What is an employee referral program?

An employee referral program is a recruiting strategy where existing employees use their own professional network to recommend qualified job candidates. In exchange, the referer may get some form of compensation, such as a commission or bonus, as a token of appreciation from the company. Unlike traditional talent sourcing that requires advertising vacancies on multiple job boards, a referral program is an internal method used to find the best employees.

Benefits of an employee referral program

The major benefit of an employee referral program is that it helps you to optimise your human resources practices. Identifying the right candidates is one of the biggest challenges employers face. So, professionals have developed multiple modern techniques to address the high cost of hiring and training new employees. The following are some reasons companies choose an employee referral program as their preferred hiring solution:

Improves the quality of new hires

When an existing employee refers a close acquaintance for an open position, they carefully consider the requirements of the position. Their understanding of your company culture, combined with their experience as your employee, helps them identify candidates that are likely to thrive in the role. That’s why candidates from employee referrals tend to perform better.

Increases employee retention

Employees that join an organisation through a referral program often stay longer at a firm than a regular hire. They not only match a company’s culture, norms and values better, but they also integrate quickly with a team with the help of their referee. It makes for a smoother transition that reduces problems, such as personality clashes. In the long-term, it can contribute to a lower turnover rate.

Related: Employee Satisfaction Surveys: What They Are and Why They’re Important for Your Business

Saves time and money

Finding top performers takes time and money. Recruiters can spend months of their valuable time advertising, interviewing and screening potential job candidates. Even when they get to the later stages of the interview process, candidates may accept other offers, resulting in even more delays. At the same time, other employees have to compensate for the staff shortage by taking on additional responsibilities and since the hire time for referred employees is shorter, the costs also decrease.

Creates a sense of accomplishment

For a referral program to be successful, you need to mobilise your current workforce. Typically, your most engaged employees will take part in the scheme to exemplify their dedication to your business. They will put in the effort to shortlist the most viable candidates and feel a sense of achievement when their referral gets hired. Rewarding these employees and supporting their effort will reinforce their loyalty and motivation.

How to create an employee referral program

The following is a guide on how to create an employee referral program:

1. Create an easy referral process

Before you announce your company’s referral program, make sure you have a simple referral procedure that your employees can follow. Remember that your employees have other responsibilities. Therefore, you want to make the process as quick as possible to encourage them to participate in the program. Test your procedure for glitches, as this can also discourage candidates from applying for the vacancy. Here are few ways to create a user-friendly experience:

• Use technology, such as online software, to build a platform for your referral program
• Create a simple online form that employees can use to fill in their referral’s details
• Put a CV dropbox in your HR department’s office
• Send out an email template that employees can use to refer qualified candidates

2. Establish your recruitment goals

The goal of your referral program is to hire quality candidates who fit your company culture and intend to bring value to your organisation for the long term. However, it’s also important to set short-term goals so that you can measure the success of your program. For example, your target could be to reduce the hiring process by at least 10 days. That way, if you don’t see results, you can proactively address any issues.

3. Incentivise your employees

In the planning stage, come up with a combination of monetary and non-monetary incentives to attract your employees to register for your new hiring scheme. This is a sustainable approach that promotes the longevity of your referral program. Although cash rewards are a popular choice, the costs can accumulate over time. Instead, consider offering an experience, such as a gift voucher, trip or extra annual leave.

If you opt for compensation as your primary incentive, try using a tiered scheme. For example, announce higher cash rewards for senior positions and offer cash bonuses for referrals that stay at your company for at least six months.

4. Announce the program

Next, promote your referral program to start gaining traction. Communicate the important details visually through a video or brochure. Publish your incentive structure and highlight the most attractive rewards. Give explicit instructions for the referral process so that your employees can follow them with ease. Market the program via email, internal media channels and bulletin boards, to keep the details accessible.

5. Explain job requirements

For each job position, share a detailed job description with your employees. This way, employees will instantly connect with your requirements and help you establish the most suitable candidates. While your employees might have an idea of what culture fit means to your company, it’s best to be as specific as possible. This helps employees in different departments and job functions identify professionals that work outside of their area of expertise. A good way to share this information is by providing a link to the job description in your email announcements.

Related: How to Write a Job Description

6. Mobilise brand ambassadors

Think of your employees as brand representatives of your company. Anytime they socialise with professionals outside of the workplace , they have the chance to positively impact the reputation of your business. This can determine whether qualified professionals want to apply for jobs with you.

Hold a referral training session to prepare candidates with content to share with potential referral candidates. Give them resources, such as your organisational mission, valuable statistics and promotion pathways to help them confidently discuss the job prospects in your company. You may also ask your top employees to join you at hiring events so that they can talk about their role and practise these skills.

7. Acknowledge good referrers

Identify the employees who refer you to the highest quality candidates. These are the candidates that stay over six months and perform their duties independently and efficiently. Along with monetary rewards, publicly recognise good referrers in team meetings. Your gratitude will encourage them to continue their effort. Since their professional network has a proven track record, you can reliably speed up the hiring timeline of their referrals.

Some companies implement a points system to incentivise good referrals. As employees refer more candidates, they get points that they can exchange for valuable prizes. The scheme also awards points based on the quality and seniority of the referral candidate.

8. Experiment with different referral tactics

The success of your referral program depends on your adaptability. The best way to continue the momentum of your program is by switching between referral tactics. This prevents complacency and renews your employees’ interest in the program’s incentives. Try these techniques to keep your referral program feeling fresh:

• Plan spontaneous programs. For example, invite your employees for a free lunch to encourage participation in the program.
• Invest in gamification technology. Online platforms make it easier for your employees to refer candidates and receive points that they can exchange for actual rewards.
• Offer special bonus schemes. For example, you can double rewards for employees who refer people from diverse backgrounds.

9. Integrate the program into your company culture

Your employee referral program is a unique characteristic of your company. Use it to drive your culture, values and mission. Here are a few ways to incorporate your referral program in other employee engagement activities:

• Build enthusiasm around your referral program with an official launch party
• Run marketing campaigns to boost employee involvement throughout the year
• Invite referral candidates for recruitment cocktails to get to know them in a casual atmosphere

10. Track the results of the program

It’s important to design a referral program that is specific to the requirements of your business. Thus, to ensure your scheme’s success, you need to evaluate its results and make necessary changes regularly. Since business is a dynamic environment, your hiring process also needs to respond to shifts in the job market. The following are a few metrics to consider when analysing the quality of your referral program:

• The total number of referrals made
• The number of referrals versus the number of successful hires
• The number of referral candidates that left before six months
• The number of referral candidates that were employed for a year
• The number of successful hires from the program versus other hiring mediums
• Your employee’s opinions and feedback on the referral program
• Managerial observations about referral candidates’ performance