What is an employee referral program?
An employee referral program is a recruiting and hiring strategy where current employees refer people they know for jobs at their places of work. Employers can motivate staff to recommend applicants by offering incentives and advantages.
One of the best ways to staff your organization is to build a referral network. Your current team members have a vested interest in hiring individuals who will reduce rather than increase the burden. Additionally, they’ll be more inclined to suggest applicants who will enhance your culture. When they are working with people they enjoy being around they are happier.
Even when you pay a referral bonus for each hired candidate, it’s typically less expensive to hire through referrals. Additionally, compared to new workers who are recruited conventionally, those who are recruited through an employee recommendation program generate 25% greater profit for their employers.
It is important to know where the employee referrals usually occur. There are three main categories from where employee referrals can occur:
Word of mouth
This is straightforward, but it means that staff members are telling people about news or information rather than communicating it in writing. This might occur over the phone, in person, at a networking event, etc. merely conversing with people about the business, jobs, solutions, services, etc.
It’s difficult to ignore social media when it comes to employee recommendations. Social media platforms like Twitter, LinkedIn, and Facebook have enormous reach, and the majority of employees have one or more social media profiles. It stands to reason that social networks will be crucial for efficient employee referrals.
The following situations also include employee referrals, albeit the first two are likely the more common. For instance, blogs, forums, chat apps, email, and text messages. Employees can be rather active in a variety of settings when they can recommend your business, products, or services.
How to create an effective employee referral program
There are a few strategies for developing effective employee referral programs which are:
1. Obtain management’s support
You must obtain management approval before beginning any internal employee referral program. You’ll need them to aggressively urge staff members to participate in these programs as well as comprehend the importance of these initiatives. The rest of the company will take it seriously if they do.
Management can also be a resource for setting hiring objectives and allocating funds for the referral program. However, if your budget doesn’t fund the program, management approval isn’t adequate, so it’s crucial to completely comprehend how the program functions within your company’s constraints.Know your hiring needs and needed resources before you go to management with demands.
2. Establish a simple referral procedure
It must be clear and simple to engage in a referral program if you want employees to do something extra (beyond their regular job obligations). So that an employee doesn’t feel like making a referral would be extra labor, referral criteria and rewards should be simple to understand and apply. There are several ways to simplify this procedure:
● Utilize a tool for employee referrals online
● Make a basic online form
● Make an email template that staff members can use to quickly recommend qualified candidates.
Each time you publish a new position, prepare to email referrals for assistance.Giving employees corporate resources that make it simpler for them to speak with possible recommendations is another strategy to promote more referrals. Employees can effectively spread the word about your business by using tools like a corporate introduction video or a career page with employee reviews and job descriptions.
3. Set objectives for the program
While getting more qualified candidates for open positions is your ultimate objective, set some precise, attainable goals for a new employee recommendation program. The program should also have a deadline so that you know when you need to accomplish these targets. The following are a few objectives you could set:
● 25% more competent applicants for available positions are needed.
● Ten days off the hiring process.
● Reduce staff turnover by 50% in the first quarter.
4. Offer a variety of rewards
Your employee referral program ought to include a reward, whether it’s a monetary reward, a non-monetary reward, or a combination of both. For instance, you may offer presents or additional time off in place of a referral bonus.
Paid vacations, entertaining gifts (such as noise-canceling headphones or dinner at a fancy restaurant in town), and financial contributions to the employee’s preferred charity are some other suggestions for employee referral programs. Even if some of these rewards are less expensive than providing monetary pay, employees may still find them enticing.
Asking your staff what would encourage them most is the greatest method to decide what incentives to provide. Additional suggestions for employee referral programs are provided below:
● Hold competitions: Holding competitions between teams for referrals and awarding prizes can help create excitement and promote teamwork. Recognize top referrers to raise worker satisfaction and promote a culture of referrals.
● Think beyond money: Ask your staff explicitly what kinds of rewards might encourage them to recommend applicants by conducting a poll of them. They are more likely to refer if they are enthusiastic about doing so.
● Adapt design based on locale: To make your referral program unique, conduct some research on the area. Consider any unique companies or services that are exclusively offered in your neighborhood that employees would enjoy.
If you do choose to provide financial referral bonuses, think about employing a tiered approach. This can entail paying more for those jobs where candidates are harder to come by. Giving a base sum for each referral and then extra money for each stage the candidate successfully completes is another method to construct a tiered system. Additionally, you can decide to pay the new hire after six months.
5. Make the program announcement and give directions
When launching a referral program, you want to let everyone in the company know about it right away. Publish your incentive plan and draw attention to the most alluring incentives. Make sure to offer detailed guidelines so that everyone is aware of the referral process.
Deliver the instructions via a video, a PDF that can be downloaded, or a webpage on the internal website of your business. To make the information readily available, it’s also a good idea to put it in areas where employees congregate, such as a break room. In your new hire onboarding process, consider information regarding your employee referral program.
