Increased unemployment benefits and pent-up consumer demand are fueling excess job openings making it especially difficult for employers to fill open roles. Employee referral programs can be one of many effective recruiting options in today's labor market. An employee referral program encourages employees to recommend qualified candidates by offering bonuses, rewards, and/or recognition to the employee if the candidate is hired. Here are some guidelines for developing and administering an employee referral program.

#1: Put it in writing.

It's a best practice to put your program in writing or include a policy on your program in your employee handbook. Be clear that all referred candidates will be considered and evaluated based on experience and qualifications and will be subject to the same pre-employment standards as all other candidates. Provide details and examples of who is and who isn't considered a qualifying referral (for example, you may want to exclude someone who has previously applied, temporary roles, and former employees). Also, include a statement that the company reserves the right to change the terms of the referral program at any time, provided it complies with applicable laws.

#2: Set clear eligibility rules.

Employers generally have discretion to set up their own rules for who is eligible to participate in the program as long they don't violate nondiscrimination laws. For instance, some employers allow both full- and part-time employees to participate but prohibit incentives from going to individuals who are no longer with the employer at the time of payout. Many employers also split up the incentive, providing part of it at the time of hire and the rest after the referred employee stays with the company for a certain length of time.

#3: Consider both incentives and recognition.

The most common form of incentive is a cash bonus, but employers have other options, such as paid time off, tickets to events, prizes, or special experiences. Given the challenges with finding talent right now, many employers are temporarily increasing incentives. However, don't assume incentives are the only way to boost referrals. Some employees will be driven by other factors, such as recognition and a desire to help the company succeed, so design your program accordingly. For instance, you can post a leader board of the top referrers as a form of recognition.

#4: Prevent conflicts of interest.

Consider ways to prevent conflicts of interest from entering the hiring process. For instance, prohibit incentives from going to referrers who would be within the open position's chain of command and individuals who are involved in the hiring process.

#5: Make it easy.

If the process is arduous, it may dampen the response. Make sure you provide a quick, easy and consistent way for employees to provide the information you need. Many employers are doing so online. A streamlined process can also help you track and validate all referrals.

#6: Help employees be good ambassadors.

Train your employees on your employer brand and encourage them to share why they think your company is a great place to work. Give employees examples of the skills and competencies you are seeking for the open position so that they can assess whether someone they know might be a good fit for the job.

#7: Promote the program.

Consider multiple ways to promote your program internally. Some employers are creating a whole campaign for their employee referral program, including a slogan, posters in the workplace, mailed flyers, internal company email messaging, staff meetings, and more.

#8: Provide status reports.

After an employee makes a referral, give them an update on where the candidate is in the hiring process. If you decide a candidate is no longer being considered for the position, inform the candidate first and then the employee who made the referral. Be mindful of applicants' privacy protections and refrain from sharing detailed feedback on the status of the candidate. Be particularly careful of situations where you should not reveal the reasons for not moving forward with a candidate, such as a negative background check or failed drug test.

#9: Evaluate the effectiveness.

Track the percentage of referred candidates who are hired, the turnover rate of referred employees, and other important metrics and compare them against other recruiting methods. Make adjustments as necessary.

#10: Don't forget to use other recruiting methods.

Unless your workforce is already diverse, relying solely on employee referrals can limit the diversity of your applicant pool. Consider a wide variety of recruiting methods to help you reach a broad pool of applicants.

Conclusion:

As part of a wider recruiting effort, employee referral programs can be a cost-effective way for employers to find great employees, particularly in a tight labor market. Consider the above guidelines as you look to develop or expand upon your own program.