Employee Referral Programs: 5 Ways to Keep Your Program Relevant

Estimated reading time: 3 minutes

Employee referral programs are consistently listed as an effective source of hire. One of the reasons they work so well is because the candidate already has some knowledge of the organization. The employee who referred them has probably told them about the organization’s strengths … as well as things they need to improve on. And the person applied knowing that information. 

But employee referral programs can get stale. So here are some things to consider if the organization would like to get better results. 

Know your cost per hire. If you haven’t calculated cost per hire lately, now might be a good time to know how much it costs to bring someone into the organization. According to this article from Paychex, the average cost per hire for a position at an accounting firm is $5000. Keep the cost per hire number in mind when deciding on the amount of the employee referral bonus. Honestly, if the company offers $50, well, that might be too low for employees to take the program seriously. Be flexible with referral bonuses. If an organization says, “Hey, we aren’t in a position to pay out thousands per referral.”, consider getting creative. Maybe offer some money and time off. Possibly consider giving employees a choice. There’s no rule that employee referral bonuses must be all money. Expand who is eligible to receive a referral. At the beginning of today’s article, I mentioned one of the reasons that employee referral programs work. Well, current employees aren’t the only people who know the strengths and weaknesses of the organization. Former employees, contractors, and sometimes even customers can all refer great candidates. Offer specials based on hiring needs. Employee referral programs can be tweaked to fit surges in hiring. Let’s say a retail company needs to hire hundreds for holiday shopping season, they might want to offer a special referral bonus for seasonal hires. I’ve also seen this type of special offer when an organization is opening a new location.Be timely with payouts. Typically, the employee who is referring someone does not play a role in the hiring process. Nor do they have a say in whether the candidate gets hired. They also don’t supervise the candidate. So, asking an employee to wait months for a referral bonus might not align with the purpose of the program. They don’t really have a part in whether the new hire stays. Maybe the accountability for hiring, training, engaging, and managing the new hire needs to fall with the managerand not the person who made the referral. Something to consider.

Employee referral programs can be a great source of hire. Obviously, they shouldn’t be an organization’s only source. But they can be a great one. For the program to work well, the program should be well defined and managed.

Consider who can be eligible for a referral.Align referral bonuses with cost per hire. Get creative with rewards.Offer special bonuses during peak hiring times.Think about when payouts should happen. 

The nice thing about employee referral programs is that they’re flexible. Organizations can offer special promotions based on hiring needs. Use this flexibility to benefit the company’s recruiting plan.

Image captured by Sharlyn Lauby while exploring the streets of Salt Lake City, UT 

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