While layoffs are on the rise many sectors lately, there were still 1.9 job openings for every unemployed individual as of this January. Employers of all sizes have been having difficulty getting filling open positions, and an employee referral program is one often overlooked strategy that could be a big help.
Defining employee referral program
The Society for Human Resource Management defines an employee referral program as “a recruiting strategy in which employers encourage current employees, through rewards, to refer qualified candidates for jobs in their organizations.”
There are many ways to get an employee referral, one of which could be as simple as a verbal ask for employees to think of anyone they know who might be a good fit for your company and any open positions you have available. Employers have found that these warm intros are 82% more effective than all other applicant sources. Though a simple warm intro is sometimes all it takes, it’s best to create a streamlined and formal referral process to maintain professionalism and ensure fairness and consistency across the board.
Are employee referrals effective?
LinkedIn recently shared that an employee referral is one of the top ways qualified professionals find new positions. Related statistics from a variety of sources have indicated that:
- Referred employees are 4x more likely to be hired than non-referred applicants.
- Nearly 45% of referred applicants that get hired remain with the company for at least 4 years.
- Referrals save employers over $7,500 per hire.
Often, smaller companies fill a higher percentage of their openings through referrals. One study found that employers with 100 employees or less filled over half of their job openings this way.
What’s in it for existing employees?
The best way to encourage employee referrals is to offer an incentive program. Many come in the form of bonuses, such as cash bonuses, tiered bonuses broken down into increments, or even bonuses that allow recipients to donate all or part of the payment to a charity or non-profit organization of their choice. In 2019, research showed the average cash bonus to be $2,500.
However, not all referral incentives have to cost money. For example, you can publicly recognize the employee via a company-wide email or at a company event.
Here are some other ideas for potential incentives you might want to consider:
- Additional paid days off
- Event tickets
- Spa treatments
- Restaurant gift cards
- Paid day trips
A successful employee referral program must be structured and well-coordinated. Your HR team should plan with key departments in your organization, including legal, financial, and payroll, to help ensure a winning outcome for everyone. Looking for help putting together an effective employee referral program for your organization? Contact our HRExperts today!
