What Is an Employee Referral

When an existing employee or external partner recommends a candidate, this candidate is an employee referral. Deploying employee referrals for hiring helps bridge this gap, offering several beneficial aspects. 

Considered one of the best recruitment methods, employee referrals can be ideal as they are promoted through a company’s best possible ambassadors – the existing employees! Want to know why an organization should opt for an employee referral program and its benefits? 

What Is an Employee Referral Program

An employee referral program is a strategy that utilizes employee peer networks to create suitable candidates to meet job vacancies in a company. This program benefits the recruiter and its employees – the recruiter can cut down on hiring costs, and the employees get incentivized for every successful referral. 

Additionally, candidates who are referred are 4x more likely to grab the job offer as compared to the ones from other sources. Some of the key benefits of an employee referral program are as follows – 

1. It makes the hiring process faster
2. It helps to enjoy a better CPH (Cost per hire)
3. Improves employee retention 
4. It helps find suitable culture and value fits for organizations
5. It makes talent acquisition for challenging job roles easier

How to Set up an Employee Referral Program in Organization

While the advantages of an employee referral program may sound lucrative, a company needs to know the basics of setting it up to obtain its maximum benefits. Here’s how to set up an effective employee referral program –

Choose When to Ask for Referrals

When deciding to use referrals for recruitment, it is important to consider the timing and specific role the company is trying to fill. This can be determined by setting the hiring goals and evaluating the success of past recruitment methods. For example, if the goal is to recruit candidates quickly, using referrals at the beginning of the hiring process may be a good option as they have been proven to reduce the overall hiring time.

Communicate Your Employee Referral Program

Once the company opts for an employee referral program, let the existing employees know about it. The company must ensure that the employees know the job opening, its requirements, candidate profile, how to refer, etc. 

Besides, the company can also offer incentives and bonuses for each successful referral to encourage participation in the program. Try keeping things well-organized and structured. Once the company starts receiving referrals, analyze if they meet the position’s requirements and take things forward. 

Motivate and Reward Employees

When a company starts an employee referral program, the employees become a whole new channel for bringing in new talent. However, that’s an additional slice for them besides day-to-day office work. Therefore, plan a reward scheme for the employees and let them know about it. Rewards may include movie tickets, cash bonuses, vouchers, or whatever the organization finds suitable. 

The company needs to be clear about the terms and conditions for referral bonuses. For example, if it wants to offer a cash bonus for referrals who stay with the company for at least three months, make sure that all employees are familiar with the terms related to the employee referral bonus. It will avoid any confusion and keep things transparent for employees. 

Track Employee Referrals

Now that everything is set up – it’s time for the report card. Start analyzing the employee referral program’s success using key metrics. They may include CPH, the ratio between total referred candidates and hires, department-wise referrals, the retention rate of existing vs. referred candidates, etc. 

The company must determine if the employee referral programs meet its expectations. This program has worked great for some departments while disappointing for a few. Please take note of the figures and from the next openings, use the referral program where it has worked well for the organization.

Benchmark your process with your Industry peers

The company must measure the performance of the referral program process with other organizations considered best-in-class. It will help to identify the internal areas of improvement. Moreover, benchmarking will help to measure the efficiency of previous performances. Besides, the company will be able to identify best practices to increase performance as benchmarking helps to understand how the competition operates. Given this, it’s crucial to benchmark the hiring process with industry peers.

Frequently Asked Questions

How Do You Use Employee Referrals?

Unlike conventional hiring methods, employee referrals are a way to find ideal candidates for job openings through coworkers. To start, the company can create an email with details like the job role, candidate profile, qualifications, and other requirements and send it to the employees. 

To make things more interesting and alluring for the employees, the organization can create a reward plan and announce the same to its employees. It helps motivate them and encourages them to participate in the referral program. 

How Effective Is an Employee Referral?

Approximately 88% of employers believe that employee referrals are the best way to find ideal candidates for a job role. Besides, as per a study, referred candidates have 2.5-6.5% more possibilities to accept job offers. The data itself talks about the effectiveness of employee referral programs. Additionally, it helps save the cost, time, and effort involved in hiring suitable candidates.