Employee referral programs are a form of selective hiring where employers encourage their current employees to recommend qualified candidates for open roles within the company.

These programs are a useful way to include non-TA employees in their organization’s hiring process. When done well, employee programs can be incredibly helpful to a company’s recruitment process. Referral programs lead to faster candidate screening times, lower turnover rates, and ultimately better hires. They also result in a lower cost per hire as it minimizes the need for sourcing and job boards.

Why do Referred Candidates make Great Hires? 🤔

With the standard non-referral recruiting process, both the candidate and company have access to basic information about one another. The candidate can gather information online and the company can gauge whether the candidate is a good fit through screening their application and resume. Although the interview process will reveal some deeper insights about the two parties, both have to judge the opportunity only based on the information they were able to gather themselves.

With referrals, the candidate and the company have a third party that can provide unique information about the candidate, the role, and the organization. Insight into the culture and company leadership style is especially beneficial, as these are important job aspects that are hard for candidates to judge based on their online research and a few interviews. That means referred candidates often have more understanding of what to expect, leading to better experience and less of a likelihood that they’ll quit. The referrer can also provide the hiring team with more specific information about the candidate like their strengths and weaknesses, personality traits, and professional goals so that recruiters and hiring managers can make more confident hiring decisions.

"At Fetcher, a high percent of new hires are referrals because our team does a great job explaining the job and our culture. The process is much simpler because the candidates already have these insights."

- Andreina Naim, Head of People

Research from the Quarterly Journal of Economics found that referred candidates were less likely to quit and produced higher profits than non-referred workers. And referred applicants are 85% more likely to be hired than applicants applying through a job board!

Get Results from Your Referral Program 📈

Recruiters, hiring managers, and candidates need to ask the right questions if they want the best results. The hiring party should ask if the referrer has worked with the potential hire in the past. Referrers with a past professional relationship with the candidate will be able to give better insight than referrals who are friends or family. Determine how long your employee has known the candidate and what the nature of their relationship is. The connection between the referrer and the referee matters. When the two know each other only through social media, the outcome is on par with that of hiring a candidate with no referral.

Referred candidates also need the right information before proceeding to the screening and interview process. Potential hires should ask how long their referrer has worked with the company and if they work in a similar role they’re applying for. This will help them assess the quality of the information their referrer is providing. Referrers and recruiters need to make sure that referred candidates are clear on the job’s responsibilities. It’s also helpful to relay what the company is NOT looking for.

How to Reward Referrals 🏅

Rewards for referrals are essential in order to motivate employees to keep recommending great contacts that could turn into great hires. There are a variety of ways to show your appreciation to team members that refer candidates – sometimes a combination of rewards is the smartest choice. At a bare minimum, always publicly thank employees for their referrals either on a company-wide email, Slack, or at a meeting. Prizes like tickets to an event or a physical prize like fancy headphones are also fun ways to reward your employees.

Keep in mind, there are pros and cons to monetary bonuses. Referral bonuses tend to be between $500 and $2,499. Strictly monetary referral bonuses incentivize employees to post job openings on LinkedIn and social media sites. Employees won’t always have quality relationships with the hundreds or even thousands of their followers. While it’s helpful to reach a larger number of prospects, it won’t lead to the types of valuable referrals employees can make when recommending their closer peers.

"At Fetcher, we created a referral program that has been a great success, especially in LATAM. We encourage everyone to recommend people, and we even have a communication channel in Slack focused on the referral program. There's nothing more beautiful than working with a former co-worker or colleague at your current job."

- Agni Bermudez, Talent Acquisition Manager

Consider implementing a tiered reward system. Issue larger bonuses or prizes for harder-to-fill roles. Add additional rewards based on what stage of the hiring process a referee reaches or based on how long a referred hire stays with the company. Intel started doubling its referral bonus when referees from underrepresented groups are hired. Lastly, give referrers a small reward no matter what, like a gift card.

Show good referrers your appreciation. Whether it’s a bonus, public recognition, or a special prize like tickets to a sports game, it is a meaningful way to incentivize future employee recommendations. Have a written policy for referral program rewards to ensure the awards don’t vary from referrer to referrer.

Finding Great Talent is a Team Effort 🤝

Make sure employees know the referral program exists! If your referral program isn’t communicated well, it won’t gain traction. Include information about the program when onboarding new employees, send emails when new roles are created and remind your team in all-hands meetings. Share your hiring needs and hiring plan for the year with employees. Make sure employees understand your company’s values as it could impact who they refer.

Don’t forget to keep team members that make referrals updated! If an employee doesn’t hear back from a recruiter, they may not want to make referrals in the future. Let them know if their referral wasn’t the right fit and encourage them to keep thinking of potential great hires.

Successful referral programs take pressure off your TA team. They can reduce your recruitment budget and average time to hire. Perhaps most importantly, referral programs keep all employees informed on their organization’s long-term plans for growth and create more employee engagement. Review your program annually to determine its results like the number of referred candidates hired, referred candidates’ turnover rate, and workplace participation. Programs can always be revamped if your hiring goals aren’t being met. Now that you know what makes an employee referral program successful, it’s time to give it a try!

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