Hi,
It is essential to get reference checks done before hiring an employee to confirm that all the information provided by the candidate is 'true'. You have employed the candidate based on his 'experience' or 'education' & not on his face value, hence it is essential to validate the documents for both.
Yes 'Pre-employemnt RC' is done only after issuing offer letter. As a good practice it is better to get the reference checks done from a 3rd party i.e. agencies who are specialized in 'Reference checks'. I had this practice in my earlier organization & I found many cases where senior as well junior candidates had forged their documents.
It is a good practice to inform the candidate that we have a procedure of 'RC'. Also get a self information form filled in by him to verify his Employment details like Company Name, Tenure, Designation, Salary. Similarly details for various degrees held by him. Also an self-confirmation from him that all the information provided is true.
There should be an added clause in the "Offer Letter" which has a mention of "your employement is subject to satisfactory reference checks....".
Hope this helps:!: