Sometimes, the best candidates are within your current employees’ networks. Utilizing employee referral programs can help bring out some of the best talent, while inspiring team members to look within their circles to find qualified candidates. Employee referrals are critical aspects of a solid recruiting process, as they yield great results.
Aside from their ability to connect organizations with more qualified candidates, referral programs can increase team morale, aid in retention, and contribute to a more positive work environment. Read on to learn more about the various programs, and how they can improve your current practices.
What are employee referral programs?
Employee referral programs encourage current employees to recommend qualified candidates from within their networks for open job positions. In return for a successful referral, they receive rewards or incentives (typically of monetary value). A referral program will incorporate the above in any way that allows for organizations and employees to collaborate on hiring efforts, and encourage employees to recommend their peers.
Once a recommended candidate has successfully been onboarded and made it past a probation period, the employee who submitted the referral will be rewarded. While a typical program will reward employees monetarily, there are many different and creative ways to implement referral programs within an organization.
Why are employee referral programs important?
Employee referral programs are valuable assets in a strong recruiting and hiring process. Utilizing referrals can help ensure that quality candidates are in your recruiting pipeline and that the job opportunity is seen by more prospects than otherwise would. Here are the top reasons why such programs can improve overall recruitment efforts and effectiveness:
Improves quality of hire
A clear, rewarding employee referral program can help improve quality of hire by encouraging employees to look within their networks for the strongest candidates to fill the vacancy. According to John Sullivan Research 88% of employers state that referrals are the best source for above-average applicants. Because employees are referring candidates from within their own circles, they are more likely to be aligned with company culture and values. These candidates are also more likely to stay with the company longer.
Reduces employee turnover
By including employees in the hiring process, you are helping them feel like the valued contributors that they are. Additionally, the candidates they refer are more likely to be aligned with the company culture and values (in addition to having the necessary skills), allowing them to help foster a positive, productive, and healthy work environment. A study by ICIMS found that referrals stayed with a company 70% longer than non-referrals, while employees that refer others stay 20% longer than those who don’t. The impact employee referrals can have on a team’s overall performance is clear; simply, employees are more inclined to remain with a company if they like their colleagues and enjoy the workplace environment.
Helps cut costs
As employees do much of the recruiting fieldwork to source candidates from within their networks, external costs associated with recruiting (such as advertising on job boards or recruiter fees) are reduced or eliminated altogether. As the open role reaches a wider audience, it is likely to be filled quicker too, helping cut costs associated with the time it takes to make a hire. In fact, a study by Cision found that 55% of companies say employee referrals reduce hiring costs!
How to have an effective program
Most critically, an effective referral program will be user-friendly, simple, quick, and rewarding. The objective of these programs is to get more qualified candidates into the pipeline. By creating a program that is unique to your specific needs, easy to take part in, and rewarding for those who do participate, your organization can reach a broader audience and experience environmental improvements such as increased morale and retention.
Understand your hiring goals
When trying to understand your goals, ask yourself these questions: What are my hiring needs? What are the short-term and long-term goals of this program? When you have a clear picture of what you hope to achieve with a referral program, you can successfully design and implement one that suits your needs.
Some example goals may include:
- Reduce recruiting costs
- Improve retention
- Reach more passive, qualified candidates
- Improve team morale
Develop a strategy, process, and rules
In developing a referral program, it is important to keep things simple and easy to understand, while making sure expectations are clearly outlined. It can be helpful to create a form that clearly communicates role requirements and candidate qualifications, and have a set way for employees to submit the form (such as via email). Providing employees with forms can ensure that their referrals have the proper qualifications, which can help make the entire process more efficient. With an easy-to-understand referral system, more employees are likely to participate.
Offer a reward that will motivate employees
More importantly than being simple, referral programs must have rewards that grab employees’ attention and motivate them to participate. If the reward isn’t enticing enough, employees may dismiss the opportunity altogether. While employee referral programs typically offer monetary rewards or salary bonuses for a successful referral, there are other ways to reward employees. Some ideas include:
- Additional PTO
- Gift card
- Employee recognition
5 Employee Referral Program Ideas
Employee referral programs can help businesses reach more qualified candidates–and quickly. Consider trying one of these programs to amp up your current recruitment efforts:
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Employee referral bonuses
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Additional PTO
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Employee recognition
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Charitable donations
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Event tickets
Offering employees an incentive to recruit talent is a great way to positively impact your hiring efforts and create a larger pool of potential candidates. Doing so will motivate employees to seek talent from within their networks. While there are different referral bonuses, monetary incentives (commonly between $1,000- $2,499 but varies based on position) seem to be the most effective. Typically these bonuses go into effect once a candidate has been working with the company for a set amount of time.
As culture has increasingly begun to value and embrace a better work-life balance, additional paid time off is highly desirable to professionals. If your company still limits the paid time off it allows employees, offering additional PTO as an incentive can be an excellent way to encourage employees to refer top-tier candidates. If you’re unable to offer an extra day off, consider allowing employees to work remotely for the day. Allowing employees to take an extra day off can be great for productivity. A study by SHRM found that vacation days can alleviate burnout and improve an employee’s focus in their role.
Employee recognition is a great driver of employee engagement, and for a good reason, humans need to feel validated and appreciated. Although perhaps not as inspiring as monetary rewards, employee recognition for successful referrals can help improve morale, job satisfaction, and productivity. Make a point to positively recognize employees who’ve successfully referred a candidate by calling them out during a big meeting, special luncheon, or awards evening. Celebrating an employees’ success publicly can also inspire others to participate in the program.
Devising a program to contribute to a good cause is a great way to inspire employees to participate. Whether they pick the charity or one is determined company-wide, both organization and employee can feel fulfillment knowing that their contribution makes a difference. As an example, DigitalOceans implemented a referral program where the referring employee received a $3,500 Referral Bonus in addition to a $1,500 charitable donation paid by DigitalOcean on the employee’s behalf via Bright Funds. The company also matched any donation the employee made from their payout. As a result, their participation rate increased to 43%, and 40% of their new hires were from referrals (for that given year).
Do not underestimate the ability of smaller incentives, such as event tickets, in motivating employees to participate in referral programs! Amusement park tickets, good game day seats, concert tickets, or vouchers for an activity such as a spa day are excellent alternatives to more costly rewards. Consider offering a variety of tickets to best suit your teams’ interests. While one employee may be motivated by floor seats to a basketball game, another may be more interested in a spa treatment. Keeping the rewards fun and exciting is a sure way to encourage employees to participate.
Key Takeaways:
Prioritizing employee referral programs not only increases the likelihood of reaching more qualified candidates but can also cut costs, improve retention, and foster higher team morale. Each organization is different and may benefit from other programs, but essentially the goal remains the same: get more passive and qualified candidates through the door. Keep the program simple and straightforward, and provide an adequate reward to appeal to more employees. As more employees participate in the program, there is a greater chance that you will find the right person for the role. Be open to change, and consider different programs when developing a solid strategy.
Crystal offers an in-depth Hiring tool, where you can source and assess candidates by learning about their personality, working style, job fit, and team compatibility.
