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Poor reference checking costs firms dearly

According to research from the Bank of Scotland Business Banking, nearly 25% of small businesses have dismissed an employee soon after recruitment due to poor reference checking processes. 23% of the small firms polled have fired a new recruit during the last five years due to incompetence, gross misconduct, or theft, largely due to failure to identify previous problems during the reference check. 53% of respondents admitted they did not check references before offering a job to a candidate, yet just as many said they have regrets about an employee recently hired.

A guide to reference checking for small firms, a look at the relevant laws, and how to comply.
  • If requesting references, make any job offer provisional. Use a phrase like 'this is a provisional offer subject to the receipt of satisfactory references'
  • Employees can bring legal claims for libel, discrimination or defamation of character if they consider a reference to be inaccurate. This applies to both current and former employees.
  • If a good reference is supplied for an unsatisfactory employee, the new employer can claim damages for being provided with misleading information.
  • Employers are not legally bound to provide references unless there is a term in an employee's contract stating so. However, there have been legal cases where employers were found guilty of negligence after failing to supply a reference. In addition, certain employers in the financial services sector are legally bound to provide references.
  • Employees don't always have the right to see references provided by a current employer, under the Data Protection Act 1998. However, they may have the right to see a reference if they are pursuing a legal action against their employer, or if they start to work for a new employer. A reference may not always remain confidential.
Under the Employment Practices Data Protection Code on Recruitment and Selection, in principle, employers can provide employees with access to references given by previous employers if requested. However, the identity of the person who provided the reference should not be disclosed. Get consent from the previous employer to disclose the reference. Downloaded The Code from the Information Commissioner's website www.informationcommissioner.gov.uk
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