Employee Referral

What is Employee Referral?

Employee referral is a strategy used to make use of current employees’ network to source quality hires. Companies can cut costs, increase retention rates, and save time on recruiting highly qualified employees. On the other hand, employees receive incentives for recommending a good hire. In most cases, the reward is cash. The referred employees are more likely to be a culture fit and stay in the organization.

Employee referrals are considered as one of the best methods of hiring skilled employees because companies depend heavily on ‘word-of-mouth’ publicity to improve their reputation and attract high talent. It’s the experience of a referrer that vouches the positive experience of working in that organization. Employers can create a huge talent pool in a short period and connect with huge employee professional network.

Benefits of Employee Referral

The HR department doesn’t have to focus on only traditional methods to recruit and can make use of existing employee networks. In a traditional recruitment method, employers spend a lot of time in sourcing, screening applications, interviewing, and hiring. Adopting an employee referral process removes the need for such a lengthy process as highly skilled employees’ information is received in a short amount of time. Interviews are scheduled and candidates are hired, thereby reducing costs as well. The benefits of an employee referral:

  1. Reduces the time to hire
  2. Higher conversion rate
  3. Referred hires are more likely to stay
  4. Lower recruitment costs
  5. Improves employee engagement
  6. Enhanced employer branding

To receive these benefits, properly communicate the program and make it as simple as possible. Provide good incentives to the employees who participate and make sure to follow-up. Employee referrals benefit the employees as well. Like, financial rewards, job satisfaction, networking opportunities, and improved working environment.

What is Employee Referral Program?

An employee referral program is a recruitment method designed to allow existing employees to refer qualified candidates for open positions in exchange for rewards. Current employees reach out to their family and friends to recommend the company and suggest a strong fit. Organizations can make use of their employees’ network and employees receive monetary or non-monetary rewards.

While employee referral programs do increase the quality of hires and offer numerous other benefits, there are a few obstacles organizations face. In rare cases, the new hire fails to meet the expectations in terms of teamwork, personality, and ownership. Some companies hire referees even when there are no open positions available. A few reasons for this decision could be the skills, abilities, and experience of the new hire. When organizations solely rely on employee referrals to hire, it results in a less diverse team. A company without diversity and inclusion may not be attractive for job seekers.

How to build an Employee Referral Program?

An employee referral program has to be structured and organized to ensure that employees are engaged to look for good hires and suggest them to the company. The reward system for the program should also be motivating. It is designed in a way that it helps source the correct candidates for the open positions. Most organizations manage their employee referral program manually. Such a method is impractical, time-consuming, and costly. Depending on the company, it may take around one to two months to design a good employee referral program.

There are a few steps most organizations follow to implement an employee referral program. This process ensures that the program is clear and effective, reduces bias or favoritism, and easy evaluation of program. The steps to build an employee referral program are:

1. Set hiring goals

Before launching the employee referral program, set clear hiring goals. The goals should be measurable and achievable. It could be specific to reduction in recruitment costs, time to hire, increase in retention, etc. When hiring goals are SMART, they help avoid costly hires and stick to an organization’s goals and mission. For example, decrease average hiring time by 15%, increase conversion rates by 20%, and so on.

2. Clearly explain the job requirements

Organizations have open positions for different roles. It can be hard for employees to understand what the company is looking for in a hire. Consider including job descriptions and explaining what the company is not looking for in an employee. Depending on the job, the requirements vary. Most of them include work experience, skills, knowledge, education, physical abilities, licenses/certifications, languages, and personal qualities. These are also mentioned when announcing a referral email.

3. Design a simple referral process

Creating complicated rules around a referral program will discourage employees from participating in the recruitment process. It should be easy to understand and apply for the program so that employees don’t have to go through a long, complex process to recommend a hire. Using an online platform to run referrals will be easy. Explain the process to suggest a new hire or the email templates that must be used.

A simple referral process improves the level of participation, eliminates errors in the referral submission process, reduces delays in hiring, and saves time and resources of the company by reducing the amount of time spent by HR to explain or resolve issues related to the process.

