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The ultimate guide to compliant reference checks in 2024

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Reference checks are a crucial part of the hiring process. A strong reference checking process ensures due diligence, identifies red flags and gathers data managers can use during hiring and onboarding. 

By getting reference checks right, recruiters can add incredible value to the hiring process. 

Good hiring decisions lead to a better work culture, increased productivity and saved costs. 

According to benchmarking data from the Society of Human Resources Management, the total cost to hire a new employee can be three to four times the position’s salary. By conducting a best-practice reference checking process you are more likely to choose the right candidate the first time around. 

Currently, too many organisations are missing out on the power of reference checking by skipping this stage entirely. Those who do harness the power of reference checks enjoy better compliance and have more confidence in their hiring decisions. 

When conducted correctly, reference checking provides recruiters and hiring managers with insightful information about candidates that helps make more informed hiring decisions. 

Setting up a compliant and value-adding reference checking process is simpler than most people think. 

In this guide, we provide a step-by-step overview of the best way to conduct reference checks. 

We include information about compliance and due diligence, formulating reference questions, using data for decision-making and more. 

The processes we outline in this guide are appropriate for organisations of all sizes. 

Let’s get started. 

What is a reference check?

A reference check is a stage of the hiring process where organisations aim to verify the information a candidate has shared during the interview process. In general, reference checks are an opportunity to learn more about a candidate’s personality, strengths and weaknesses from the perspective of previous employers, colleagues and peers. 

At Xref, we refer to them as Reference Surveys because they assist organisations with opinion-based feedback provided by previous managers who share valuable insights on candidates. 

How are reference surveys different to verification checks?

In the verification stage of recruitment, employers check a candidate’s identity, qualifications, work history and skill set. Reference surveys are different to screening and verification checks, as checks expire and they don’t provide indepth feedback from people who know the candidate. 

What is due diligence, and why is it important? 

Reference checking is a due diligence exercise. Employers have a responsibility to take reasonable steps to ensure they are hiring the right person for the role. 

Certain industries like aged care and child care require specific validation procedures occur while hiring. Organisations normally conduct these checks during the reference checking process to ensure due diligence and create a clear audit trail. 

How can reference checking help with hiring decisions? 

Reference checking is a lot more than a box-checking exercise

Employers use reference checks to gain deeper insights into candidates and to understand how previous managers view their skill sets. Information about strengths and weaknesses can also be used to create tailored onboarding programs for new hires. 

The data you can expect to receive from a good reference check includes opinion-based information such as: 

  • Personal attributes, skills, experience and employment history 
  • An understanding of candidate strengths and weaknesses 
  • Knowledge of referee sentiment toward a candidate’s job performance  

For example, through a reference check you can understand how a previous manager rates a candidate's attention to detail, initiative and teamwork skills. Hiring managers can then use this information to make smarter decisions.

Who are the people involved in the reference checking process?

There are three main parties involved in the reference checking process. They are recruiters and hiring managers, candidates and referees.

Each party has a different role to play. 

Recruiters and hiring managers

Recruiters and hiring managers are focused on getting to know a candidate better and conducting due diligence. A new hire should be a positive addition to a new organisation and team. For this group, reference checking provides a way to gather insights about a candidate that can be used during the hiring process.

Recruiters and hiring managers are also invested in a fast hiring process so they can secure the right candidate without delay. 

A clunky reference checking process can frustrate recruiters because it leads to wasted time which increases the risk of losing top talent to competitors. No one wants to lose a candidate because a reference checking process takes too long. 


Candidates are interested in securing an offer quickly and appreciate a fast and efficient reference checking process. 

Candidates are concerned about their privacy as they are sharing valuable data that they want to be protected. They also want to be sure recruiters aren’t going to contact past or present colleagues without their consent.

Privacy should be respected at all times for confidentiality and security reasons. 


