Does Your Company Need An Employee Referral Program? [Examples + Best Practices]

Finding qualified candidates to fill your open positions can be challenging. Job posting sites claim to make the process easy by connecting you with hundreds if not thousands of potential employees. But having such a large pool of candidates can be overwhelming.

Just thinking about the sheer volume of work involved in reviewing applications, narrowing them down to good fits, and then vetting those potential candidates is enough to make anyone’s head explode.

You work with or run a solid organization with wonderful employees. How do you make sure that you don’t get a bevy of potential candidates, but rather the right candidate?

Look at this like finding the perfect place to take your significant other on a special occasion. Sure, you could do a Google search for random restaurants in your neighborhood. You could even check a review site for recommendations.

However, you don’t know any of those people, so how much weight does their opinion really carry? Instead of taking a risk on a very special evening, why not reach out to the people you trust? Asking friends and family for a recommendation is a much safer avenue to finding the perfect date night experience.

What if we applied this type of thinking to your search for the perfect employee? Rather than leave it up to a random internet search, ask the people you already know, like, and trust… your employees.

What is an employee referral program?

An employee referral program is a structured system by which you ask existing employees to recommend people they know for open positions within your organization. Employees often receive some sort of incentive for their assistance.

An employee referral program leverages the power of your employees’ networks and can save you time, money, and a huge headache when it comes to hiring the best talent for your business.

Benefits of an Employee Referral Program

There are many benefits to utilizing an employee referral program as part of your hiring strategy. These include:

1. High Quality Hires

Good employees know what skills are necessary to excel in a position and understand the workplace culture. When they recommend someone for the job, there’s a good chance they have the qualifications necessary to successfully perform in the role.

2. Decreased Turnover Rates

With employee turnover rates on the rise, you’ll want to keep it front of mind when you’re making hiring decisions. According to ERIN, 45% of referred employees stay with a company longer compared to 22% from job boards and 33% from career sites.

3. Less Time and Lower Cost Per Hire

According to LinkedIn, employees hired through referrals take an average of 29 days to hire and onboard, whereas job boards can take 39 days and a career site can take upwards of 55 days. The less time it takes to hire and onboard means less revenue lost, fewer employees stressed because they are handling multiple jobs, and more productivity from your new hire.

Using a headhunter? According to Jobvite, you can expect to pay between 15% and 25% of the gross annual salary of the candidate. If you’re hiring an employee at $100k per year, that’s $15k to $25k in headhunting fees. The cost to reward an employee for an amazing referral? Around $2,000.

4. Increase Employee Satisfaction and Loyalty

Doesn’t it feel nice when you have a hand in the decision-making process? Employees that refer candidates feel like they’ve contributed to the company, making them more engaged and more likely to stay.

Employee Referral Program Ideas

Now that you see the benefit to you as the employer or hiring manager, how do you create an employee referral program that encourages your existing employees to introduce you to their quality contacts? There are a number of ways to do this and best practices that you can adopt to get the most out of your program.

Make it Clear What You’re Looking For

In a mid-sized to a large company, one department may have no idea what another one is working on. In order for employees to make connections, they need to know what your expectations are for the new position. When you reach out to employees looking for suggestions, provide them with all the details you can. This should include:

Job descriptions Desired experience Necessary skills

Make it Easy for Employees to Refer

Consider the referral experience from your employees’ point of view. Is there a simple form for them to submit when they recommend someone, or do they have to jump through a variety of complicated hoops to pass along their referrals? Some companies even host recruitment happy hours where existing employees can invite friends who might be a good fit.

The easier you make it for your employees to refer their contacts, the more quality candidates will be presented to you.

Keep Your Employees Updated on Referral Status

It’s frustrating to make a suggestion or an introduction and not know if it’s been acted upon. When your employee recommends a colleague, keep them updated as to the steps of the hiring process. Some times to check-in include:

When you receive an application When you make contact When an interview is scheduled When a position has been offered to their contact When the position has been given to someone else (after the candidate has been contacted)

Provide a Juicy Incentive

Surprisingly, this may not always be a monetary reward. While money is always appreciated, you can offer a combination of "cash" and experiences, time off, gifts, etc. For some, these may be even more desired than a financial incentive. One great option is to give your employees the choice. That way, you know they’ll be motivated to help. A few employee referral incentive ideas to get your creative juices flowing:

Cash bonuses Gift certificates to their favorite restaurants and local establishments Weekend getaways or week-long excursions for frequent referrers VIP parking Show tickets Physical gifts (it’s important to let them choose so they don’t end up with something they can’t use) Perks like a gym membership or massage

The sky's the limit when it comes to thanking your employees for their referrals. You can also consider using a platform like XoxoDay to make distributing employee referral perks as easy and streamlined as possible.

Show Appreciation for "Frequent Referrers"

If you’ve got employees that consistently send you quality employee candidates, acknowledge them publicly. This shows your amazing team members that they are appreciated and motivates other employees to step up their referral game.

Employee Referral Program Examples

Looking for real-world examples of these programs in action? We’ve compiled a few employee referral program samples to introduce you to some of the possibilities.

Inmobi, a mobile advertising company offers referring employees the choice of a bike or a trip to Bali. They park the vehicles in front of the company headquarters to motivate employees to participate. Accenture, a consulting and IT company encourages philanthropy and community involvement by letting their employees donate a part of their referral bonus to a charity of their choice. Distillery, an American software development company gifts their employees new tech gadgets for every referral they make. Atlassian software company encourages employees to "Refer-a-Mate" and offers them $2,000 in cash bonuses. Intel tech company takes financial incentives one step further by doubling their employee referral reward for women, minorities, and veterans that are referred to the company.

If you’d like to tap into a pool of qualified, trustworthy, easy-to-hire (and onboard) candidates, an employee referral program can help. Instituting this type of hiring process in your organization can save you money, time, headaches, and the pain of having to repeatedly hire for the same position when your first employee doesn’t work out well. In addition, you’ll improve your workplace culture and enhance your brand.

An employee referral program is the best thing you can do to improve the quality of your incoming employees. Choose your incentives wisely and then watch the quality candidates roll on in.

Originally published Mar 9, 2022 7:00:00 AM, updated March 09 2022