidate’s former schools or universities for education verification.
• validating their job history with all their previous employers.
• investigating employment gaps.
• conducting criminal record or credit checks. 

Under privacy regulations like GDPR, collecting a candidate’s data as part of a reference check is typically considered legitimate. However, background checks (and similar processes like social media screening) carry a higher risk of uncovering sensitive data about things like the candidate’s health or personal relationships, which cannot be stored unless in particular situations. So before conducting a background check, consider what information you have a legitimate interest in collecting and seek legal advice if unsure.

why are reference checks necessary?

• A chance to check the facts — The figures on the number of candidates who lie on their resumes are hard to determine. Some put the proportion at 36%, others as high as 70%. We’ll never know the exact figure, but we can be sure that it’s common. Reference checks are often the best chance to identify these lies and verify whether a candidate is skilled, experienced and trustworthy enough to deserve a job offer.
• They can help you avoid significant risks — With the high cost of hiring, the impact of the ongoing skills shortage and the impact on morale that high employee turnover can have, making a single bad hire can cause serious damage to an organization. Checking references can’t eliminate this threat entirely, but it can reveal whether an attractive candidate really is as good as they appear to be.
• You can ensure a good cultural fit — A candidate with all the right qualifications and work experience can still struggle to adapt to your company’s unique culture. When this happens, their performance is likely to suffer, and they may start looking for a new job quickly. The rest of the team could be impacted as well. Assessing a candidate’s potential cultural fit requires a well-rounded and accurate picture of how they are as an employee, and former colleagues and managers are an essential source of this information.

what is a personal reference, or character reference?

The terms ‘personal reference’ and ‘character reference’ are sometimes used interchangeably with the type of employment reference described above. However, they also commonly refer to a type of reference that focuses more on a candidate’s personality and moral character rather than their work performance or practical skills. 

A good employment reference check will often include some details about the candidate's personality. But the main focus of personal and character reference checks is the candidate’s character. 

Personal and character references are mostly required in organizations where the candidate’s good character is particularly important—such as roles requiring security clearance. They’re unlikely to be required in most organizations, but it’s important to know the difference to ensure clarity when communicating with candidates.

keep track of the different types of pre-employment screening

Get a reminder of the critical differences between reference checks, background checks and social media screenings with our infographic. Pre-employment screenings go by many different names, so getting a standard definition for each type can save a lot of confusion and improve communication within your team and with candidates. Download it, print it out and stick it up in the office, or make adjustments to the slide template so you can use it in your presentations.

This is an updated version of an article originally published on 11 July 2022.