Referees play a vital role in the reference checking process. They are the people who provide the reference checks! Referees are often busy people who are focused on their own lives and workdays. As a result, getting in touch with a referee can be difficult if you’re reference checking over the phone.  

Referees want to provide valuable information for candidates and potential employers and prefer a process that’s simple and convenient. They also prefer to be contacted according to their preference. For example, many busy professionals appreciate online communication over a phone call. 

It can be challenging for recruiters to contact referees according to their preferences. Nevertheless, as much as possible, recruiters should aim to respect a referee's time and contact preferences to make the process as easy as possible for them.

How do you conduct reference checks?

Reference checks are conducted by asking a candidate to nominate referees and then reaching out to them to ask about a candidate's prior work performance. 

There are two main methods for reference checking. 

The first uses traditional methods including calls, emails and letters of reference. 

The second is a digital method harnessing platforms like Xref to automate the identify verification and reference checking process. 

Here’s a breakdown of how each method works. 

Traditional reference checking processes

Traditional reference checks involve recruiters calling referees, sending questions over email, or receiving pre-written letters of recommendation. 

The benefits of traditional reference checks

Phone calls are the most popular form of traditional reference check. They may allow recruiters to build a rapport with referees, assess their tone of voice and ask follow-up questions as they arise. 

The drawback of traditional reference checks

Traditional reference checking can be time-consuming. Recruiters need to obtain referee details from candidates and then organise a call with a referee may involve back-and-forth scheduling. Recruiter time is precious and delayed timelines come at a cost to their productivity.  

Conducting reference checks via email solves the phone tag issue but recruiters cannot guarantee quality responses and still need to spend time crafting, sending and following up on emails. 

Previous employers use letters of recommendation to provide information about the qualities or employment history of a former employee. However, this method is not as common and letters do not always contain detailed information.  Recruiters may also need to spend time authenticating the document. 

One of the biggest challenges from a compliance viewpoint is that traditional reference checks are more higher risk of fraud. Recruiters must check they are talking to the right people and storing private data in the most compliant and secure way possible. 

Traditional methods can also make it difficult to collect data in a structured way.  A recruiter may get bits of information via a phone call, email and letter of recommendation making it hard to find and present data, and fairly compare one candidate against the other. 

Digital reference checks

Digital reference checking happens when recruiters use online platforms to validate information and contact referees for feedback automatically. Xref is an example of a leading digital reference checking software. 

The benefits of digital reference checks 

Digital reference checking provides a faster and more structured way to contact referees. Recruiters can validate information and collect data from a large number of sources without adding to their workloads. 

Online reference checking can be completed at any time of day, allowing candidates and referees to complete their part of the process outside of business hours. The ability to partake in a reference check at any time is particularly useful for teams who hire abroad, as time zones are no longer a barrier.  

Studies show digital reference checks reduce bias and improve validity by offering a consistent and structured process. Askingsk referees the same questions about a candidate reduces biases towards specific candidates. Consistency leads to standardised data collection and an opportunity for recruiters to identify trends. 

Digital reference checking with Xref

Here’s how the digital reference checking process works with Xref. Recruiters send an online request to candidates asking for referee information. Candidates input referee details and the platform takes care of the rest. 

Referees are automatically contacted via email or SMS and asked to participate in a feedback questionnaire. Both closed and open-ended questions are asked so recruiters have plenty of data to work with. Xref allows referees to answer questions at any time and on any device. 

Once questions are received some platforms will automatically analyse, benchmark and produce reports for decision-making.In the case of Xref, recruiters receive a score of candidate competencies, an analysis of recruiter sentiment and benchmark data to measure candidate scores. 

During the hiring process, Xref’s Reference Surveys assist organisations with opinion-based feedback provided by previous managers who share valuable insights on candidates. 

Xref branded green graphic with a screenshot of Reference requests in Xref platform

Digital reference checking platforms like Xref offer anti-fraud features for added security. Identities and IP addresses are validated so employers are more certain about who they are dealing with. Xref takes things an extra step with an anti-fraud algorithm that alerts recruiters of suspicious activity. 

