The employee reference system is broken: why is this, and how could it be fixed?


Providing a reference is something that most of us are familiar with, having applied for a job at some point. But UK referencing law is not always helpful.

Given that many employers now avoid giving a reference for fear of litigation, we ask if the current system has had its day ...

How do employment references work in the UK?

First, let's take a look at some facts related to the references that employers give out. Some of these may surprise you:

Do employers ever give bad references?

There was a time that bad references were a more common occurrence in the UK. But in 1994, a case was brought to the House of Lords, where a former employee of a company felt that a reference the company had given to them was unfair.

This case was Spring v Guardian Assurance plc, and it changed the way references are given in the UK. The employee's victory meant that many companies introduced guidelines governing exactly what staff could and couldn't put in a reference.

A utopian system where everyone is simply 100% honest all of the time is a nice idea, but unfortunately something that could never exist in reality.

In 2017, Britain is in a situation where many employer references include nothing more than basic factual information like job title, salary, and dates of employment. As above, many employers will avoid giving a reference altogether, even when asked. This is often perfectly legal.

So this begs the question: why do we even bother? What's the point of a system that people are too scared to properly utilise?

How can employees find out about a bad reference?

Under the Data Protection Act, 1998, employees of a company can request to see a reference that was given concerning them when they applied for their job. 

This request is made to their current, rather than former employer. The employee has no right to make this request of their former employer.

While this is a decent step toward transparency, there is a major problem with the system as it stands ...

Quite simply, in today's ultra-competitive jobs market, an employee who receives a bad reference would seem unlikely to be successful in their job application. 

This would leave the employee with little recourse to see their reference - because legally they are only entitled to request this of a company they have successfully placed at. This is a problem, given the situation outlined above.  

Is the employer reference system fit for purpose?

In a perfect world, employers would always be honest when giving a reference, and the system itself would be a transparent and intuitive affair. But in reality, this is rarely the case.

When an employee leaves a company - be it of their own free will or because they have been asked to - it's safe to say that there is sometimes a degree of ill-feeling on one or more sides.

This isn't always due to dismissal either. It isn't hard to imagine an employee giving their notice at a crucial stage of a project and dropping the rest of their team - including their line manager - into the mire. This could certainly cause resentment.

It's not beyond the realms of possibility that resentment of this sort could cause someone to give a reference that embellished the truth - or in the very worst cases contained outright fabrication. This is what the current employer's reference system attempts to guard against.

Although the current system allows employers to be honest about any negative aspects of an employee's performance, this is widely avoided due to fear of litigation.

The trouble is that the system in its current form terrifies many employers into giving little or no information in a reference - leaving us with the confused and ineffective mess we have today.

Then there's the problem that there's really no motivation for most employers to give an employee reference. Unless they are in a regulated industry (e.g. financial services), or a previous agreement to provide one has been signed, an employer really doesn't have to do anything in this case.

Why would someone waste their precious time writing a document that could potentially open their company up to liability, when they don't have to? 

Of course many employers would like to do a good turn for a former employee by helping them out in finding a new role - no hard feelings after all. This positive motivation is really what the system in its current form relies on.

But in our imperfect world, another more negative motivation also exists, where unscrupulous employers may wish to feed disinformation to a competitor to encourage them to make a bad hire. With the cost of a bad hire widely acknowledged to run into the thousands, this possibility really can't be discounted. 

So the existing referencing system is clearly not ideal - but could it be improved?

How could the employer reference system be improved?

As we say, a utopian system where everyone is simply 100% honest all of the time is a nice idea, but unfortunately something that could never exist in reality. The real world complicates things far too much to expect people to deal with references dispassionately all of the time.

But surely a more efficient system could be devised? There must be a better way ...

A better referencing system would pay dividends for the economy as a whole - by making it easier for companies to hire the right person. Better-placed employees should mean a more efficient economy and increased productivity across the board - which would be good for everyone.

It might seem like a small thing, but this really could make a difference - especially when times are hard and every hire counts.

Should employers be forced to give a reference?

In regulated industries such as financial services, employers must give a reference. Quite simply it is recognised that this is beneficial for the industry as a whole, and as such, the system takes account of it. 

But why shouldn't this be the case across the board? While financial services is an important industry, where quality must be assured, what does it say about the rest of the economy when we treat it so much less seriously?

British productivity is widely acknowledged to be languishing, compared to much of the rest of Europe, so surely any way we could conceivably raise this is worth exploring - especially while the uncertainty of Brexit looms large.