6. Thank the staff members who recommended applicants
When an employee recommends a candidate you hire, thank them for their contribution to the success of your business. Try these to identify them:
The publication of a profile of them in the business newsletter, mentioning them on the business’s social media channels, and highlighting their contribution on the internal website or communication channel of the organization.
7. Make referrals a part of your company’s culture
Your referral program shouldn’t feel like an extra benefit for customers at your company. Instead, incorporate it into the corporate culture. While it needs to be a part of the onboarding procedure, it’s also beneficial to incorporate it into other processes across your business.
The program will feel more organically integrated into the business in this manner rather than feeling like a recruiting tactic created to increase hires and save money.Here are some ideas for integrating your referral program with the culture of your business:
· Have a formal launch to generate excitement for the program. Plan a party or mention the initiative at a corporate gathering. Provide the most crucial information to workers while concentrating on encouraging participation.
· Encourage employee referrals by advertising the program. Think of launching a few promotions each year to promote the program internally. To increase employee engagement, use a memorable catchphrase and other marketing strategies.
· Host quarterly happy hours for hiring. This might be a terrific method to have a casual meeting with possible applicants. Invite their recommendations, and have your staff provide food and beverages.
8. Monitor your referral program’s performance
It’s crucial to monitor your results to determine whether your program is effective at your firm (or pinpoint areas that need improvement). Referrals ought to be assessed for both quantity and quality. For instance, consider:
● The overall quantity of referrals made
● The number of referrals that led to employment
● Whether you employed additional recruiting techniques or referrals, you filled more positions.
● How long the candidates were employees of the business
● How the program is seen by managers and workers
Ways to create an employee referral program
1. Determine when to request referrals
Decide first whether you want to use recommendations to find competent individuals. Will you start the hiring process by requesting recommendations or will you first try the more conventional approaches, such as posting jobs? Do you want to use them for all available positions or only for those that are more difficult to fill?
When you’ve established your hiring objectives, these queries will be simpler to respond to. For instance, it makes sense to ask for referrals right immediately if you want to hire prospects more quickly than usual because they have been shown to shorten the hiring process overall.
It’s also crucial to think about previous hiring practices for a particular position
Consider that your business frequently hires new designers, but lately you are having trouble finding qualified applicants. This is a signal that it’s time to investigate potential new candidate sources, such as recommendations from present workers. On the other hand, there’s no need to alter your hiring practices if you’ve always discovered talented designers on portfolio websites.
2. Promote your internal referral program
How involved your coworkers are in the process will determine how effective your employee referral program is:
• The proper way to refer someone (and that you want them to refer someone, to start with);
• Making a referral is simple and fast.
• What are the role’s prerequisites are.
Employees will respond appropriately if the procedure has been established and explained clearly, which will result in a more effective employee referral program. Here is how to go about it:
• Describe the position and the characteristics of your ideal applicant. Let your coworkers know what you’re looking for via email, a messaging app, or the intranet. Include crucial information like your job title.Include pertinent information, such as the job title of your upcoming hiring, the team they’ll be working with, their primary responsibilities, and the qualifications they must meet. Use this external network employee referral email template alternatively if you also want recommendations for candidates from people outside your organization (such as clients, business partners, etc.).
• Describe the procedure for submitting employee referrals. The first step is to request candidate recommendations from your coworkers. You must now explain to them how to accomplish that. Ensure that the procedure is simple and quick. You can go from there if they only give you the candidate’s profile (for example, their resume or LinkedIn account, whichever is simplest) and contact information.
• Evaluate and speak with suggested applicants. It’s time to examine prospects once you start receiving fascinating ones in your email. If their profile complies with your needs, adhere to your standard employment practices (e.g., schedule an interview or send them an assignment). However, if you discover any deal-breakers, inform the applicants that you won’t be taking them into consideration for the position. However, first, confirm that they have been referred or explain how you discovered their profile. You can utilize the email template provided here to contact recommended prospects.
3. Encourage and reward staff members
You get new hiring allies when you establish an employee referral program among your coworkers. But it’s not that easy; it’s still your responsibility, not theirs, to discover qualified applicants. It’s not always on their minds to recommend potential good fits because they have their own responsibilities and initiatives to work on. You might need to motivate the procedure at this point.
Coworkers can be greatly motivated by a referral bonus program for employees. When individuals perceive a personal benefit, they are more inclined to consider and suggest contacts in their network who would be a good fit for your open positions. Ensure that everyone on staff is aware of the rules governing the employee referral bonus.
To clarify the bonus’s operation and provide additional information on an employee referral policy, you can send an email with an employee referral program announcement. Know what qualifies as a successful employee referral and when an employee can receive a referral incentive (for example, employees receive a bonus for each referred candidate that is employed or for each referred candidate who stays with the company for a certain amount of time).
Bonuses for employee referrals don’t have to be excessive. Employees can be easily motivated by giving them small, inexpensive rewards like gift cards, event tickets, or extra vacation days. Trying to find extra motivation? You can utilize the employee referral program examples and bonus suggestions we’ve gathered to inspire your coworkers and thank them for their useful recommendations.