Transitioning to digital reference checks

For some recruiters, a downside to digital reference checking can be the lack of human interaction. They may be used to traditional methods and unsure of methods that don’t involve direct recruiter-to-referee interaction. 

However, most recruiters who begin using digital reference checks find they get better information from referees who have time to put more thought into answers. Xref also offers ‘sentiment analysis’, a feature that provides recruiters with clear insight into referee attitudes. 

Digital reference checking platforms may also initially appear to be an investment. 

Recruiters need to find and implement a new tool, a process that seems like it’ll use time and resources. 

However, the right digital reference checking platform will be easy to set up (it only takes minutes for some organisations) and offer almost immediate ROI.  

For instance, Weir Minerals set up Xref in their organisation and saved incredible amounts of time. Reference checks are now regularly sent back within 24 hours allowing a much faster hiring process. 

Xref branded green graphic with a comparison of digital reference checks vs Traditional reference checks

How to create a best-practice reference checking process

When conducted correctly, the reference checking process offers powerful insights into a candidate's personality attributes and soft skills.  

Read on to learn about how you can set up a high-performing reference checking process

Choosing a digital reference checking platform

It’s crucial to ensure the reference checking platform you choose is compliant. 

A compliant platform will include: 

  • A question bank with best-practice and non-discriminatory questions 
  • Data privacy measures in line with global legal standards
  • Anti-fraud features that alert users of suspicious activity 

When assessing reference checking platforms we recommend asking the following questions: 

  • Does the platform offer features to save time? 
  • Is the platform secure and compliant? 
  • What fraud detection measures does the platform use? 
  • Is it simple to monitor processes and view data? 
  • What are other users saying about the technology? 
  • How much support will I receive? 
  • Are there hidden costs? 
  • Is implementation easy? 

Xref is a global platform created by HR specialists. We prioritise security and compliance and are GDPR-compliant and ISO 27001 certified. Our customers say our platform is easy to implement and use and helps improve their recruiting function. 

Ask the right number of referees

After you’ve chosen a platform, it’s time to standardise your process. Get clear on how referees will be contacted and what questions will be asked for each position. 

Best practice is to approach at least two professional referees for a reference check. 

Insight from one referee does provide enough insight into candidates or provide recruiters with enough data to identify strengths and weaknesses. 

Referees should be current or former managers and colleagues. For those new to the workforce, you can also talk to former or current teachers, academic supervisors and mentors. 

Choose the right mix of questions for reference checks

There’s an art to asking questions. The right reference check questions will provide the information you are looking for and give extra details you didn’t even know you needed. 

Read our blog on creating powerful reference questions or use Xref’s free reference check templates for ready-made high-performing questions that follow best-practice formulas.  

Using referencing insights to make hiring decisions

Once you’ve conducted your reference check it’s time to use the answers to make hiring decisions. 

If you set up your process according to our recommendations, the data you receive will be well-structured and include information about identity, personal attributes and role-specific skills. 

Every candidate has strengths and weaknesses, we are all human after all. 

Once you make a choice, the information received from reference checks will help you shape the best onboarding and training experience for your new candidate. Hiring managers can create tailored plans based on what they know about a candidate’s strengths and areas for improvement. 

Using reference check data to inform a new hire’s first few months in your company can help set them up for success thereby increasing retention and employee happiness. 

Final thoughts 

When conducted correctly, reference checking is an incredibly important part of the hiring process. 

By conducting reference checks employers can ensure they meet compliance and due diligence standards and make the best hiring decisions for their organisation. 

A high-performing reference checking process will save recruiters time rather than add to their workload. 

Strong processes include identity verification, methodologies that can be standardised and repeated, best-practice questions and a system for using the data collected to make the best hiring decisions. 

Learn more about how Xref can help your organisation conduct reference checks.

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