Care must be taken to ensure that a revised system for employer references does not introduce any more bureaucracy than needed.

Given the regularity with which employers avoid giving a reference, or give a reference so basic as to be of very little use to anyone, we suggest that the time is now right to force employers to give a reference upon request. 

While this would do little to combat the 'factual references' now offered by many employers, where only basic information is given, it would at least be a step in the right direction, and fix the current system where there is literally no motivation for former employers to get involved in most cases.

Would anonymity ensure objectivity?

The problem of companies deliberately feeding misinformation to competitors through the medium of a reference is another point that could be addressed, if the system were to be perfected. 

A system to allow employers to remain anonymous - or even a rule demanding that they do so - would therefore be a good idea.

While there is no way to know the scale of this potential problem (because who would admit to doing it?), it seems naive to believe that this sort of manipulation does not go on in the real world. Although this is far from the biggest fault with the referencing system, it is therefore something that should be addressed.

Could the government stop employers giving purely factual references?

The problem of companies supplying purely factual references stating largely useless information since the case of Spring v Guardian Assurance plc would be a tough one to change. 

Since this landmark case, many companies now have strict rules governing the information that staff can and can't give out about former employees - and the only incentive likely to change this would be a legal one.

But how, exactly could the law demand that employers give what is effectively a more subjective view of former employees in the references they provide? 

This would be very difficult. 

Unless there was a standardised system or form involved in giving a reference to a new employer, it would potentially be very difficult to encourage employers to be more forthcoming with information.

One obvious way to create this situation would be to change the law so that it is weighted more in the employer's favour in cases of suspected defamation. This route is fraught with potential danger however - given the type of situation which led to current defamation law being so strict. 

One route towards a more useful, but still objective and dispassionate referencing system would therefore be a standardised form. This could be housed on a government website - which would also help to ensure anonymity for the employer requesting the information.

Employees could be rated for a number of factors on a scale of one to ten - keeping avenues for subjectivity to a minimum while demanding more from employers than the dates of a person's employment and job title.

Increased transparency for employees where references are concerned

As above, the Data Protection Act 1998 allows employees of a company to make a request to see any reference that was given concerning them by a former employer. But the act does not enshrine the right for employees to make this request of a company where they are not employed.

In order to avoid the situation where employees are unknowingly unsuccessful in a job application due to a (potentially unfair) reference from a previous employer, an improved system would allow workers to see any reference made concerning them. 

Such a system might conceivably even allow the employee to make this request of their former employer - although this would then introduce a burden of honesty on the employer's part.

Better training for employees involved in giving references 

In addition to making the giving of references mandatory, we suggest that an effective training and support system should be put into place in order to reassure and assist companies and employees involved in this process.

Although the current system allows employers to be honest about any negative aspects of an employee's performance, this is widely avoided due to fear of litigation. If an employee has had disciplinary proceedings initiated against them during the time of their employment, then this is potentially useful information for a future employer.

While the disclosure of such information is currently generally acceptable in an employer's reference, this is a widely misunderstood (and consequently avoided) area of the law. 

A better understanding of this process among reference-givers would help to promote a much more honest and useful system. 

Clearly, care must be taken to ensure that a revised system for employer references does not introduce any more bureaucracy than needed. This is especially true now, during a time when government spending is being cut back in many areas due to the prolonged economic downturn the country is experiencing. 

Despite this, it is likely that the burden would be on the government in order to provide better education where references are concerned. This would be a short-term sacrifice in order to achieve the longer-term economic gain of increased productivity that a more efficient system of hiring should help to usher in.

Conclusion: a system that needs to be taken more seriously

Although we talk about improving the economy in this article, it's important to note that we don't see an improved system of referencing as a panacea for Britain's productivity woes. With this said, we at Agency Central know that hiring is a serious business, and any way in which it can be improved will be likely to have a dramatic effect when taken in total.

Hopefully what we've shown here is that referencing is something that everyone should take more seriously. The current system is far from perfect - and includes some major holes which need patching. Not least here, we're talking about the ability of many employers to simply choose not to give a reference for an employee.

By ensuring that employers carry out what is in most cases a simple and quick administrative task, the government could make a real step in the right direction where this issue is concerned. 

The other improvements outlined in this article would be more involved, but could have an even greater knock-on effect when combined with this approach. 

Hopefully in the near future, the legislation surrounding employer references will come under review - but until then it's important that those of us who see the flaws in the current system continue to point them out. This will hopefully lead to a more efficient and transparent system for all parties concerned - which would be a win both for recruitment and the economy.

Written by Matt Atkinson

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