Gaining a tenant’s verification of employment

Gaining a tenant’s verification of employment is a crucial step before the tenancy agreement commences. Carrying out employment verification can make such a difference to a landlord’s life. It can reduce concerns about rental income, prevent the need for problem-solving, and alleviate stress later down the line.

It’s not always possible to reduce every single risk as a landlord, but completing tenant employment verification as part of the tenant screening process is one of the most effective ways to do so. It will allow you to assess affordability and reduce the rental risks.

This comprehensive guide will outline the most common methods to complete the verification of employment and showcase how to verify tenant income. It will also provide some key information about data protection regulations that are important to follow as a landlord.

What is verification of employment?

Tenant employment verification confirms the employment status of potential tenants. It will give the landlord a chance to assess the tenant’s financial stability and indicate whether the individual or family can afford the monthly rent and any bills they need to pay as outlined in the tenancy agreement.

Landlords can make their own judgment, but tenants should earn between 2.5 to 3 times the monthly rent as a general rule of thumb. For example, the tenant should earn between £25,000 and £30,000 if the monthly rent is £1,000.

Why is verification of employment so important?

Employment verification will help reduce the risk of late or missed payments. Whilst there’s never a guarantee, reducing these risks as much as possible is helpful.

This is, therefore, an effective way to avoid landlord financial losses. If it is repeated, the problem could snowball and lead to legal disputes and difficulties.

It could also be helpful for the tenants themselves. It will reduce the likelihood of eviction, help build a trusting relationship with the landlord, and give them a picture of whether they can afford the rental payments. However, landlords may be wondering how to verify tenant income. Let’s find out.

How to verify tenant income

There are multiple ways for landlords to complete a verification of employment. The landlord should gather various information from different sources to paint the most accurate picture possible. 

Some of the most common methods of obtaining employment verification include requesting payslips, employment contracts, or receiving direct confirmation from the employer. 

Requesting payslips

This is one of the most common ways to complete a verification of employment. It is a standard and reliable method to check the tenant’s income. It includes the tenant’s gross and net income, deductions, and tax contributions. Landlords may want to request multiple payslips to check that the income is consistent throughout the year.

As a result of this, a landlord can make an informed decision about the tenancy application and ensure a financially stable tenancy.

Requesting tax returns

If a tenant is self-employed, they should provide their tax return. This will indicate how much the self-employed tenant has earned over the past 12 months.

Requesting bank statements

A payslip and tax returns will give a good indication, but it is worth cross-referencing with a bank statement to build further evidence for the tenant employment verification. 

Using a bank statement can verify the payslip and highlight any additional income the potential tenant may be getting. It will also allow the landlord to understand the tenant’s current expenditure.

Requesting government benefit documents

The potential tenant may be receiving some government benefits. If this is the case, which should be outlined in other documents, then the landlord can request these documents to identify the income of the potential tenant.

Direct contact with the tenant’s employer

Landlords can reach out to a tenant’s employer directly to complete a verification of employment. Before contacting anyone to verify an applicant’s employment, ensure that the rental application includes a signed consent section for a background check and that the applicant has signed it.

Some employers and HR departments remain tight-lipped and refuse to give out information for privacy reasons. However, it is likely they will at least confirm employment dates and whether they still work at the company. This will still achieve tenant employment verification.

Using third-party services for verification of employment

It is possible to use third-party services to complete tenant employment verification. The landlord should make sure the company is reputable before starting the process. Researching the company and checking reviews from websites such as Trustpilot is important.

There might also be a list of accreditations, and landlords should ensure they have good data protection services. Using a third party can have several benefits. 

• Efficiency and accuracy: Third-party services are often faster and more accurate than manual verification. They have established processes and access to databases that allow them to verify employment details quickly.
• Reduced risk of discrimination: Using a third-party service can help landlords avoid accusations of discrimination. These services follow standardised procedures, reducing the potential for bias in the verification process.
• Professionalism: Using a third-party service adds professionalism to the tenant screening process. It demonstrates to potential tenants that the landlord takes the application process seriously.
• Data security: Reputable third-party services have robust data security measures in place to protect sensitive tenant information.
• Legal compliance: Third-party services are familiar with relevant laws and regulations regarding employment verification, helping landlords stay compliant.
• Effort and time: Using a reputable third-party service will reduce the time and effort required for a landlord to complete a verification of employment.

Legal considerations during verification of employment.

During the tenant employment verification process, landlords will obtain personal sensitive information about the tenant. The landlord must follow UK data protection regulations (GDPR) to protect this data. It is also essential for the landlord to make it clear to the tenant that these regulations will be followed to generate a positive landlord-tenant relationship.  

The data must be kept safe and locked away. This is the case for both digital and physical data landlords may encounter during the verification of the employment process.

If the data is stored digitally, the landlord must use password protection and ensure the WiFi network is password-protected and secure. The data should be erased when the tenancy ends.

Consent is an integral part of GDPR compliance. Good communication between the landlord and tenant must take place. The landlord should explain why they need the data and how it will be used. Getting the tenant to sign a document to prove they are fully informed is also helpful. Check out our advice article for further guidance on GDPR for landlords. 

Completing a verification of employment is a crucial step to take when it comes to renting out property. It’s a good way to ensure you have the required monthly rental income. It’s also worth ensuring you protect your property by investing in landlord insurance today! At CIA Landlords, we have the expertise to find the best landlord insurance deals that are suitable for your needs as a landlord. Contact us today at 01788 818 670.