8 Steps To Design an Employee Referral Program (With Free Sample)
As a Human Resources professional, you’re probably already aware of the benefits that come with utilizing an employee referral program. Not only does it save time and money by streamlining recruitment efforts, but when done right, it can also drastically improve the quality of your new hires. According to LinkedIn Talent Solutions, it takes, on average, 29 days to hire a candidate referred by an employee. Additionally, employee referral programs can lower your cost to hire and improve retention rates.
This article will explain what an employee referral program is and how HR can develop an effective employee referral strategy.
Contents
What is an employee referral program?
The benefits of employee referral programs
3 examples of employee referral programs
How to design and implement an employee referral program
Sample employee referral program
Recruiting referrals: Best practices for HR to follow
FAQs
What is an employee referral program?
An employee referral program is a Human Resources strategy that encourages employees to refer qualified individuals they know for open positions within the company.
Company referral programs work by offering incentives to employees when their suggested candidates are successfully hired. The rewards often increase based on the referred employee’s tenure at the company. This type of referral system ensures that employees are motivated to recommend top-notch candidates rather than just friends or family members looking for jobs.
Employees can make internal referrals by recommending individuals who are already working at the company for a specific role. Alternatively, they can refer candidates who are not currently employed by the organization but would be a good fit for the position.
The benefits of employee referral programs
Implementing an employee referral program offers several benefits. According to Forbes, referrals result in 70% more qualified candidates compared to non-referrals. Additionally, these programs can expedite the hiring process, save on recruitment agency costs, and reduce employee attrition by 15%, as observed in a study conducted by the National Bureau of Economic Research.
Let’s break the benefits of employee referrals down further.
Increased efficiency in the hiring process By bypassing the need to review numerous job applications, you can promptly connect with suitable candidates. Access to qualified candidates These programs encourage employees to recommend individuals they believe would thrive in the role, ensuring a higher caliber of applicants. Reduced hiring costs By avoiding fees associated with recruitment agencies and minimizing the duration of job board postings, unnecessary expenses can be eliminated. Enhanced employee retention Studies indicate that referred employees tend to stay longer with a company, contributing to improved stability in the workforce. Improved cultural fit Employees better understand individuals who would align well with the company culture and are more likely to recommend candidates they genuinely appreciate. Increased employee engagement Employee referral programs foster a sense of involvement and inspiration among workers, promoting a positive work environment.
3 examples of employee referral programs
Here are a few examples of employee referral programs that companies use:
1. Booking.com
Booking.com needed more bilingual Portuguese speakers. In an effort to increase candidate referrals, HR doubled the referral bonus and organized fun lunches offering Portuguese food with a note requesting Portuguese-speaking referrals. This resulted in a spike in Portuguese-speaking referrals. Referrals also became the number 1 method of finding talent for the company.
2. Intel
Having a diverse workforce is crucial for the success of any company. To ensure inclusivity in their recruitment efforts, tech giant Intel offers a double employee referral bonus. This means that when employees successfully refer someone, they receive a cash reward and double the amount if the person referred is a woman or belongs to a minority group.
3. Salesforce
Employee referral programs are usually formal and done by submitting forms — but Salesforce has an unusual way to attract new employees. They hold happy hours where employees bring potential candidates, so they can mingle with recruiters in an informal setting. Finding the right person for the job has never been so fun for everyone involved.
How to design and implement an employee referral program
To design and implement an effective employee referral program, follow these steps:
Step 1: Define the program’s goals
Clearly establish what you aim to achieve through the program. Will it focus on collecting referrals for various roles or specific positions? Having a clear endgame enhances communication of the program’s vision.
Step 2: Determine the program’s structure
Employee referral programs can range from informal gatherings to dedicated internal platforms for submission and tracking. Choose a format that suits your company’s needs best.
Step 3: Create enticing incentives for employees
Once the program’s workings and objectives are defined, consider what would motivate employees to participate. Options include cash bonuses, special meals, extra vacation time, company gear, or even unique experiences paid for by the company. It’s also worth considering a tiered reward structure based on employee tenure.
Step 4: Develop the necessary program forms
Translate your program into action by creating a dedicated site, drafting email templates, scheduling meetings, or any other means required to bring your program to life.
Step 5: Formalize the process to minimize bias
Employee referral programs can inadvertently introduce biases during the hiring process. Take the time to carefully review and ensure the entire process is fair and impartial.
Step 6: Communicate the program to all employees
It is vital that employees are aware of the program’s existence for it to be effective. Consider integrating it into the onboarding process or other company-wide communications.
Step 7: Continuously promote the program to the workforce
Regularly remind employees about the program’s availability and benefits. Find creative ways to ensure that information about the program is regularly and consistently conveyed.
Step 8: Establish methods to track the program’s effectiveness
As with any project, monitoring progress and value is crucial. Determine how you will measure the program’s success and identify areas where adjustments may be necessary.
Sample employee referral program
Recruiting referrals: Best practices for HR to follow
While there are several advantages to implementing an employee referral program, there are also some potential drawbacks. For instance, relying solely on internal networks can result in a lack of diversity in the workplace. So, it’s essential for the Human Resources department to carefully oversee the process and proactively mitigate such concerns.
Here are some recommendations to enhance your employee referral program:
- Establish a comprehensive employee referral program policy: Having a well-defined structure in place strengthens the effectiveness of the program. When both recruiters and referrers have clear guidelines to follow, the desired outcomes can be achieved consistently.
- Leverage recruiting software: While an employee referral program relies on human connections, utilizing online tools can streamline the process. These platforms enable better applicant tracking and facilitate communication with all parties involved.
- Provide training on best referral practices: Engaging employees is crucial for the program’s success. Regular seminars can create awareness about the program and educate employees on the type of individuals they should recommend to the company.
- Emphasize diversity and inclusion: A diverse workplace fosters strength and innovation. According to research, companies with diverse workforces are 35% more likely to achieve substantial financial gains. It’s imperative to prioritize diversity and inclusion throughout the employee referral program. For example, Intel doubled their bonus for referring people from underrepresented groups.
- Monitor and evaluate results: To ensure the program’s effectiveness, closely monitor its outcomes. Tracking the progress and success of referred employees can provide valuable insights and help identify areas for improvement.
Key takeaway
Employee referral programs are an excellent way of attracting top applicants for a role. Research shows that referred employees tend to be more qualified, stay longer at a job, and be better culture fits. The programs can also cut down on hiring costs and the length of time needed to recruit someone for a role.
By giving workers rewards for recommending the best people they know for the role, you inspire them to participate in the process to the best of their ability. You can be more confident applicants truly have what it takes to thrive in the company.
FAQs
An employee referral program is a strategy used to encourage workers to recommend qualified people they know for open positions in the company, usually via special bonuses.
Usually, employees get a monetary reward like a cash bonus when they successfully refer someone, but other companies offer trips, vacation time, gift cards, products, charity donations, and more.
Hold seminars, send email blasts, put up fliers, host happy hours, and add it to the onboarding process. There are all kinds of ways to promote an employee referral program to workers.
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