4. Create a reward plan

A good reward plan for employee referral program will encourage everyone to participate. This improves engagement and employees will be eager to look for highly qualified employees in their network and recommend them. The reward plan should be a mix of both monetary and non-monetary rewards. A few of them are:

  • Cash prizes
  • Paid vacations
  • Prizes, gift vouchers, or tickets
  • High-value coupons
  • Donation to a charity

Without a reward plan, there would be no benefit in designing or implementing an employee referral plan. Such rewards depend on the urgency of hire, the position, and other factors. Most organizations reward the referrers when the new hire stays with the company for a specific period of time. A good reward plan helps motivate even the non-participating employees and improve employee engagement.

5. Provide clear instructions

When announcing the program, make sure to highlight the rewards and process to participate in the employee referral program. Include everything in the email or announcement boards that makes it easier to search for good hires without having to ask for clarification. Additionally, keep employees updated on the referred hire so that they don’t get discouraged and reluctant to participate in the future. Providing clear instructions also includes providing visual aids, using simple language, breaking down the process into steps, etc.

6. Reward and recognize

After successfully announcing the program, organizations receive tons of recommendations for an open position. Do not lose sight of hiring goals that were set. Select the best hire and publicly recognize the employee who referred the hire. Make sure that the employee feels appreciated for participating in the process. The reward could range from cash prizes to public praise from top executives if the employee has referred many quality hires in the past.

Some companies use a scoring system to track the number of quality hires recommended by each employee. This makes sure that every effort is counted, and other employees participate in future programs as well.

7. Track the employee referral program

While most companies benefit greatly from employee referrals, others may not. There could be gaps in the referral process or employees not being motivated enough to passionately look for good hires. In such cases, identify the areas that require improvement. To get started, list the number of referrals made, the number of referrals who were hired, the retention rate, etc. This can help identify any flaws in the reward system or the recruitment method itself.

How to use Employee Referrals with Keka

There are a few main problems employees face when trying to refer employees for open positions. If the organization doesn’t take the time to clearly explain the job requirements, it can be hard to refer anyone. Sometimes, employees are not motivated enough to frequently check the job board or referral announcements. In other cases, employees are not sure what specific skills are needed.

Without an efficient online referral platform, referrers will have to go through a lengthy process to even participate in the employee referral program. A manual employee referral program starts with the company announcing publicly and encouraging employees to fill out forms or sending an email to HR. The forms require employees to enter name and contact information every time they recommend a candidate which is a time-consuming process. After the referees have been pooled, they are interviewed and selected followed by rewards and follow-up.

For some organizations, it’s not practical to implement an employee referral program manually. They need an online platform that makes the process simpler, easy, and reliable to handle referral processes. Keka’s hiring software not only streamlines the recruitment process but also provides an internal job board. Some of its useful features include:

  • Notifying employees on the platform
  • Clearly define job descriptions for
  • Easily apply for the employee referral program
  • Scheduling interviews
  • Adding notes, reminders, and follow-ups

Keka’s hiring system not only helps with setting up a referral process but can also be used to create approval chains for acquisition and interview, salary breakups, manage requisition workflows, and make instant changes to avoid miscommunication and save time.

Frequently Asked Question (FAQs):

1) What should an employee referral say?

An employee referral should include the future hire’s job title, role, responsibilities, skills, knowledge, and the team they will be working with. Overall, it should clearly state the description of the job so that employees can refer a good fit.

2) Example of an Employee Referral Program?

For example, Accenture’s “Get Referred” employee referral program requires candidates to connect with the company on social media. A candidate’s profile is then scanned to list the current employees the candidate knows. The employee will then be rewarded for serving as a referral.

3) What are 4 types of referrals?

There are 4 types of employee referrals – social recommendations, email referrals, online, and word-of-mouth referrals.

4) What counts as an employee referral?

Employee referral is when existing employees recommend a candidate for an open position in the organization. When an employee is in the candidate’s network or if the employee makes use of his network and suggests highly qualified candidates, it counts as an employee referral.

5) What makes a good employee referral program?

A good employee referral program is clear, simple and easy to understand. It motivates employees to participate in the internal recruitment process and rewards/recognizes employees who referred good hires.

cookie image

By clicking “Accept", you consent to our website's use of cookies to give you the most relevant experience by remembering your preferences and repeat visits. You may visit "cookie policy” to know more about cookies we use.