These days, many companies are relying on an employee referral program to attract new candidates to their business. This is because studies have shown that referred candidates tend to be of higher value. They are also more likely to accept an offer, perform better, and stay at the job longer. All this results in lower recruitment costs, reduced turnover, and more engaged and productive employees.
If you are thinking about introducing an employee referral program in your business, then read on. We are going to explain what employee referral programs are, what the benefits of requesting referrals are, and what steps you need to take to implement a successful program.
Table of Contents
Table of Contents
What is an Employee Referral Program?
An employee referral program, also known as a recruitment referral program, is a hiring strategy where employers ask their existing employees to recommend or refer qualified candidates who could be a good match for the company. It is a way of expanding the talent pool without the need to reach out to outside sources. Think of it as a cross between an internal and external recruitment process.
Compared to more time-consuming recruitment strategies like human design or virtual recruiting ideas, employee referral programs are based on the assumption that employees generally know people with similar skills and attitudes. So, if you have a valuable employee, then their contacts are also likely to be of value. And because someone has been referred by a friend or associate whose opinion matters to them, then they are far more likely to become a productive and motivated member of staff. And, in return, the original referring employee usually receives some form of incentive.+
Do Employee Referral Programs Work?
Provided you do the right planning, promote it well, and offer the right incentives, employee referral programs make good business sense. They can be an easy and cost-effective tool for avoiding understaffing and overstaffing issues in your company.
Here are the main advantages of including an employee referral program in your recruitment and selection process:
- Faster time-to-hire: Finding, interviewing, and onboarding the perfect candidate takes time. In fact, most of the time is usually spent trawling through the applicant pool. Employee referral programs give you a head start as your existing employees hand you, potential candidates, on a plate. This saves your recruiting manager roles a great deal of valuable time.
- Saves you money: Employee referral programs are also very cost-effective as your sourcing strategy relies primarily on word-of-mouth and internal communication.
- Top talent attracts top talent: People tend to surround themselves with those that are like them. Your employees also know whether or not someone would fit into your company culture. So if someone you consider a valuable employee refers a potential candidate, they are likely to become an equally valuable member of staff. Plus, your employees will only refer candidates they can be sure won’t negatively impact their own reputation.
- Improved employee retention: Candidates hired via an employee referral program tend to be of higher quality. They also tend to stay at their jobs longer, improving your retention rate. Employee referral programs also make it easier to rehire former employees (boomerang employees).
How to Build an Employee Referral Program: 4 Steps
If this is your first time designing a program, or if your existing employee referral program is not yielding the results you’d like, then you may be wondering what the key to success is.
In fact, the answer is simple: it’s simplicity, recognition, incentives, and communication.
Just follow the steps below to plan, design, promote and maintain a successful employee referral program in your company:
Plan Your Employee Referral Program
The most vital step of all employee referral programs is planning. If you fail to do the right planning and consider all aspects of your program, then the initiative is likely to fail.
There are a number of aspects you need to consider:
- Make sure you understand and define your hiring needs and resources. Do you need to fill a lot of positions? Are you looking to expand your organization or just fill current vacancies? Are you having trouble finding suitable candidates for certain positions? If so, why?
- Set clear goals for your employee referral program. Try to make these goals measurable. For example, this might be “Increase the total number of referrals by 5% in March”, or “Reduce turnover rate by 10% by June”.
- Clarify the resources you will need to establish your referral program. This includes staff, time, and budgets. You should also assign a specific employee to manage and monitor the program to ensure your goals are met.
Design Your Employee Referral Program
The next step is designing your team member referral program. The key here is simplicity. How will employees refer potential candidates to you? What information will they have about your company and the positions you are looking to fill? What recruitment software will you use to manage applications? How will you ensure your program is clear, consistent, transparent, and fair? And which incentives will you use to encourage your employees to refer applicants?
Most companies choose to use an applicant tracking system for managing job postings and applications. Many come with templates and tools for automating the processes involved in employee referral programs in their employee referral programs.
You should also design a clear employee referral program policy that outlines all processes and procedures so that your current employees understand how the initiative works and what they can expect when they refer a candidate.
Promote Your Employee Referral Program
Once you’ve planned and designed your employee referral program, you need to promote it at every level of your company. Don’t overwhelm your employees with information – less is more. You want to make it as easy as possible for your employees to refer candidates to you. This will motivate them to get on board and spread the word.
You could do this through your intranet or through a mass internal email. Alternatively, simply post something on your social media pages and ask your employees to share it with their contacts. Some companies even hold launch parties for their employee referral programs. This can be a great motivator!
Speak to your marketing department to see what they think would work best.
Maintain Your Employee Referral Program
The final step is monitoring and maintenance.
All company referral programs rely on the motivation and enthusiasm of their employees. Make sure you are recognizing and rewarding your employees on a regular basis. Also, make sure you update those who have referred candidates so that they know if their recommendations have been successful. And celebrate each new hire!
What can you do to keep your employees engaged with your program? Are your incentives working? What about the candidates that are being referred – how many are you hiring? Are they valuable members of staff?
Tracking the right metrics will help you understand whether or not your employee referral program is working. KPIs like employee referral rates, participation rates, and referral to hire ratios are a great place to start
Examples of Employee Referral Programs to Consider
Finally, let’s finish by taking a look at a few examples of successful employee referral programs. See if any of these inspire you to design and launch your own program.
According to Salesforce, the majority of their new hires come from employee referrals.
So what is the company doing right?
Salesforce organizes regular referral events known as “recruitment happy hours”. The company encourages all its employees to bring along their friends and associates to these networking events. Everyone has fun, and potential candidates are given the opportunity to meet with members of the recruitment team to see if they might be a good fit for the company.
Transport company SMRT decided to launch an employee referral program to enhance its workforce, increase its talent pool and strengthen its labour capabilities. For each successful new hire under SMRT’s employee referral scheme, employees stand to earn cash rewards of up to $3,000. A great incentive that has had a positive impact on the company’s turnover and retention rates.
Company referral programs don’t always depend on cash incentives to succeed. In fact, Dutch consulting and IT firm Accenture chose a very different approach.
In fact, the company’s employee referral program is centred around the philosophy that referring people makes you feel good. This might be because you have helped out a friend or associate by recommending them for a position, or because you have helped your company find a great new employee.
Employees still get a referral bonus for recommending successful candidates, but they are encouraged to donate part of this bonus to a charity of their choice. And whatever they donate is matched by the company.
Finally, we can’t talk about successful employee referral programs without mentioning our own fantastic initiative for attracting talented friends to join the Factorial Family!
The employee referral program process at Factorial offers a range of incentives to employees. If they refer a successful candidate, they can pick from a selection of prizes including AirPods, an iPad, or a Galaxy Tab.
Why are we being so generous you might ask?
Simple. Because we believe that our employees are the best people to help us grow. Nobody understands our culture and values better than those who vibe with us every day! And this makes our employees the best talent for finding the newest members of our family. And surely, this love and trust is the cornerstone of all successful employee referral programs, right?