4. Monitor worker recommendations
Finally, you must monitor and examine some HR indicators to assess the successor failure of your employee referral program. These might consist of:
• The ratio of hired referrals to overall referrals: Or, to put it another way, what percentage of the recommended candidates were recruited (or progressed to the last hiring step, or another “successful” milestone)? This indicator will demonstrate whether the candidates your staff suggests are in fact qualified for the positions you have open. If your coworkers frequently suggest applicants that are ineligible, you may need to clarify your qualifications or reevaluate why they are making these recommendations in the first place.
• Number of referrals per role/department: If you frequently find qualified candidates for a particular position through referrals, this is important information to remember for the next time you post that position. Instead of posting the position on job sites or utilizing other methods of recruitment, you can save time and money by immediately asking for references. On the other hand, if staff members from a department are reluctant to recommend their buddies, that may indicate a more serious problem. These team members may be reluctant to extend an invitation to new members because they are dissatisfied with their work, management, and/or office environment.
• Retention and turnover rates for referred candidates compared to the rest of the workforce. Is it true at your organization that referred candidates stay longer, despite the widely known figure to the contrary? If so, does this apply to all departments or just certain roles and levels of seniority? You can use the answers to these questions to decide if recommendations are a good alternative, and you can even use them to support your case for buying employee referral software or raising your employee referral bonuses.
After learning the fundamentals, you can read our other tutorials on how to create your first employee recommendation program or how to improve your current referral procedure. You can also look into these four suggestions for employee referral programs that you can test out at your business.
Benefits of an employee referral program
Save time and money
The organization can save a lot of time and deal directly with acceptable prospects by having your current staff make a pre-selection of them rather than weaker applicants. Additionally, referral hires are frequently better prepared for the interview since their colleagues assist them to prepare, and applicant screening and job interviews take less time.
Since there is no need to place pricey job adverts or employ headhunters, the general recruitment costs are also lower. The organization can rely less on external recruiting strategies as the pool of employee referrals grows. This is because of more specialized hiring practices. The possibility of hiring is increased if it occurs through an employee recommendation scheme.
Experience in numerous businesses demonstrates that candidates who are hired in this manner become accustomed to their roles more rapidly and become productive early. This is also because referral-making employees feel more accountable for their recommendations and give their new acquaintances stronger initial support as a result.
Vacancies are filled more quickly, and the possibility of long-term work ties is increased
Employees are more loyal than other candidates and stay with their new employer for a longer period. When compared to employees that were hired through various recruitment techniques, their turnover rate is exceptionally low.
Hiring through employee referrals has a favorable impact on the office environment. Employee referral programs have a favorable impact on business culture because goodwill relationships foster a sense of community among employees.
Employees feel appreciated when given the chance to take part in the hiring process, which raises motivation and satisfaction levels. This enhances the corporate brand and fosters a sense of teamwork. After all, having many successful referrals is good for a company’s reputation.
Increased staff diversity
Employee referral programs also provide intangible benefits to employers in the form of increased staff diversity and organic company growth. A 2012 CareerXroads study debunked the long-held misconception that “referrals have a negative diversity impact,” revealing that employee recommendations are “the most productive source for diversity recruits, way ahead of major job boards, company affinity groups, and diversity career fairs.”
Poor cultural fit accounts for 89% of hiring failures, and the moment an employee quits, the timer and expenses reset. Employee recommendations can protect against a lack of “fit.” Referred personnel are better acquainted with the nuances of the corporate culture that for external hires could later prove to be an unwelcome surprise and drive them to leave, in addition to already having a personal connection within the organization.
Emphasis on Culture
According to a recent Towers Watson survey, 54% of the employers polled said it was tough to fill open positions, even during a recession. Susan M. Heathfield, a consultant in human resources, asserts that there is a straightforward fix for the problem: “Companies may overcome the shortage of top performers by developing a culture that generates exceptional employee referrals.” They complement one another. Employee recommendations are crucial in developing a welcoming, sociable culture, yet without a welcoming workplace, employees won’t recommend their jobs to others.
Hiring efficiency upcoming trends
Programs for employee referrals should advance and become more well-known. Why does this matter? Non-employee referral sources are now available. Despite the hazards associated with this kind of program, many businesses are aware that their business partners and former workers can be reliable referral sources.
Sophisticated third-party software with social features that can access employees’ social networks in addition to tracking referrals. For example, startups like Top Prospect and AdviseMeJobs in Germany have discovered a market in this area. Employee referral programs will be a more prominent and well-known aspect of a company’s culture and talent acquisition strategy, resulting in hiring efficiency.
If these patterns persist, recruiting will inevitably become less purely business and more social instead of seeking applications, courting individuals. Therefore, the next time a position opens up at your organization, be sure to start by talking to the greatest recruiters you have on staff: your current employees.