Income and employment verification documents

Reasons verification documents are requested

While employees may not have to disclose why they are submitting a request for income and employment verification documents, this usually happens for one or more of the following reasons:

• Requesting a loan payment reduction or deferral, and the bank asking to see proof of current income before determining whether to approve the request;
• Pursuing an employment opportunity, and the company requesting employment verification as part of a background check process;
• Applying to rent a home, and the property management company asking to confirm that employees can afford their deposit, rent payment, maintenance, and other associated costs; or
• Applying for a mortgage or an automotive loan, and the lender wanting to confirm that employees have a steady job and enough income to cover monthly payments before approving the loan.

Common verification documents

The information included in employment verification and income verification documents depends on what the requesting party needs, as well as state requirements regarding the types of data employers are permitted to disclose to third parties. In addition to this, employees may be required to sign a release form before employers can share the requested information with a third party.

Types of employment verification documents

Employment verification documents may be necessary for a number of situations, ranging from a lender evaluating an applicant for a new loan to an employer evaluating a potential new hire’s qualifications for hiring purposes.

The most common proof of employment is an employment verification report issued by an employer. Even though there is no specific format required for the employment verification report, it is important to include all the specifics required by the third party. Depending on the circumstances, some employment verification reports are more detailed than others, but most of the information provided is generally the same. It is also important to ensure the accuracy of the report to avoid delays or denials.

A standard verification of employment report includes the following key information:

• The date the report was created;
• Dates of employment;
• Job title;
• Employment classification;
• Annual compensation; and
• A description of an employee’s responsibilities.

The employment verification report should also include the contact details of the individual responsible for verifying the employee’s information.

In addition to the employment verification report, there are other documents used to provide necessary information, including:

• Pay stubs and other salary information that demonstrate an employee’s earnings over an extended period of time;
• References from people at their current place of employment; or
• Contracts and other signed documents.

Types of income verification documents

Income verification documents are used for several reasons, with the main purpose being determining if someone is eligible for a service, a loan, or a rental. Since this type of verification serves to ensure that applicants can afford what they are pursuing, understanding how to show proof of income is essential.

An income verification report can summarise income and employment. Therefore, an income verification report includes basic income information to give a clear picture of a person’s earnings, such as average workweek hours, yearly salary, or hourly wage, and how a renter foresees this income will be sustained in the future. In many cases, this may be preferable to a proof of income letter. An income verification report can also serve as a recommendation that further assures the landlord the renter can be a trustworthy tenant.

In addition to an income verification report, a lender or renter can ask for other supporting documents to show verifiable income. Some of them are:

Importance of providing verification documents

Given that employment and income verification can affect employees during some of their biggest life-changing events – from lending decisions to new jobs – it is critical to understand how they may request information to be shared, and how an employer can best provide the appropriate documents to successfully fulfil verification.

Whether they are buying a home, applying for a job, or seeking financial aid or assistance, employees need to present employment verification and income verification documents. In some situations, it is necessary to gather more than one.

It is important for employers and HR departments to comply with regulations during this process. At the same time, both employers and employees need to make sure they fill out employment verification and income verification documents completely and honestly in order to avoid penalties for making false disclosures.