Table of contents
Employee referral programs are becoming a go-to strategy for many HR professionals — and for good reason. They not only streamline the hiring process but also strengthen company culture.
According to Forbes, employee referrals are the “holy grail of hiring.” While referrals only make up 7% of applications, they result in almost 45% of successful hires. Referral programs tap into employees’ networks, leading to stronger connections, better hires, and a more cohesive workplace. Plus, when those efforts are celebrated, it motivates everyone to continue contributing to the company’s success.
But that’s not all. Employee referral programs can also help foster deeper employee engagement. When employees see their contributions — whether it’s referring talent or other achievements — recognized and rewarded, it builds trust and strengthens their connection to the company. Recognition drives motivation, and when your employees feel valued, they’re more likely to actively contribute to your organization’s success.
Now that we’ve explored the basics, let’s dive into the key components of an effective employee referral program — starting with the definition, the importance of recognizing your employees’ contributions, and how to create a program that drives success.
What is the definition of employee referral?
The definition of employee referral is a hiring and recruitment strategy where employees are asked to submit their recommendations on potential candidates for open roles.
What is an employee referral program?
An employee referral program is a strategic approach to hiring, leveraging the recommendations of employees to find the right candidates for available roles. Going beyond traditional recruitment channels such as job boards, referral programs ask current employees to submit potential candidates from their professional network. And if the referred candidate is successful, the employee who made the referral typically receives a reward.
At its core, employee referral programs operate on the belief that existing employees are effective at evaluating whether a candidate will be a good cultural fit for an organization. This is because employees understand the company’s work environment and cultural values, making them well-poised to recommend candidates more likely to thrive within the organization.
Why are employee referral programs important?
- Higher quality hires: Referred candidates are often a better fit for your company’s culture and tend to stay longer.
- More efficient hiring process: Referral programs streamline recruitment by tapping into existing employees’ networks, saving time.
- Cost savings: Referral programs reduce costs by eliminating fees from job boards, recruiting agencies, and other hiring methods.
Why are employee referral programs important?
Tapping into the networks of your existing workforce can speed up the hiring process while bringing in higher-quality candidates who are more loyal to your organization.
Here are some of the key benefits of employee referral programs:
- Boost in engagement: Referral programs enhance employee engagement by actively involving staff in the hiring process, making them feel more connected to the company’s success and growth.
- Increased retention: Candidates hired through referrals are more likely to stay in the role longer, according to Indeed. This is often because the referring employee understands the nature of the work at the company, so they’ll be able to refer candidates who are more likely to thrive in the environment.
- Improved cultural fit: Also noteworthy, according to Indeed, is that referred candidates are more likely to be a good cultural fit for the company, as current employees have a deeper understanding of company culture and values.
- Strengthens employer branding: A successful referral program enhances the company’s reputation as an employer, attracting more quality candidates and reinforcing its brand as an attractive place to work.
How to create an employee referral program
Setting up a fully-fledged employee referral program can seem daunting. Fortunately, there are some straightforward best practices to guide you. The following are four key steps to get started.
1. Prepare and plan
A quality employee referral program isn’t established overnight – you need to plan and prepare as you would for any significant undertaking. Some questions to ask your leadership team are:
- How often do you need to hire and for which positions?
- Are there open job roles that you’ve often struggled to fill?
- What minimum practical requirements are there for new hires? For example, do they all need to be competent in specific skills, such as webinar tools?
- What is your company culture, and which types of candidates are the best fit?
- What do you hope to achieve with your employee referral program?
- Are you looking to widen your applicant pool for particular roles?
- Do you need to spend less time on hiring?
The answers to these questions can help bring structure to your program and can help with deciding how much time, money, and effort to spend on getting it up and running.
2. Clearly define rules and processes
To create an efficient and effective referral program, it’s essential to have clarity on the rules and processes upfront.
Here’s how to do it:
- Begin by specifying the roles that you have open and the ideal qualifications for candidates.
- Then, outline how employees should go about submitting candidates and any necessary documentation by establishing a referral submission process.
- Detail the timeline for reviewing referrals, and the selection and onboarding process, and be clear on when employees will receive their reward. For example, will it be after they make a referral, once a candidate gets hired, or after they’ve completed their probationary period?
Today, there’s lots of tech to make this more straightforward. As scheduling software automates a calendar, applicant tracking tools streamline referrals.
Such tools often have features and templates designed for referrals. They will give you email templates to send out to your employees and will also have analytics to monitor who recommended which candidates. If you don’t wish to use specialized software, you’ll need to create the processes yourself. Just remember that it’s vital to keep track of referrers and keep them up to date on how applications progress.
3. Promote your employee referral program and recognize participation
Promoting your referral program
With your employee referral program designed, it’s time to promote it to your staff. You need to make everyone aware and highlight the benefits of the program as swiftly and effectively as you can. One idea would be to screen share an example referral during your next company-wide town hall or showcase successful stories to motivate employees to submit a referral as well.
Recognizing participation
The next vital step is to recognize all participation in the program. The only way your program will succeed is with employee buy-in. Every time an employee submits a referral, publicly recognize and reward their participation. Doing so encourages employees to continue submitting referrals. It’s also worth considering offering a small reward for employees who have submitted a referral, even if their candidate wasn’t hired.
4. Mix up your employee referral incentives
Your referral incentives should be both varied and tailored to what employee motivation means in your organization.
For example, a tiered points-based system is one approach where you might give out 1,000 points ($10 equivalent) for simply submitting a referral. Then, if the referred candidate moves on to the interview stages, the reward might increase to 2,500 points ($25 equivalent), and so forth. The points are redeemable for items from a user-friendly rewards marketplace, allowing employees to choose a reward that is most meaningful to them.
For employees motivated by professional development, incentives like workshops, training courses, or conference tickets can be highly effective. Offering a diverse rewards marketplace that includes both growth opportunities and tangible items appeals to a wider range of preferences, making your referral program more engaging for everyone.
Boost engagement with referral recognitions
Recognizing employees for their role in the referral process is a game-changer for engagement. It fosters a sense of pride and strengthens the culture of teamwork. Consider these strategies:
- Celebrate participation: Acknowledge every referral submitted, whether or not the candidate is hired.
- Offer varied rewards: Tailor incentives to suit individual preferences, from bonuses to professional development opportunities.
- Public recognition: Highlight successful referrals and those who actively contribute to the program in team meetings or company-wide communications.
When employees feel valued for their efforts, they’re more likely to stay engaged and continue contributing to your organization’s growth.
Build an engaged workforce with employee referral programs
An employee referral program is a powerful tool for creating a more engaged, loyal workforce. By tapping into the networks of your current employees, you not only attract candidates who align with your company’s values but also enhance the overall work culture.
Recognition plays a pivotal role in this process, driving participation and fostering a sense of pride. Ready to elevate your referral program and build a culture of recognition? The right strategies can help you unlock long-term success.
Employee referral program FAQ
